SINGAPORE: Grade A office rents are expected to go up slightly this year by about 3 per cent, despite new supply of such office space entering the market.
Industry observers said smaller companies are driving up this demand, even as several larger firms give up their prime area offices.
Grade A offices are described as the highest quality of office space available, with most of them located in the Central Business District (CBD) of Singapore.
They are generally known for having impressive architectural designs, generous floor plans, and even amenities like food courts and fitness facilities.
The gross effective rent for Grade A office space in the CBD reached a 15-year high to S$11.42 (US$8.39) per sq ft per month in the first quarter of this year, according to global real estate consultancy JLL.
“We are seeing a lot more enquiries coming from small- and medium-sized occupiers, from the professional and financial services as well as the consumer goods sectors,” said Ms Tay Huey Ying, head of research and consultancy at JLL Singapore.
“By the first quarter of this year, we started to see the office leasing market brightening up a little bit, and we attribute this to the nascent recovery that we have seen in Singapore's economic growth.”
Property experts said small- and medium-size enterprises (SMEs) usually have a high growth potential, and are able to bid higher prices for Grade A property space.
But large tenants, such as those that occupy more than 100,000 sq ft of space, have more cost pressures to consider and are looking to cut back while waiting for better global economic prospects.
Most of Grade A offices are located in the Central Business District (CBD) of Singapore.
“The Singapore office leasing market was rather slow in 2023, and that is mainly due to the prolonged macroeconomic uncertainties and the interest rate hikes that have led to many occupiers taking a cautious stance,” said Ms Tay.
“So they have to manage their costs. That led them to put on hold expansion and relocation plans. and this is particularly obvious or particularly significant for large space occupiers, because the relocation and the fit-out costs for such large space occupiers is substantial.”
Earlier this year, Singapore saw some larger firms giving up several of their office floors in the prime area. These companies include tech giant Meta, which will not be renewing its lease at South Beach Tower on Beach Road.
However, experts believe that the market is looking up, as vacancy rate remains stable at about 5 per cent.
“Although there might be some bad news with regards to tech giving up space or downsizing, the thing is that some of the tech space that has been given up was also quickly taken up by the tech themselves again,” said Mr Desmond Sim, CEO at real estate consulting firm Edmund Tie.
“In the market generally, renewal seems to be the main force that is driving rentals.”
He added that generally, the Singapore office market “has been pretty resilient and stable” over the past few years.
More than 2.4 million sq ft of premium office space will be added to the Singapore office market, with projects such as the IOI Central Boulevard Towers and Labrador Tower expected to be completed this year.
This increased supply is unlikely to put pressure on rent prices, as the demand for Grade A office space remains strong, said observers.
Singapore, with its conducive business environment, good governance, and easy access to talent, remains a popular location for businesses as a gateway to access the rapidly growing Southeast Asia market.
“I still have some positivity in the market, despite the amount of supply that is coming in, especially for this year,” said Mr Sim.
“The reason is because Singapore seems to be a magnet for what we call wealth management. And the growth of Southeast Asia seems to also favour Singapore, because firms tend to like to have Singapore as their regional (headquarters).”
Rents could be higher for longer, said market watchers, who expect the supply of new completions to taper after this year and pick up again only in 2028.
Continue reading...
Industry observers said smaller companies are driving up this demand, even as several larger firms give up their prime area offices.
Grade A offices are described as the highest quality of office space available, with most of them located in the Central Business District (CBD) of Singapore.
They are generally known for having impressive architectural designs, generous floor plans, and even amenities like food courts and fitness facilities.
HIGHER DEMAND LARGELY DRIVEN BY SMALLER BUSINESSES
The gross effective rent for Grade A office space in the CBD reached a 15-year high to S$11.42 (US$8.39) per sq ft per month in the first quarter of this year, according to global real estate consultancy JLL.
“We are seeing a lot more enquiries coming from small- and medium-sized occupiers, from the professional and financial services as well as the consumer goods sectors,” said Ms Tay Huey Ying, head of research and consultancy at JLL Singapore.
“By the first quarter of this year, we started to see the office leasing market brightening up a little bit, and we attribute this to the nascent recovery that we have seen in Singapore's economic growth.”
Property experts said small- and medium-size enterprises (SMEs) usually have a high growth potential, and are able to bid higher prices for Grade A property space.
But large tenants, such as those that occupy more than 100,000 sq ft of space, have more cost pressures to consider and are looking to cut back while waiting for better global economic prospects.
Most of Grade A offices are located in the Central Business District (CBD) of Singapore.
“The Singapore office leasing market was rather slow in 2023, and that is mainly due to the prolonged macroeconomic uncertainties and the interest rate hikes that have led to many occupiers taking a cautious stance,” said Ms Tay.
“So they have to manage their costs. That led them to put on hold expansion and relocation plans. and this is particularly obvious or particularly significant for large space occupiers, because the relocation and the fit-out costs for such large space occupiers is substantial.”
Earlier this year, Singapore saw some larger firms giving up several of their office floors in the prime area. These companies include tech giant Meta, which will not be renewing its lease at South Beach Tower on Beach Road.
RENTS COULD BE HIGHER FOR LONGER
However, experts believe that the market is looking up, as vacancy rate remains stable at about 5 per cent.
“Although there might be some bad news with regards to tech giving up space or downsizing, the thing is that some of the tech space that has been given up was also quickly taken up by the tech themselves again,” said Mr Desmond Sim, CEO at real estate consulting firm Edmund Tie.
“In the market generally, renewal seems to be the main force that is driving rentals.”
Related:
He added that generally, the Singapore office market “has been pretty resilient and stable” over the past few years.
More than 2.4 million sq ft of premium office space will be added to the Singapore office market, with projects such as the IOI Central Boulevard Towers and Labrador Tower expected to be completed this year.
This increased supply is unlikely to put pressure on rent prices, as the demand for Grade A office space remains strong, said observers.
Singapore, with its conducive business environment, good governance, and easy access to talent, remains a popular location for businesses as a gateway to access the rapidly growing Southeast Asia market.
“I still have some positivity in the market, despite the amount of supply that is coming in, especially for this year,” said Mr Sim.
“The reason is because Singapore seems to be a magnet for what we call wealth management. And the growth of Southeast Asia seems to also favour Singapore, because firms tend to like to have Singapore as their regional (headquarters).”
Rents could be higher for longer, said market watchers, who expect the supply of new completions to taper after this year and pick up again only in 2028.
Continue reading...