Regional political tensions drive Marina Bay office rent surge

Increased prime-grade office rents in Marina Bay precinct reflect regional political tensions.

Prime Grade office rents in the Raffles Place / Marina Bay precinct surged by 0.7% in the fourth quarter of 2023, reaching an average of S$11.13 per square foot per month.

Calvin Yeo, Managing Director of Occupier Strategy and Solutions at Knight Frank Singapore, attributed this growth to an influx of regional offices driven by political tensions in neighbouring regions. 

Yeo noted, "Singapore is experiencing an influx of regional offices from the two political tensions in the region. And that is largely the office occupancy and demand." This influx contributes significantly to the heightened demand for prime-grade office spaces in Marina Bay.

This growth, extending from the previous quarter's 0.8% increase, underscores a sustained upward trajectory. However, the full-year basis shows a 4.1% rise, a slowdown from the previous year's 5.5% growth. 

Yeo pointed out that conflicts in the Middle East are already impacting economic sentiments, leading to caution among businesses. "With the conflicts in the Middle East, we are starting to see economic caution, economic slowdown, and firms are taking a more cautious approach to the expansion in their real estate requirements," he said.

Looking ahead to 2024, Yeo anticipates a trend towards office renewals driven by the adoption of hybrid working models, saying that the industry is expecting to see more office renewals as hybrid working allows corporations to accommodate expansions within their current spaces.

Additionally, the flexible office sector, including coworking spaces, continues to offer compelling solutions for transitional needs. Yeo highlighted that coworking centres are currently experiencing 80% occupancy, indicating sustained demand for such flexible workspaces.

The strong occupancy levels in the Raffles Place / Marina Bay precinct, reaching 95.6% in Q4 2023, and the overall CBD occupancy maintaining stability at 94.6%, reflect the delicate balance businesses are navigating amidst a sluggish economy. Renewals and modest expansions are the primary drivers of occupancy levels, as businesses remain conservative in their approach, carefully managing costs and revenues.