Prime Office Rents Growing More Slowly Occupancy Levels Still Healthy Knight Frank
Prime office rents in Singapore’s Raffles Place and Marina Bay precinct have seen a slight increase of 0.6% quarter-on-quarter (q-o-q) in the third quarter of 2024, reaching an average of $11.35 per square foot (psf) per month, according to a new research report by Knight Frank. This growth is marginally slower than the previous quarter’s increase of 0.7%.
The slower rental growth is attributed to the absence of expansions from large occupiers, particularly in the tech sector, which have put their plans on hold in response to a slowdown in the industry and uncertain economic conditions. This has resulted in multiple tech companies downsizing their office footprint, such as Facebook’s parent company, Meta, which chose not to renew its lease for seven floors at South Beach Tower.
Instead, smaller occupiers have been more active in the market, taking up spaces that have become available as a result of these downsizing trends. This has been driven in part by an increase in international firms setting up offices in Singapore, particularly in the investment and wealth management sectors, attracted by the city-state’s stability, infrastructure, and position as a gateway city.
Demand has also been boosted by an increase in the number of single-family offices in Singapore. However, leasing activity by larger occupiers, both domestic and cross-border, has been subdued due to economic uncertainty and a lack of available large floorplate office space for consolidation.
Despite this, occupancy levels in the Central Business District (CBD) remain healthy, with a rate of 93.4% for prime offices in the Raffles Place and Marina Bay precinct as of September. This is only slightly lower than the previous quarter’s rate of 95%, despite the completion of IOI Central Boulevard Towers.
Looking ahead, Knight Frank predicts that office market dynamics will remain largely unchanged for the rest of the year, with prime office rents expected to stay relatively flat at around 3% growth for the entire year. With upcoming office supply in the pipeline, such as Labrador Tower and Pasir Panjang Road with 807,293 sq ft, and Paya Lebar Green on Jalan Afifi with 388,879 sq ft, the market is expected to remain stable.
However, there is potential for a boost in economic growth, with interest rate cuts expected to support the services sectors, including finance and insurance. The Singapore economy is projected to expand between 2% and 3% for 2024.
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