Singapore Prime Office Rents Surged 1.4% in Q3 Despite Darkening Global Picture

Prime office rents in Singapore’s Raffles Place/Marina Bay precinct leapt 1.4 percent in the third quarter compared with the previous three-month period to hit S$10.51 ($7.30) per square foot per month, as the city-state continues to provide a safe harbour for firms amid economic unease and overseas turmoil, according to Knight Frank.

Occupancy levels in the key precinct remained healthy at 95.4 percent in the July-September quarter, with overall CBD occupancy of 93.6 percent, as employees returned to the workplace and companies expanded headcount, the property consultancy said in its quarterly office report.

Although inflation, supply chain disruptions and geopolitical unrest are pushing global economies towards a slowdown, Knight Frank considers Singapore well positioned as a shelter for multinationals to weather the coming economic challenges.

“The spectre of a recession is currently being mitigated by business activity normalising to pre-pandemic levels and headcount growth, maintaining demand for office space,” said Calvin Yeo, managing director for occupier strategy and solutions at Knight Frank Singapore.

Landlord’s Market Arises

With occupancies steadily tightening and leasing activity expected to remain firm for the rest of 2022, Knight Frank is maintaining its forecast of 3 to 5 percent full-year rent growth as Singapore’s office sector increasingly becomes a landlord’s market into 2023.

The resurgence of co-working spaces means that older office buildings in the central business district will experience stiff competition in leasing to new market entrants and funded start-ups, the agency said.

In September, co-working operator WeWork launched a 21-floor location at the former HSBC headquarters in Collyer Quay. Sprawling more than 220,000 square feet (20,439 square metres), the space is billed as the New York-based company’s largest location in the Pacific region, which comprises Australia, South Korea and Southeast Asia.

“To remain competitive in the contemporary office arena, ageing office buildings might need to consider redevelopment or asset enhancement options so as to remain relevant,” Knight Frank said.

The surge in rents is magnified by a shortage of new office inventory in the market, with the whole of 2022 to see the addition of just under 1.2 million square feet of supply, including 773,441 square feet at GuocoLand’s Guoco Midtown on Beach Road.

The city-state is due to add 1.6 million and 1.9 million square feet of key supply in 2023 and 2024, respectively, including 1.4 million coming online next year at IOI Properties’ IOI Central Boulevard Towers in the downtown core.

New Economy Drivers

In its Singapore Marketbeat office report, Cushman & Wakefield said tech firms have become more cautious amid the tightening financing landscape after they drove office demand in recent years.

“Some however have continued to expand, reflecting their long-term confidence in Singapore,” said Jeryl Teoh, Cushman’s senior director of commercial leasing in the Lion City.

The property services firm pointed to e-commerce giant Amazon, which is preparing to move into 369,000 square feet of office space at IOI Central Boulevard Towers after signing a lease with Malaysia-based IOI Properties during the third quarter.

Global law firms also made commitments in the July-September period, with London-headquartered Stephenson Harwood leasing 17,000 square feet at Marina Bay Financial Centre Tower 1 and Los Angeles-based Gibson Dunn securing 15,000 square feet at One Raffles Quay’s North Tower. Liechtenstein’s VP Bank, meanwhile, signed up for 11,000 square feet of space at Guoco Midtown.