Singapore Downtown Office Rents Revived in Q1 to Reach 15-Year High: JLL

After a brief slump in the second half of 2023, office rents in downtown Singapore jumped 1.3 percent on a quarterly basis in the first three months of 2024 to hit a 15-year high, according to JLL.

Gross effective rents for grade A office space in the Lion City’s central business district averaged S$11.42 ($8.47) per square foot per month in the first quarter, up from S$11.27 in the prior three-month period, JLL said in a release.

The latest reading is the highest rent recorded since the S$12.55 per square feet per month seen in the fourth quarter of 2008 and follows two quarters of declining rents totalling 0.5 percent, the property consultancy said.

“We had predicted the Singapore office leasing market could stage a quick rebound on improved economic outlook and this appeared to have materialised sooner than expected,” said Tay Huey Ying, head of research and consultancy at JLL Singapore.

Big Occupiers Biding Time

The average grade A vacancy rate tightened to a post-COVID low of 5.3 percent in the first quarter after a 5.5 percent reading in the previous quarter, with newer and better-quality buildings recording even lower vacancies, according to JLL.

The consultancy has noted an increase in enquiries driven by firms in professional and financial services as well as from the consumer goods sector, said Andrew Tangye, head of office leasing and advisory at JLL Singapore.

“At the same time, there has been a noticeable reduction in shadow space from 0.6 million square feet in end-2022 to less than 0.25 million square feet as of the end of March 2024,” Tangye said, referring to the amount of currently occupied space being marketed for lease.

With GuocoLand’s Guoco Midtown having achieved 92 percent take-up in December amid a shortage of new large-scale office projects, big occupiers may be sitting on the sidelines until suitable spaces become available.

“A lot of the leasing activity is still from small- to mid-sized tenants who can arguably bid higher to get their preferred space in the right buildings but activity from larger occupiers is still weak as they remain cautious on spending with many electing to renew or optimise existing spaces,” Tangye said.

Potential Plateau

Prime office rents in the Raffles Place/Marina Bay precinct rose 0.6 percent on a quarterly basis to an average of S$11.20 per square foot per month in the first three months of the year, Knight Frank said in its Singapore Office Market Update. On a yearly basis they climbed 3.4 percent, slowing from the 5.7 percent growth recorded in the comparable period a year ago.

Occupancy in Raffles Place/Marina Bay remained tight at 95.6 percent in the first quarter, largely unchanged from the previous quarter, the consultancy said.

“Although rents remain supported by renewals as most corporates resist relocation or expansion to avoid capital expenditure, there is a possibility of rents flatlining in the second half of 2024, as corporates such as technology firms and banks restructure, and reduce their footprints,” said Calvin Yeo, managing director for occupier strategy and solutions at Knight Frank Singapore.

The agency forecasts rents to grow between 1 percent and 3 percent for the whole of 2024.