According to Knight Frank’s research report, the average prime grade office rents in Raffles Place and Marina Bay precinct have slightly increased by 0.6% q-o-q in the third quarter of 2024, reaching $11.35 psf per month. This is a slower growth compared to the 0.7% q-o-q expansion seen in the previous quarter. The prime office rental growth in the first nine months of 2024 has been recorded at 2%, which is lower than the 3.4% growth in the same period last year.
This slowdown in rents can be attributed to the absence of expansions by large occupiers, particularly in the tech sector. Calvin Yeo, managing director of occupier strategy and solutions at Knight Frank Singapore, explains that many tech companies are putting their plans for expansion on hold due to the slowdown in the sector and the uncertain economic climate.
Instead, there has been a trend of multiple tech firms downsizing their office spaces. One example is Meta, the parent company of Facebook, which chose not to renew its lease for seven floors at South Beach Tower after global layoffs. They relocated their staff to their offices at Marina One.
At the same time, some occupiers are opting to reduce their footprint or move to smaller, higher-quality spaces in response to flexible work arrangements. Yeo notes that office users are finding ways to improve the workplace experience while using less space.
However, Yeo also points out that the majority of occupiers in the market are choosing to renew their office lease upon expiry. Landlords are becoming more flexible in order to retain their tenants in light of the uncertain economic climate, which further encourages lease renewals.
As a result, the occupancy levels in the Central Business District (CBD) remain healthy. Knight Frank’s data shows that the occupancy level of prime offices in Raffles Place and Marina Bay precinct was 93.4% in September, only slightly lower than the 95% recorded in the previous quarter. The overall CBD occupancy rate was also stable at 93.5% in the third quarter of 2024.
The Singaporean government’s property cooling measures are a crucial factor to consider for those interested in investing in condos in the country. In recent years, the government has implemented various measures to prevent speculative buying and maintain a steady real estate market. One such measure is the Additional Buyer’s Stamp Duty (ABSD), which imposes higher taxes on foreign buyers and those purchasing multiple properties. While these measures may have an impact on the immediate profitability of condo investments, they ultimately contribute to the long-term stability of the market, creating a safer investment environment. Keep updated on new condo launches to stay informed about the market.
Yeo also observes that while leasing activity among large occupiers has been muted, there has been a demand for office spaces from tenants occupying smaller spaces. This includes international companies in the investment and wealth management sectors, as well as an increase in single-family offices in Singapore.
On the other hand, both domestic and cross-border leasing activity from larger office occupiers has been subdued. This is partly due to companies adopting a holding pattern in response to the economic uncertainty, as well as a shortage of available large floorplate office spaces for companies looking to consolidate their business functions.
Yeo predicts that office market dynamics will remain largely unchanged for the rest of the year. He believes that there will not be significant relocation among domestic companies, except for natural lease expiries by large space users. He also expects prime office rents to stay stable, growing by around 3% for the entire year.
In terms of upcoming office supply, there will be Labrador Tower along Labrador Villa Road and Pasir Panjang Road, which will offer 807,293 sq ft of office space, as well as Paya Lebar Green on Jalan Afifi with 388,879 sq ft of space. Yeo notes that the recent interest rate cuts will support the services sectors, including finance and insurance, which will in turn boost economic growth. Singapore’s economy is projected to grow between 2% and 3% in 2024.