SINGAPORE (Sept 23): Gross effective rent for CBD Grade A offices in 3Q2024 remained unchanged at $11.50 per square foot (psf) per month, according to data from JLL. This follows a marginal 0.7% q-o-q growth in 2Q2024, which is a slowdown from the 1.4% q-o-q growth in 1Q2024.The rental growth plateau coincides with a steady increase in vacancy rates for Grade A offices in the CBD, reaching 8.3% q-o-q in 3Q2024. This rise can be attributed to the recent completion of the IOI Central Boulevard Towers (IOICBT). According to JLL, this has led to a decrease in demand for office space as occupiers become more resistant to rent hikes. If the IOICBT is excluded from the data, the CBD Grade A vacancy rate would have remained relatively tight, similar to the post-pandemic low of 5.3% in 1Q2024. However, the global economic slowdown and delay in US interest rate cuts have had a significant impact on demand.Due to rising operating costs and cautious spending, net take-up of office space in Singapore has decreased. This has also been influenced by companies practicing workplace optimisation and reducing their office footprint upon lease expiration. But, the current market situation presents opportunities for occupiers looking to upgrade to superior units in high-quality buildings, says Andrew Tangye, head of office leasing and advisory at JLL Singapore. He also notes that some tenants are relocating to better units in the same building, such as a significant portion of Meta’s former space at South Beach Tower.The demand for office space in the past year has been primarily driven by small and medium-sized occupiers in growth industries like financial services, professional services, and emerging tech. Despite this, Tangye expects CBD vacancy rates to remain elevated in the coming quarters while occupiers adjust to their new office spaces. However, there is limited availability of stock in certain key office clusters.Changes in completion dates can also affect market dynamics. The postponement of Shaw Tower’s completion from 2025 to 2026 will further exacerbate the scarcity of office space. This means that occupiers looking to relocate or expand in 2025 will only have one new building to choose from: Keppel South Central, a 0.6 million sq ft Grade A office complex in the Shenton Way and Tanjong Pagar sub-market. This limited supply could shift market dynamics in favor of landlords, according to Tangye. JLL’s Head of Research and Consultancy for Southeast Asia, Dr. Chua Yang Liang, expects office rent growth to remain modest until 2024, followed by a stronger recovery in 2025 backed by improved global economic conditions, lower interest rates, and companies adapting to new work models and growth strategies.In addition, the recent decision by the government not to award the Jurong Lake District Master Developer site and place it back on the reserve list has led to a “more constrained outlook” for new office supply across Singapore. If this trend continues, it could lead to tight office supply conditions in the medium term, adds Dr. Chua.
Investing in Singapore’s real estate market can be a lucrative opportunity for foreign investors. However, it is crucial for them to understand the regulations and restrictions surrounding property ownership in the country. Unlike landed properties, which have stricter ownership rules, foreigners can generally purchase condos without much restriction. However, they are still subject to the Additional Buyer’s Stamp Duty (ABSD), which is currently set at 20% for their first property purchase. Despite this additional cost, the stability and growth potential of the Singapore real estate market remains a major draw for foreign investment. In fact, many foreigners are enticed by the numerous Singapore projects that offer promising returns on their investments.