Singapore office completions to hit 7-year high in 2024

Two major projects are expected to be completed next year.

No new investment grade office buildings were completed in the Singapore CBD in 3Q23. According to JLL, Guoco Midtown, which was completed in 1Q23, will be the only new investment grade office supply in 2023 as the expected completion of IOI Central Bouelvard Towers has been pushed back from 4Q23 to 1Q24. 

Here’s more from JLL:

Three major office projects are scheduled for completion in the CBD over the next 24 months—IOI Central Boulevard Towers (1.3 million sq ft), Keppel South Central (0.6 million sq ft) in 2024, and the redeveloped Shaw Tower (0.4 million sq ft) in 2025. As of 3Q23, more than 1.5 million sq ft of these spaces remain uncommitted. 

Landlords step up efforts to compete for tenants amid soft demand

Demand for office space was subdued in 3Q23 as occupiers remained wary and cost conscious. A steady amount of office stock was also being returned to the market as more occupiers opted to right-size upon lease renewal to manage costs. Landlords are taking proactive measures to boost occupancy, including subdividing large spaces, providing ready-fitted units and adjusting their rental expectations.

Leasing activity from small-to-medium space users is holding up better than that of large space users. In 3Q23, Nardello & Co, a global investigation firm, launched its new office in Singapore at 61 Robinson Road. International law firm Charles Russell Speechlys also established its presence in the Singapore market by opening a new office at Marina Bay Financial Centre Tower 2. 

Office rents contract while asset value fall deepens

Overall CBD Investment Grade office rents fell for the first time in 10 quarters in 3Q23 as tenants took opportunity of the soft leasing market to negotiate for more favourable rental terms.

With interest rates remaining elevated alongside a weakening leasing market, office assets faced greater repricing pressure in 3Q23.

Outlook: Rents and asset prices to fall further

Near-term prospects for the office leasing market remain weak as the macroeconomic environment stays volatile. The short-term oversupply of office space could become more pronounced, with upcoming projects vying for a limited pool of tenants as office occupiers continue to adopt a pragmatic approach to their real estate strategy.

Downward pressure on rents is set to intensify in the coming quarters, and with interest rates expected to remain high, the decline in asset prices is likely to be extended. 

Note: Singapore Office refers to Singapore's CBD Grade A office market in Marina Bay, Raffles Place, Shenton Way and Marina Centre.