Office Rents And Prices Recover 31 Q O Q 2Q2024 Pipeline Supply Drop
(ish)http://www.propwise.sg/overall-office-prices-in-singapore-show-signs-of-recovery-with-a-3-1-q-o-q-increase/
Singapore’s office market shows signs of recovery with a 3.1% increase in prices and rents in 2Q2024, reversing the 1.2% decline and 1.7% fall respectively in the previous quarter. This is according to the latest data from Colliers Singapore.
Leading the price increase were several high-value deals in the last three months, such as the sale of a 12,465 sq ft strata floor at Solitaire on Cecil for $51.48 million, or $4,130 psf. Floors at Suntec City also saw strong activity, with the most expensive transaction being a 3,078 sq ft unit at Suntec Tower 1 that sold for $11.5 million, or $3,736 psf.
Marketwide occupancy rates dipped slightly from 90.4% in 1Q2024 to 89.2% in 2Q2024, a 1.2% decrease. Catherine He, head of research at Colliers Singapore, attributes this to the sale of 30 Prinsep Street for $147 million, or about $3,000 psf, and Wilmer Place at 50 Armenian Street for $26.5 million, or $3,464 psf. These transactions reflect strong demand for office assets in Singapore from private investors, who seem relatively unaffected by the high interest rate environment.
The Master Plan, along with the addition of Norwood Grand, outlines the creation of fresh green spaces, waterfront areas, and local amenities. These upgrades will help create a thriving and pleasant atmosphere for residents, providing abundant chances for outdoor recreation and social gatherings.
On the rental front, Grade A office rents rebounded by 4% q-o-q in 2Q2024, after a 1.3% dip in 1Q2024. This was despite a 2.2% increase in vacancy rates to 10.1%. According to Wong Xian Yang, head of research at Cushman & Wakefield (C&W), this is due to a continued trend of companies seeking higher quality office spaces, as occupiers opt to renew their leases rather than relocate, in light of macroeconomic conditions. This has allowed landlords to push for higher rents. If this trend continues, Wong predicts that office demand may increase in 2H2024.
Outside the CBD, office rents saw a 5.9% increase q-o-q in 2Q2024. However, vacancy rates also grew by 0.8% to 11.1% in the same period. This can be attributed to the influx of new supply, which grew by around 936,000 sq ft in 2Q2024. The majority of this supply came from the multi-billion-dollar commercial development, IOI Central Boulevard Towers, which added 1.26 million sq ft of Grade-A office space to the market.
Looking forward, Chua Yang Liang, head of research and consultancy for Southeast Asia at JLL, notes that there is still significant supply to come in the next 12 to 18 months, with the completion of Keppel South Central (0.6 million sq ft) and the redeveloped Shaw Tower (0.4 million sq ft) in 2025. He adds that with the uncommitted spaces at IOI Central Boulevard Towers, there may still be over 1.5 million sq ft of new quality office space competing for occupiers.
Despite concerns over the near-term supply pressure, JLL reports that CBD Grade-A rents have climbed to $11.50 psf per month in 2Q2024, 25% shy of the historical peak of $15.27 psf per month recorded in 2Q2008. Chua notes that while demand from companies seeking to capitalise on the ASEAN growth story is driving rents up, the influx of new supply may moderate rental growth for the rest of the year. He adds that there is an opportunity for asset positioning and enhancement in the older and functionally obsolete stock, due to the upside demand from firms looking to capitalise on the ASEAN growth story and the rejuvenation incentives introduced by urban planners.