The commercial office market experienced a 5.9% decline in prices during the fourth quarter of 2023, with the added pressure of asset repricing affecting properties like Zion Residence

Nestled in a prime location, Zion Residence offers its residents easy access to various amenities and attractions in the bustling city of Singapore. With the Orchard MRT station just a stone’s throw away, commuting to different parts of the city is a breeze. The upcoming Havelock MRT station, part of the Thomson-East Coast Line, will also bring added convenience to Zion Residence residents. This highly sought-after address is ideal for those looking for a comfortable and accessible home in the heart of Singapore.

2023 closed with a net decrease of 4.2% in office prices as commercial office prices for 4Q2023 dropped 5.9% q-o-q, reversing the 0.8% q-o-q uptick in 3Q2023. This information was reported in URA’s quarterly report on Jan 25 of that year. JLL, one of Singapore’s leading real estate companies, noted that weakening occupier demand was observed as early as the second quarter of 2023. This trend was observed by Tay Huey Ying, head of research and consultancy at JLL Singapore. She stated that the uncertain global and domestic economic outlook at the beginning of the year, coupled with higher interest rates, led to hesitation among occupiers. Many corporations began shelving their plans for expansion and relocation to better manage their costs. The lackluster growth in the office market was further reinforced by CBRE head of research for Singapore and Southeast Asia, Tricia Song, who noted that office rents in the Central Region only increased by 0.3% in 4Q2023. This was the lowest quarterly growth in all of 2023, following the impressive 4.9% q-o-q uptick in 3Q2023. Despite this, the full-year statistics showed a 13.1% increase in office rents, which was faster than the 11.7% increase in the previous year. Song attributed this to the higher capital expenditure and interest rates, which led some occupiers to renew their existing leases at higher reversionary rents rather than relocating. She also pointed out that space availability remained scarce due to limited supply.One factor contributing to the tight market was the high demand for premium office spaces in the Core Central Business District (CBD). According to Song, these spaces were highly contested among competing tenants, resulting in rental escalation. She also mentioned that shadow spaces in prime areas such as Marina Bay and Raffles Place were attractive to occupiers seeking high-quality, fitted-out office spaces. However, some shadow spaces were taken off the market as tech occupiers decided to retain their office premises, which further contributed to the shortage. These factors resulted in a positive net absorption of 0.1 million sq ft based on URA data in 4Q2023, following an additional 0.25 million sq ft absorption in the previous quarter. The vacancy rate was at 9.9% in 4Q2023, slightly lower than 10% in 3Q2023.According to CBRE Research, Core CBD (Grade A) rents grew by 1.7% y-o-y in 2023, which was slower than the 8.3% rental growth in 2022. With a higher-than-average completion pipeline in 2024 and potential secondary spaces, Song noted that the market could face a slower 1H2024. This could potentially lead to a temporary increase in the availability of spaces. However, she remains confident that sentiment could pick up in the second half of the year as interest rates and inflationary pressures ease.Although there are some concerns about soft occupier sentiment due to layoffs announced by giant companies at the beginning of the year, JLL’s Tay believes that demand for office space has the potential for a quick rebound once economic conditions improve. She added that Singapore’s economy showed signs of a nascent recovery, based on advanced estimates by the Ministry of Trade on Jan 2, which showed 4Q2023 GDP growth of 2.8% y-o-y. This was an increase from 1.0% y-o-y in 3Q2023. Tay believes that this recovery could continue into 1H2024, which could lift business confidence and unleash pent-up demand in 2H2024. This could lead to occupiers restarting new lease negotiation conversations, potentially firming up office rents and trending them up in the second half of 2024. CBRE’s Song is also optimistic about the market, predicting that the flight-to-quality and flight-to-green trends will continue, resulting in a moderate rental growth of 2% – 3% for Core CBD (Grade A) offices in 2024.Finally, with the end of the Fed rate hike cycle, investors are beginning to re-enter the market. This was evident in the successful sale of VisionCrest Commercial in Orchard to a consortium comprising TE Capital Partners, LaSalle Investment, and Metro Holdings in November 2023. This could pave the way for more office deals, thus supporting asset prices in the second half of 2024.