Office rents to soften next year on the back of record building completions: Savills Singapore

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: JLL

Located in the eastern region of Singapore, Tampines Ave 11 Condo UOL Group is a quality residential development by renowned developer UOL Group. This neighbourhood is surrounded by public amenities such as Tampines West MRT Station, Tampines Regional Library, and various shopping malls – Tampines Mall, Century Square, and Tampines 1. These amenities offer plenty of food, shopping, and entertainment options just a stone’s throw away.

A downward adjustment in office rents is likely in 2024 according to the October report by Savills Singapore. Despite a tight supply of Grade A office space underpinning rental rates this year, the growth of office rents has shown signs of tempering. As of 3Q2023, the average monthly rents of the basket of CBD Grade A offices tracked by Savills had edged up just 0.1% q-o-q to $9.64 psf, compared to 0.7% in 2Q2023.

The general outlook for the office market is expected to remain lackluster through 2024, leading to slower leasing activity and subsequently, a decline in CBD rents. Savills is projecting CBD Grade A rents to fall between 2% to 3% y-o-y in 2024.

Rental numbers in 3Q2023 suggest a softening of the market due to economic uncertainty, global tensions and high interest rates. Rents of Grade A offices in Marina Bay, Tanjong Pagar, City Hall and Orchard Road remained unchanged, while Raffles Place and Shenton Way respectively saw an increase of 0.1%. The higher quarterly growth of 1.1% seen in the Beach Road-Middle Road area was largely due to higher rents at Bugis Junction Towers.

A significant influx of islandwide office supply is also expected next year upon the completion of projects such as IOI Central Boulevard Towers, Keppel South Central, Paya Lebar Green and Labrador Tower. This is likely to further push down rents in 2024.

However, Alan Cheong, executive director, research and consultancy at Savills Singapore cautions that the impact of declining supply may be limited in light of the potential economic turmoil resulting from current global political and business risks. “The recent attacks on Israel’s soil and the consequent retaliatory actions may ignite Middle East flashpoints, possibly spilling over to the economic realm,” he says.

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