Singapore office rentals will fall in the third quarter of 2023 due to lower demand

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Singapore office rents decreased in 3Q2023, as per figures released in a press release by JLL in a September 25 press announcement. The company adds that it is the first quarter of decline after nine consecutive quarters of office rents rising within the state of Singapore.

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JLL’s study shows that the it is possible to rent out the grade of A office spaces in the CBD decreased by 0.3% q-o-q to an average of $11.29 per month. That’s 3Q2023, a decrease from $11.32 per month in 2Q2023.

The decrease is due to constant economic pressures, according to Andrew Tangye, head of office leasing and advisory at JLL Singapore. “The uncertain near-term outlook that is a result of the combination of slower economic growth as well as geopolitical tensions and higher costs have kept tenants on edge and cautious about their spending which has led to a decrease in office space utilization,” he adds.

He says the lower rents are due to an increase in office inventory being returning to the marketplace “at increasing rates” as more occupiers right-size after lease renewal to cut expenses.

Tay Huey Ying from JLL Singapore’s head for research and consulting, agrees and says that office rent correction was more prevalent in the past quarter. “Our analysis suggests that over 15 properties had lower rents in the 3rd quarter of 2023 as compared to 2Q2023, and this lowered the rents average in CBD Grade A properties in the very first instance since they reversed during 2Q2021.”

She anticipates pressure to lower office rents to grow as rents continue to correct over the next few months due to the current macroeconomic climate and the anticipated increase in office supply. “Against against a flood of projects that are slated to be launched which are competing for a smaller number of tenants and office space, the short-term surplus of office space is likely to get more severe,” she adds.

Three office developments are scheduled to be completed in the CBD in the coming 24 months. IOI Central Boulevard Towers (1.3 million square feet) along with Keppel South Central (0.6 million square feet) in 2024. Then there is the newly developed Shaw Tower (0.4 million square feet) by the beginning of 2025. JLL declares that, to date there are more than 1.5 million square feet is believed to remain unconfirmed.

In spite of the current headwinds, the long-term prospects for Singapore’s Grade-A CBD commercial leasing sector is positive, JLL opines. Demand will be driven by Singapore’s growing image as a global city, but the availability of office spaces in the CBD will be limited due to a shortage of greenfield sites and URA’s emphasis on creating more spaces for play and living downtown.

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