Singapore Office Rents Hold Steady Despite Opening of IOI Central Boulevard

Singapore’s office vacancy hit a 2.5 year high in the third quarter of 2024, with an influx of completed projects and near-term economic headwinds cooling down rent growth, according to JLL.

Overall grade A office vacancy in the central business district rose for the second consecutive quarter to 8.3 percent by the end of September, primarily due to the recent completion of IOI Central Boulevard Towers in the Marina Bay area.

The plateau in leasing rates comes after Singapore office rents jumped 1.3 percent in the first quarter to reach a 15-year high, according to JLL, as slowing GDP growth both in Singapore and globally, as well as the prolonged delay in US interest rate cuts have weighed on demand.

“Companies in Singapore continue to grapple with higher operating costs and remain cautious about capital expenditure, requiring a stronger justification for relocation,” Andrew Tangye, head of office leasing and advisory for JLL Singapore, said. “In addition, workplace optimisation has led to some tenants reducing their office footprint upon lease expiration. Both factors have reduced the net take-up of office space.”

Occupiers Remain Cautious

Major occupiers remain cautious despite the short-term uptick in overall vacancy, as corporate giants continue to show increasing resistance to rent hikes. Gross effective rents for grade A office space in the central business district remained unchanged in the third quarter at S$11.50 ($8.92) per square foot per month, according to JLL.

During the second quarter, average rents had grown by just 0.7 percent in the Lion City’s central business district, after averaging S$11.42 per square foot per month in the first three months of the year.

Those occupiers willing to commit to new leases are finding space available which might have been harder to secure when vacancy was tighter, according to JLL.

“Amidst these conditions, opportunities remain. A handful of occupiers, who can build a strong justification for a relocation, are capitalising on these current opportunities to upgrade to superior units in high-quality buildings. The move would also allow them to redesign and futureproof their workspaces, boosting enquiries in buildings that were previously facing vacancy pressure,” Tangye said.

“For example, a significant portion of Meta’s former space at South Beach Tower has been relet or is currently in advanced negotiations, drawing tenants relocating from other CBD buildings as well as existing occupants expanding with the building.”

Small, Mid-Sized Players Play a Bigger Role

With major occupiers continuing to reject rent hikes, small and mid-sized occupiers have been finding more leasing opportunities in the grade A market, the agency said.

“Office demand continued to be driven primarily by small and mid-sized occupiers in growth sectors such as financial services, professional services, and emerging tech industries. This trend has been fairly consistent over the past 12 months,” Dr Chua Yang Liang, head of research and consultancy for JLL Southeast Asia, said.

With a limited supply of new projects expected to enter the market in the next year, tenants are not likely to see rent reductions.

“As occupiers take time to move into their new offices before relinquishing their old spaces, overall CBD vacancy rates may remain elevated over the next few quarters. The actual physical availability of stock in some key office clusters remains limited. This scarcity is further exacerbated by the pushback in Shaw Tower’s completion from 2025 to 2026,” Tangye said. “This limited supply could shift market dynamics back in landlords’ favour.”

While office rents have cooled off this year, JLL expects rates to climb in 2025 on the back of limited supply and an expected improvement in global economic conditions.

“Rent growth is expected to stay modest through 2024, but is poised for a more robust recovery in 2025, as global economic conditions should improve on the back of lower interest rates and companies adapt to new work models and growth strategies,” Chua said.