Singapore Core CBD Office Rents Stayed Flat in Q2, Snapping 3-Year Growth Streak: CBRE

Grade A office rents in Singapore’s core central business district remained flat in the April-June period after 12 straight quarters of increases, according to CBRE.

Second-quarter rents averaged S$11.95 ($8.80) per square foot per month in the core CBD, bringing a halt to a three-year streak that saw cumulative rent growth of 14.9 percent, the consultancy said in a release.

David McKellar, CBRE’s head of office services and occupier services for Singapore, pointed to a growing awareness among landlords that tenants have more options in the market, especially with the completion of IOI Properties’ IOI Central Boulevard Towers in Marina Bay and a wave of upcoming lease expiries.

“As a result they are prioritising occupancies in their buildings and are therefore more willing to negotiate on rents,” McKellar said.

Expanded Demand

Discounting the 550,000 square feet (51,097 square metres) of committed space from IOI Central Boulevard Towers’ first phase completed in the second quarter, there was still 170,000 square feet of net demand in the core CBD, which CBRE defines as Marina Bay, Marina Centre, Raffles Place and Shenton Way.

Legal firms and Chinese tech giants were some of the biggest contributors towards expanded demand during the period, according to the consultancy, with those sectors showing strong interest despite perceived macroeconomic uncertainties.

“In the legal sector, workplace transformations have prompted firms to reassess their space requirements, leading to relocations,” McKellar said. “Some are also finding the confidence in their growth prospects to transition from serviced offices and co-working spaces to establish a more permanent presence with their own dedicated office spaces.”

And while tech firms in general remain cautious with space requirements in Singapore, one Chinese tech company bucked the trend and capitalised on the opportunity to relocate to a larger space, McKellar said without naming the company. Mingtiandi reported that Tencent recently moved staff from 30 Raffles Place to 56,000 square feet of flexible space managed by The Work Project at CapitaSky in Tanjong Pagar.

After Grade A rents rose 0.4 percent in the core CBD for the first half, CBRE is maintaining its growth forecast of 2 to 3 percent for the whole of 2024.

World-Beating Efficiency

In a report last month, Savills estimated that just 0.2 to 0.5 percent of Singapore’s office stock would need repurposing annually through 2033, contrasting with a global average of 0.7 to 0.9 percent and a high of 1.1 to 1.3 percent in New York City.

Repurposing means redeveloping office buildings for other uses like residential, retail, leisure, health and education, the consultancy said. Some landlords can afford to retrofit their stock to new office standards, while owners of lower-grade stock may find repurposing to be a more cost-effective alternative.

Tenants, meanwhile, are increasingly opting to reduce the size of their offices by boosting space efficiency, said Vincent Lau, executive director for project management at Savills Singapore.

“Landlords and tenants aiming to enhance their spaces and embrace sustainability should recognise that green initiatives now extend beyond simple office fitouts,” Lau said. “To maximise effectiveness, they should align retrofit projects with comprehensive green requirements, adopting a cohesive approach to sustainability.”