Singapore office rents climb 3.1% in Q2, reversing decline in Q1: URA
The islandwide vacancy rate for office space rises to 10.8% as at end-June, from 9.6% as at end-March
OFFICE rents in the central region of Singapore rose 3.1 per cent in the second quarter of 2024, reversing a 1.7 per cent decline in the previous quarter.
Rents rebounded in Q2 despite limited relocation activity, as occupiers of quality buildings renew their leases at higher rates, market watchers said.
“Amid geopolitical uncertainty and still-high interest rates, large occupiers continue to face capital expenditure constraints and are opting to renew rather than relocate,” said Wong Xian Yang, head of research at Cushman & Wakefield.
“This has allowed landlords to push for higher rents.”
Some companies are consolidating their employees in one location, while others are cutting space at their current premises, said Colliers Singapore’s research head Catherine He.
While office demand has slowed, the continued increase in rents in Q2 could have been due to the take-up of higher-quality but smaller spaces, Wong said.
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He added: “Given a slowdown in large occupier activities and capital expenditure constraints, some landlords are exploring subdivision to cater to smaller tenants, or offering capital expenditure contributions to support tenant fit-outs.”
In Q2, demand was driven by law firms and some tech companies seeking spaces in prime locations to attract and retain talent, CBRE’s head of research for South-east Asia Tricia Song noted.
Office space prices rose 3.1 per cent in Q2, compared with a 1.2 per cent decline in the first quarter, Urban Redevelopment Authority data released on Friday (Jul 26) showed.
The higher prices could be attributed to several strata office floors transacting at record levels, said Colliers’ He.
A freehold strata floor of Solitaire at Cecil was sold for S$4,130 per square foot (psf) while several floors at Suntec City were transacted, with the highest unit price at S$3,736 psf, she said.
At the end of Q2, islandwide office supply was about 1.01 million square metres (sq m) in gross floor area (GFA), slightly lower than the 1.13 million sq m GFA space at the end of Q1.
Net demand, as measured by the amount of occupied office space, fell by 20,000 sq m in Q2, widening from the 9,000 sq m drop in Q1.
The stock of office space rose by 87,000 sq m in Q2, after contracting by 41,000 sq m in the previous quarter. The increase in net supply was driven by Odeon 333 and the partial completion of IOI Central Boulevard Towers, said CBRE’s Song.
As a result, islandwide vacancy rate for office space rose to 10.8 per cent as at end-June, from 9.6 per cent as at end-March.
Supply over the next 12 to 18 months remains significant, with Keppel South Central (600,000 sq ft) and the redeveloped Shaw Tower (400,000 sq ft) on track for completion in 2025, said Chua Yang Liang, JLL’s head of research and consultancy (South-east Asia).
He said: “Adding the uncommitted spaces at IOI Central Boulevard Towers, there could still be over 1.5 million sq ft of new quality office space competing for occupiers.”
As supply comes onstream, landlords may face increasing competition. These new buildings are likely to attract tenants with their specifications that are modern and compliant with environmental, social and governance standards, said Colliers’ He.
“As such, with higher competition and tepid demand, the pace of rental growth would depend on the holding power of landlords but is likely to ease.”
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