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Singapore office rents see subdued growth in 1Q2023: JLL

By Jennifer Venkat

/ EdgeProp Singapore |

March 29, 2023 3:24 PM SGT

View of the CBD in Singapore (Photo: Albert Chua/EdgeProp Singapore)

SINGAPORE (EDGEPROP) - Grade A office rents in the CBD grew in 1Q2023, though q-o-q growth slowed for the second consecutive quarter, says JLL. Research by the real estate consultancy showed that the gross effective rent for CBD Grade A office spaces rose 1.0% q-o-q to an average of $11.30 psf per month (psf pm) in 1Q2023. This is marginally lower than the 1.2% q-o-q growth recorded in the previous quarter, which marked the first slowdown following five straight quarters of growth.

JLL Singapore's head of office leasing and advisory, Andrew Tangye, attributes the easing rental growth to macroeconomic uncertainties that dampen demand for office space. He says large space users have “generally pressed the pause button” for expansionary and relocation plans. “As such, leasing activity in 1Q2023 was driven mainly by small-to-medium-sized space occupiers with immediate requirements such as new market entrants and those looking to accommodate new workplace design or increased hirings that took place in 2022.”

Such occupiers include German insurer Munich Re, which took up two floors at 18 Cross Street for its new office, and fine wine merchant Corney & Barrow, which relocated to Hub Synergy Point. JLL Singapore's head of research and consultancy, Tay Huey Ying, adds that despite the current “cautious mood”, the tight supply of Grade A office space saw some occupiers seizing the opportunity to upgrade to better office space at new and upcoming completions.

New office space in the CBD includes Guoco Midtown in the Bugis-Beach Road area, which received its Temporary Occupation Permit in January. It has secured tenants for about 80% of its space, while at least another 10% is understood to be in advanced negotiations. In the Marina Bay financial district, JLL estimates 45% of the space at IOI Central Boulevard Towers is already pre-committed or under advanced negotiation. It is due to be completed in 3Q2023.

Occupiers who have recently committed to spaces or are in active negotiation at Guoco Midtown and IOI Central Boulevard Towers include companies from the financial services, technology, media and professional service sectors.

Outside the CBD, Labrador Tower along Pasir Panjang Road is estimated to be 25% pre-committed one year ahead of its completion in 2024. Tenants secured include Prudential, which reportedly took up about 150,000 sq ft of space in the Green Mark Platinum Super Low Energy development. The insurer is located at 51 Scotts Road, with a 15-year tenure expiring in November though the landlord has secured a two-year extension to November 2024.

Given the macroeconomic environment, Tay believes office demand will remain more muted. While leasing activity for recent or soon-to-be completed projects is expected to maintain good traction, she anticipates backfilling of spaces vacated by relocating occupiers could take a little longer. She adds that this will likely keep rent growth modest, if at all, for the rest of the year.

Tangye predicts rental growth will accelerate again post-2024, underpinned by a sharp dip in new completions and a return in demand as economic prospects improve. “With rent growth currently taking a pause, and a few projects completed in and outside of the CBD within these two years, there is no better window than now for occupiers, especially large space users, to lock in spaces in good quality new office buildings.”