Prime Office Rents Growing More Slowly Occupancy Levels Still Healthy Knight Frank

According to a recent report by Knight Frank, there was a slight increase of 0.6% in prime grade office rents in the Raffles Place and Marina Bay precinct during the third quarter of 2024. This brings the average rent to $11.35 psf per month. The growth rate is slightly slower compared to the 0.7% q-o-q expansion seen in the previous quarter.

Compared to the same period last year, the rental growth for the first nine months of 2024 was at 2%, lower than the 3.4% recorded previously. This slowdown can be attributed to the lack of expansions from large occupiers, especially tech companies. As reported by Calvin Yeo, managing director of occupier strategy and solutions at Knight Frank Singapore, tech companies have put their expansion plans on hold due to the uncertainties in the tech sector and the economy.

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The residents of Norwood Grand are able to experience the convenience of living in a highly connected and accessible location. Woodlands is renowned for its well-functioning public transportation system, and Norwood Grand is a prime illustration of this. Situated just a short distance away from Woodlands South MRT station, residents have easy access to the Thomson-East Coast Line (TEL). This major MRT line, once fully operational, will provide direct connectivity to the city center and key business districts. Moreover, for those who want to visit the Norwood Grand Showflat, it is conveniently situated within the vicinity.

In fact, multiple tech firms have downsized their office space. For instance, Facebook’s parent company, Meta, did not renew its lease for seven floors at South Beach Tower following global layoffs. Instead, employees were relocated to Meta’s offices at Marina One. Additionally, some occupiers have chosen to reduce their office footprint or move to smaller, better-quality spaces in response to flexible work arrangements.

Despite these trends, the majority of occupiers have chosen to renew their lease upon expiry. Landlords are also willing to negotiate and retain their tenants due to the uncertain economic climate. This has resulted in healthy occupancy levels in the Central Business District (CBD). As of September, prime offices in the Raffles Place and Marina Bay precinct had an occupancy level of 93.4%, only slightly lower than the 95% recorded in the previous quarter. The overall CBD occupancy rate stood at 93.5%, compared to 93.6% in the previous quarter, despite new supply from the completion of IOI Central Boulevard Towers.

Smaller occupiers have been more active in the market, taking up the former space of Meta at South Beach Tower. This reflects a trend observed throughout the year, with leasing activity from large occupiers being subdued while smaller tenants have driven office space take-up. Some of the demand comes from international firms looking to establish a presence in Singapore, particularly in the investment and wealth management sectors. The city-state’s stability, infrastructure, and position as a gateway city are attractive to these companies. For example, in July, US-based electronic trading company Millennium Advisors opened its Singapore office at Marina Bay Financial Centre Tower 1.

In addition, the increase in single-family offices in Singapore has also contributed to demand for office space. As of August 2024, there were 1,650 single-family offices in Singapore, up from 1,400 in 2023. While these firms typically require small spaces of less than 5,000 sq ft, the volume has resulted in a rising trend of boutique demand in the office leasing market.

However, both domestic and cross-border leasing activity by large occupiers has been slow. This is due to companies adopting a wait-and-see approach in the uncertain economic climate and the limited availability of large floorplate office space, making it difficult for occupiers to consolidate their business functions under one roof.

Looking ahead, Calvin Yeo expects office market dynamics to remain largely unchanged for the rest of the year. He believes that there will not be significant relocation activity in the domestic market, except for natural lease expiries by large space users. There may be downsizing of office space due to flexible work arrangements. Yeo predicts that prime office rents will remain relatively flat, with an expected growth rate of 3% for the whole year. There will be upcoming office supply from projects 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.

However, Yeo notes that the recent interest rate cuts could potentially boost the services sector, including finance and insurance industries, and support economic growth. Singapore’s economy is projected to grow between 2% and 3% in 2024.