Grade A office rents in the Central Business District (CBD) saw a marginal increase of 1.0% q-o-q in 1Q2023, according to research by real estate consultancy JLL. This represented the second consecutive quarter of slower growth, down from the 1.2% q-o-q recorded in the previous quarter.
Andrew Tangye, head of office leasing and advisory at JLL Singapore, cites macroeconomic uncertainties as the main contributor to the slower growth, with larger space users exercising caution over relocation and expansion plans. This has meant that leasing activity in 1Q2023 was driven mainly by small-to-medium-sized occupiers with immediate needs, such as companies that had increased hirings or needed to accommodate new workspace designs.
Notable tenants that have taken up space at Guoco Midtown in the Bugis-Beach Road area and IOI Central Boulevard Towers in the Marina Bay financial district include financial services, technology, media, and professional service companies. Other soon-to-be-completed projects in the vicinity, such as Labrador Tower at Pasir Panjang Road, have also secured tenants with Prudential reportedly taking up 150,000 sq ft of space at the green-marked Super Low Energy development.
Tay Huey Ying, head of research and consultancy at JLL Singapore, notes that despite the “cautious environment”, occupiers searching for better office space have seen an opportunity to upgrade. That being said, she expects backfilling of space vacated due to relocation to take a while, in turn keeping rental growth modest or even static for the remainder of the year.
In the long-term, however, Tangye believes rental growth should pick up pace again post-2024, given the lowered influx of new completions and the potential for demand to rise as the economy improves. He concludes that now may be a good opportunity for larger space users to lock in spaces in good buildings.