Grade A office rents in core CBD continue to grow: CBRE

amid the pandemic

The Singapore Grade A office market has seen an upturn in sentiment, as limited supply and the back-to-office momentum has contributed to an increase in leasing activity. CBRE’s data shows a positive net absorption of 0.11 million sq ft in the 3Q2023, compared to 0.03 million sq ft in the 1H2023 and a fall in vacancy from 4% to 3.2%.

Gross effective rents for Grade A office buildings in the central business district (CBD) have seen a rise of 0.4% in the 3Q2023 to reach $11.85 psf per month. According to CBRE, this is largely a result of the reduction in shadow space that has occurred due to the tech sector slowdown. In the 3Q2023, the shadow space stands at 0.33 million sq ft, halving from the record high in the 1Q2023.

David McKeller, CBRE’s Singapore co-head of office services said that occupiers in the co-working and asset management sector have been among those to take advantage of these opportunities, moving into fitted office spaces within the prime Marina Bay and Raffles Place areas. Increased office usage has also contributed to this demand, with more people returning to a physical workplace.

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Despite a cautious economic outlook and high interest rates, CBRE’s data shows that Grade A office rents have grown 1.3% since the start of the year. This trend is likely to continue as the completion of IOI Central Boulevard Towers is due to be pushed back to 1Q2024, keeping market vacancy low and increasing landlords’ confidence in the remainder of 2023. CBRE estimates core CBD Grade A office rents could grow by 1.5% to 2% for the whole of 2023.

Overall, the market has outperformed expectations, with limited supply, higher office use, and reduced shadow space all resulting in a healthy upturn in the core CBD Grade A office market sentiment. More employees are returning to the feel and usage of a physical office, taking advantage of what the Singapore office market has to offer.