Singapore CBD Grade A office rents inch up 0.5% in Q1

Vacancy rates dropped to 3.6% during the quarter. 

Despite lingering uncertainties, a report by Cushman and Wakefield said Singapore’s office market remains resilient in navigating global economic shifts, supported by her status as a safe-haven and vibrant regional business hub. 

Singapore’s unemployment is expected to remain low at about 2% in 2024 and would be supportive of office demand.

Here’s more from Cushman and Wakefield:

In Q1 2024, CBD Grade A office rents inched 0.5% qoq higher as landlords largely held on to their rental expectations amidst low vacancy rates. While there were pockets of relocation activities, occupiers largely remained cautious with some opting for short term renewals. CBD Grade A office vacancy rates dropped slightly to 3.6% in Q1 2024, from 3.7% in the last quarter. However, CBD Grade A office rental growth is starting to moderate, reflecting cautious occupier sentiments amidst CapEx constraints and still-tight financing conditions. CBD Grade A net demand remains positive for Q1 2024 though it is muted at about 30,000 sf. 

Decentralised all grades office rents moved up 0.5% qoq in Q1 2024, slowing from the 0.9% qoq in the preceding quarter. This came as decentralised all grades office vacancy rates climbed moderately to 3.5% in Q1 2024 from 3.3% in Q4 2023.

More Incoming Supply to Moderate Rental Growth 

A slew of available CBD Grade A office supply from both primary and secondary markets will come on stream from the Q2 2024. IOI Central Boulevard Tower is expected to achieve TOP in April. Cost discipline in the tech sector could lead to more secondary office stock returned to the market in H2 2024. Additionally, islandwide office shadow stock has risen to 0.4 msf in Q1 2024, from 0.3 msf in the prior quarter. 

The increase of new CBD supply (1.3 msf) into the market, the highest for till 2028, coupled with more available secondary spaces presents a window of opportunity for tenants. While office demand is expected to improve in tandem with economic growth and a continued flight to quality, new supply is expected to outpace demand this year, leading to higher vacancy rates in 2024. 

That said, this window of opportunity would not last indefinitely, with slowly accumulating pent-up office demand given rising office-using employment coupled with higher office attendance. This demand could be slowly released as occupier CapEX constraints are eased in tandem with financing conditions.