Singapore CBD Grade A office rental growth slows to 0.2% in Q2

The growth rate was at 0.5% in the previous quarter.

Singapore CBD Grade A office rents continued to edge higher, albeit at a moderate pace. According to Cushman and Wakefield, despite slowing office demand, overall vacancy rates remain relatively low. 

CBD Grade A office rents reached $10.84 psf pm, up 0.2% qoq in Q2 2024, this compares to the 0.5% qoq increase in the previous quarter. 

Here’s more from Cushman and Wakefield:

In the first half of 2024, CBD Grade A office rents grew by 0.7% ytd, lower than the 1.3% growth in the same period last year. CBD Grade A office vacancy rates rose to 5.4% in Q2 2024, from 3.6% in Q1 2024. The rise in vacancy due to the completion of IOI Central Boulevard Towers and Odeon 333 (combined NLA of 1.3 msf) outweighed net demand of 0.6 msf in Q2 2024. 

“Many Grade A office landlords, assured by high occupancy rates, continue to be sanguine on the prospects of the Singapore office market and have largely held on to their asking rents” says Jeryl Teoh Senior Director, Co-Head of Commercial Leasing at Cushman & Wakefield.

There are signs of cracks appearing. “The high interest rate environment continues to dampen new office demand. Some right-sizing activities have continued as occupiers look to reduce cost and align their workplace to a hybrid work model.” Deyang Leong, Senior Director, Co-Head of Commercial Leasing at Cushman & Wakefield added. Excluding the net demand stemming from the IOI Central Boulevard Towers pre-commitment, Q2 2024 net demand would fall to only 33,000 sf, similar to 30,000 sf in Q1 2024.

For 2024, we continue to hold on to our CBD Grade A office forecast at 0-2% yoy, given sluggish office demand amidst prolonged high interest rates. Nonetheless, vacant space remains concentrated within a few developments, with most Grade A offices remaining well occupied. As such, landlords continue to hold the upper hand, although their advantage is starting to diminish.