Singapore prime office rents rise by 1.3% in H1 2024

Rents inched up by 0.7% in Q2.

According to a Knight Frank report, prime Grade office rents in the Raffles Place / Marina Bay precinct recorded a 0.7% q-o-q marginal expansion in Q2 2024, moving up slightly to an average of S$11.28 psf pm. 

Coupled with the 0.6% q-o-q growth in Q1, rents grew 1.3% in the first half of 2024, slowing from the 2.5% increase between January and June of 2023. 

Here’s more from Knight Frank:

Despite the larger islandwide trend of rents either holding or increasing marginally, some landlords started to adjust their rental expectations, especially for buildings with pockets of available space. 

The longer lead time for decanted spaces to be absorbed led to a slight decrease in occupancy levels in the Raffles Place / Marina Bay precinct and in the overall CBD to 95.0% and 93.6% respectively in Q2 2024, from 95.6% and 94.7% in Q1. Nevertheless, occupancy levels in the quarter were healthy, as businesses typically continued to renew their office space, without mandates to expand or relocate with the prevailing uncertainty and the simmering global political tensions.

Demand Drivers

With the tepid and unclear economic climate, some office occupiers have begun to resist high asking rents, and explored alternative fitted relocation options when their current leases end. While larger corporates still showed a preference for quality spaces in choice locations, smaller occupiers with tighter budgets have been more willing to consider less costly options where rents are more affordable. 

In addition, more decanted spaces surfaced in the market as certain companies in the financial and technology sectors began consolidating their business functions, typically in one location. 

For example, Tencent, recently announced their relocation to CapitaSky from 30 Raffles Place where they previously occupied co-working space with WeWork. The Chinese tech giant inked a three-year deal to occupy some 28,000 sf and is expected to move staff from The Work Project at CapitaSpring as well where the lease was reported to end soon. 

Another tech giant Meta will not be renewing 115,000 sf at South Beach Tower, and will consolidate at Marina One. French bank BNP Paribas was reported to also not be renewing some of their current space at Ocean Financial Centre. As more quality decanted space becomes available, landlords face pressure to moderate their rent expectations. 

Owners of quality office assets are expected to increasingly prioritise building occupancy by locking tenants in for the next few years in order to preserve rental income in the face of the ongoing global uncertainty. 

In the midst of an office leasing market that has been quiet for almost a year, the financial and insurance sector grew by 6.5% y-o-y in Q1 2024 according to the Economic Survey of Singapore by the Ministry of Trade and Industry (MTI), improving from the 5.4% y-o-y expansion in the previous quarter. As the world has become a riskier place post pandemic, the insurance sector has been expanding. 

At the same time, despite the cost cutting and manpower reduction of certain banks in the finance sector, there is a growing focus on private wealth. Both HSBC and AIA were reported to open new wealth centres in the CBD, with AIA reportedly launching a new wealth centre at Six Battery Road. In the months ahead, insurance and reinsurance companies as well as the private wealth arms of banks and private wealth management firms could expand modestly.