2024 Q3 Singapore Office Market Review By Corporate Locations

Office Market Review Q3 2024

The marginal rental decline in the top-Grade A sector last quarter was hardly noticeable. The lack of supply, is in effect, supporting rental rates to be stable and we are expecting them to remain unchanged for the next 12 months.

Office Market Review

Q3 2024

Contents include:

Recommended Leasing Options
Latest Rental Rates
Future Office Developments

Demand

Rentals remain high, compared to other major cities and this has stifled market movement. Tenants are finding it difficult to source the best solution and landlords are finding it difficult to attract new tenants, whilst at the same time preserving what rental levels they have already established. However, most of their buildings are close to full occupancy.

Demand for the new schemes, like IOI Central Boulevard Towers in Downtown has increased, not least because of scarcity of choice. It is rumored that two major law firms are lined up to secure significant space here and 60% of this 1.26M sq ft scheme is now reserved. Edge of town locations have been popular because they offer such good value for money, including locations like The Concourse.

Some of the major schemes scheduled for completion in Q4 2024 and Q2 2025, such as Keppel South Central and Shaw Tower respectively, have also come onto the radar of more tenants.

Activity in office leasing remains subdued, whilst limited supply diminishes further.
Most tenants are still looking for short-term lease extensions/renewal.
Many companies are more open-minded in terms of location to get the best value.
The main market drivers are existing companies expanding in their current building.
Other sectors still active include law firms, energy, consumer products and data consultants.
Leasing activity is expected to increase in 2025, when more major leases come up for renewal.

Great value for money options can be found by being flexible about location.

Supply

Whilst the increase in supply of Grade A space in the CBD in 2024 was 1.3 Million sq ft (the highest until 2028), the bulk of this came from just one scheme, namely IOI Central Boulevard Towers (1.2 Million sq ft). Out of that overall figure, 60% is pre-committed (with Amazon taking up over 400,000 sq ft). So net new supply is considerably less.

The average new supply between 2024 and 2026 is expected to be around 800,000 sq ft per annum. Taking this into context, when the net yearly average take-up is approximately 700,000 sq ft, it is clear that it is going to be a landlords market for some time to come.

Supply of office space is drying up, causing rates to stay firm.
Most office leasing activity is concentrated on the smaller units, which are being snapped up quickly.
This has a more limited effect on overall occupancy levels.
Some secondary CBD locations have increased interest from tenants who are still very cost sensitive, although pre-leasing of schemes like Keppel South Central has been low-key.
Existing buildings where the most supply can be found is in the prime properties such as Marina One, Asia Square and CapitaGreen.

The office rental market is challenging for both tenants and landlords.

Rentals / Forecast

In the lower mid-range, rates are definitely firming up and what was low $8.00 per sq ft has increased to high $8.00 per sq ft since the beginning of the year. The top end of the markets has stayed static for the most part.

We expect Premium Grade A office space ‘effective rates’ to remain stable in 2024, averaging between $12.00 and $13.00 per sq ft. Whilst demand is fickle and still relatively weak, some tenants are resisting further rate advances. Lease renewal negotiations can sometimes be trickier than new leases, but landlords are also keen to hold onto their existing tenants.

Prime rates are expected to remain stable throughout 2024.