Singapore office rents to decline by up to 3% in 2024

Rents are expected to soften as supply surges from both CBD and non-CBD areas. 

The office market in Singapore is presently insulated from inclement economic conditions. That Grade A rents could still eke out a small increase of 0.1% QoQ is due to few major lease expiries and a market that only saw a modest new supply of prime space, according to a recent report from Savills. 

“Also, the total net office supply in the CBD (all Grades) was a negative 969,000 sq ft in 2022, and this reduction created a tight market situation that despite the famine technology companies experienced on the funding front last year, and net supply turning positive in 2023, landlords still felt confident asking for higher rents. However, confidence may wane when new supply in 2024 draws near,” the analyst said.

Here’s more from Savills:

The graph below shows that in the quarters running up to a spike in new supply, rents in prime locations (using Raffles Place here as an example) tended to move down in anticipation of the building completions in both CBD and non-CBD locations. For rents, we saw this happening in the 2009 and 2010 period and for the years 2014 to 2016. We also saw that rents began rising before net supply turned negative. 

The graph is not meant to be a robust statistical analysis, rather it points to what leasing professionals, with decades of experience, have opined, that landlords are anticipatory creatures. 

If this behaviour continues, we may expect to see rents soften in 2024 because the CBD and non-CBD completions are at record levels. The rental adjustment is expected next year rather than this because the significant reduction in net supply in 2022 created a tight market situation whose effects could be felt for 2023 and partially into 2024. 

As business and global political risk levels rise, the sharp drop in new supply in 2025 and 2026 may not be strong enough to convincingly turn rents around. The recent attacks on Israel and consequent retaliatory actions may disrupt the Middle East, with economic consequences. Our forecast for CBD Grade A rents is still a 2% YoY change for 2023. 

However, for 2024, arising from the economic and political flare ups, and because of the spike in CBD (Central Boulevard and Keppel South Central) and non-CBD supply (Labrador Tower and Paya Lebar Green), we are forecasting a -2% to -3% YoY change, followed by 0% change for 2025. Given the fact that the market is dynamic, some landlords may use this time to undertake extensive asset enhancement work.