Global uncertainty amid higher cost environment weigh on demand

• Persistent global economic uncertainties and an elevated interest rate environment compelled some companies to retract, if not postpone, any expansion/relocation plans.
• Occupiers in emerging tech, non-bank financial services, and professional services continue to drive demand. Environmental Resources Management expanded its SEA hub while Wotton + Kearney and Baillie Gifford plan to open new offices here.

Near-term supply pressure could derail market recovery

• IOI Central Boulevard Towers received Phase 1 Temporary Occupation Permit in Q2 2024. Keppel South Central and Shaw Tower are on track for completion by 2025. Some 1.5 million sq ft of new quality office space will compete for occupiers.
• The market is also grappling with the backfilling of spaces from corporate restructuring, e.g., Meta’s space at South Beach Tower, which expires in Q3 2024, and part of BNP Paribas’s space at Ocean Financial Centre, which expires in Q4 2024.

Office rent growth loses momentum in Q2 2024

• Rents grew for the second consecutive quarter, driven by lease renewals in high-occupancy buildings. However, the pace of growth has moderated due to cautious occupier sentiment and near-term supply pressure.
• Investors in Q2 2024 maintained a conservative approach to acquisition bids due to delayed interest rate cuts and cautious occupier sentiment. As a result, growth in capital values was limited during this period.

Outlook: Rents to stay on a modest growth path

• Weakened external demand, coupled with near-term supply pressure, weighs on landlords’ expectations of rental growth. As a result, rent growth should remain modest for the remainder of 2024.
• Office capital values are expected to remain relatively unchanged, resulting in fairly stable yields, until there is a reduction in interest rates and a widespread recovery in the office occupier market is observed.