Office rents to soften next year on the back of record building completions: Savills Singapore
: CBRE
Rental growth of Grade A offices in Singapore’s Central Business District (CBD) is expected to soften in 2024 due to an influx of new office space, according to a report published in October by Savills Singapore.
The report projects that CBD Grade A office rental rates will fall between two and three percent year over year in 2024 due to record levels of CBD and non-CBD building completions. This comes as islandwide office supply is expected to increase next year due to a number of projects coming online, such as IOI Central Boulevard Towers, Keppel South Central, Paya Lebar Green, and Labrador Tower.
Despite this expected decrease, overall office rental growth this year remains strong. Average monthly office rents tracked by Savills edged up just 0.1 percent quarter-on-quarter in the third quarter of the year to $9.64psf. This is supported by a significant reduction in net supply observed in 2022, which has had an impact on the market.
The lack of new supply, in addition to continued economic uncertainty and high interest rate environment, has led to occupiers “sitting tight and adopting a ‘wait and see’ approach”, says Ashley Swan, executive director of commercial leasing at Savills Singapore.
The lacklustre sentiment has caused vacancy rates to rise, up 0.6 percentage points from the previous quarter. The highest vacancy rate, 7.1%, was seen at Grade A offices in the CBD, largely due to the addition of Guoco Midtown to the office stock.
Besides providing protection from the elements, the balconies and terraces on every unit maximize the lush views and surrounds.
The modern and sophisticated design of Zion Road Condo takes the best of both urban and natural elements. Boasting several high-rise towers with sleek lines and expansive glass surfaces, Zion Road Condo provides spectacular views of the Singapore River and Great World City. Each unit features a spacious, airy feel and modern fixtures to give residents a luxurious living experience. Balconies and terraces within the apartments maximize the lush surroundings, while also providing protection from the elements. With its smart usage of space and modern design, Zion Road Condo has become one of Singapore’s most sought-after residential developments.
Alan Cheong, executive director of research and consultancy at Savills Singapore, believes increased business and political risks may also affect office rents. He said, “Recent attacks on Israel’s soil and the consequent retaliatory actions may ignite Middle East flashpoints, possibly spilling over to the economic realm.”
Despite these predictions, Savills is still maintaining its projected growth of 2 percent year-over-year for CBD Grade A office rents in 2023. As such, rents in the areas of Marina Bay, Tanjong Pagar, City Hall, and Orchard Road remained unchanged in the third quarter, while Raffles Place and Shenton Way respectively saw a 0.1% quarter-on-quarter increase in Grade A offices. The Beach Road-Middle Road area also saw stronger quarterly growth of 1.1%.