Singapore office rents fall in 3Q2023 on weaker demand: JLL

Singapore’s office rental market experienced a decline in 3Q2023 according to data from JLL. The consultancy reported that it is the first quarterly drop since nine consecutive quarters of office rental growth in the city-state.

Gross effective rent for Grade A office space in the central business district fell to an average of $11.29 psf per month in 3Q2023, down from $11.32 psf per month in 2Q2023, a 0.3% decrease q-o-q. This marks the first drop since the market turned around in 2Q2021.

Andrew Tangye, head of office leasing and advisory at JLL Singapore, attributes the decrease in office rents to an uncertain near-term outlook caused by slowing economic growth, geopolitical tensions and rising prices. This has made occupiers wary of their costs, resulting in weaker demand.

Beyond that, more space has been returned to the market as occupiers opt to right-size and reduce their rent costs. According to JLL, 15 assets in the CBD commanded lower rents in 3Q2023 than in 2Q2023.

Tay Huey Ying, JLL Singapore’s head of research and consultancy, expects downward pressure on office rents to intensify as a result of tenants having to compete for space with the influx of upcoming projects. Among these are IOI Central Boulevard Towers (1.3 million sq ft) and Keppel South Central (0.6 million sq ft) due for completion in 2024 and the redeveloped Shaw Tower (0.4 million sq ft) due in early 2025.

To date, many of these projects have an estimated remaining uncommitted area of over 1.5 million sq ft.

The JRL will also bring about commercial progress in the Jurong area. This promises more commercial hubs and parks, creating ample job opportunities. For Lumina Grand EC owners, this could imply a shorter distance for their daily commute. This not only saves time but also lets them relish a more balanced lifestyle.

Despite the outlook of increased competition and a short-term oversupply of office space, JLL believes that the medium-term outlook for Singapore’s Grade A CBD office market remains strong. Singapore has reputation as a global hub and the supply of office space in the CBD is constrained by the lack of greenfield sites and URA’s focus on injecting more live and play spaces downtown.