Singapore

Singapore’s Grade A Office Market Registers 12th Consecutive Quarter of Rental Growth

Low vacancies, limited supply, and flight to quality driving growth.

March 27, 2024

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Melvin Lin

Head of Marketing & Communications, Singapore

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Singapore, 27 March 2024 – Prime office rental in Singapore has continued its steady upward trajectory, CBRE has found. According to the leading real estate services and investment firm, Core CBD (Grade A) rents maintained the consistent pace of growth observed over the past four quarters, rising 0.4% q-o-q in Q1 2024 to reach S$11.95 per square foot.

This also marks the 12th consecutive quarter of growth, over which rents have hiked a total of 14.9% since 2021.

David McKellar, Co-head of Office Services and Occupier Services, observed, “This continued growth in rent for the Grade A offices is in line with what we have projected. In spite of the cautious economic conditions, vacancies in the core CBD remain low at about 3.6%, partly aggravated by the delayed completion of the IOI Central Boulevard Towers. As a result of the limited supply, combined with elevated interest rates and capital expenditure, we are noting lease renewals at higher rates.”

Diving deeper into the market trends, David added, “Workplace transformations have led to relocations, especially for firms with smaller to mid-sized requirements, namely in the private wealth asset management, insurance, and legal sectors. Conversely though, sectors like traditional banking, technology, and agile space have adopted a more conservative stance in the quarter, mitigating some of the rental increase pressures.”

The sustained growth in Grade A rents has also positively influenced Core CBD (Grade B) rents, which have displayed signs of recovery. It recorded a 0.6% quarterly increase to S$8.55 psf in Q1 2024 – its first quarterly increase in a year.

That said, CBRE notes that some sectors may still see some consolidation of space requirements such as selected technology companies and banks which have recently announced layoffs globally. 

Tricia Song, CBRE's Head of Research for Singapore and Southeast Asia, elaborated, “The technology and banking sectors are major occupiers in the Singapore office market. In early 2023, Singapore saw an increase in shadow spaces in tandem with the global layoffs, which came off significantly by year-end. The recent resurgence in layoffs announcements may well point to some volatilities in shadow spaces or secondary spaces vacated upon expiries in the coming months. However, we note that Q1 2024 so far has seen a fraction of layoffs experienced in Q1 2023 globally.” Likewise, in Q1 2024, CBRE Research shows that the amount of shadow spaces has been relatively stable compared to Q4 2023, at about 0.2 million sq ft. 

On the rental outlook, Tricia projected, “Economists have recently bumped up the Singapore GDP growth in 2024 due to an improvement in external demand. But with still-high interest rates, businesses are likely to remain cautious in their spending and investment plans in the near term. On the balance, CBRE Research maintains our previous rental forecast for 2024, and expects Core CBD (Grade A) rents to grow by 2% to 3% for the year – surpassing the 1.7% increase in 2023. The flight to quality is expected to continue to drive demand, with a focus on sustainability as businesses continue to seek to upgrade to environmentally friendlier buildings.”

“While existing prime office buildings have performed well, we are however cautious about uptake for new developments completing in 2024 and 2025. While we anticipate increased leasing activity among these new builds in H2 2024 as completion dates draw near, with approximately 3.4 million sq. ft. of office space completing over the next couple of years, landlords may be motivated to enhance occupancy by adjusting rental expectations and adopting more flexible deal structures”, Tricia added.

David concluded by advising tenants to plan ahead and assess options in advance to capitalise on this window of opportunity. He pointed out, “Beyond the expected completions this year, there are minimal completions expected in 2025 to 2027. This is especially so for the CBD, where there are no expected new developments over the period.”
 

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2023 revenue). The company has more than 130,000 employees (including Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.