Current rental rates for top Grade A buildings range from $11.50 to $13.00 per sq ft (average effective) depending upon the size of the units. Upper mid-range office space varies from $10.00 to $11.35 per sq ft and lower mid-range is between $8.00 to $9.50 per sq ft. There is very little office space available below $7.00 per sq ft per month and this is normally found in the oldest buildings or those located far from an MRT station.
The spur in demand for office space in Q3 /Q4 2022 is beginning to wane. Many landlords are now adjusting their rental expectations accordingly. Most owners are being pragmatic to ensure the highest occupancy levels for their building, rather than holding out for the highest possible rental.
Naturally, the mindset of any landlord will usually depend on the current vacancy rate of their building. They are unlikely to compromise on rental rates, when there are only pockets of space left in their building, whilst keeping one eye on future lease renewals / rent reviews coming up.
We are expecting only modest rental growth this year, as most landlords try to achieve their previously set targets. We anticipate rates to advance by only up to 5% in the prime locations in the next 12 months.
However, rentals in the secondary locations are expected to remain flat during this period, as finding new tenants is proving more difficult than they expected.
The spur in demand for office space in Q3/Q4 2022 is now beginning to wane