Market challenges persist but quality office spaces attract opportunistic expansion and relocation

• Global economic sluggishness and high interest rates continued to weigh on office demand. Occupiers who could justify relocation, are seizing opportunities to upgrade to superior units in high-quality buildings.
• A significant portion of Meta’s former space at South Beach Tower has been re-let or is currently in advanced negotiations. Backfill demand comes from tenants relocating from other CBD buildings and existing occupants expanding within the building.

Shaw Tower completion delay eases near-term supply pressure

• IOI Central Boulevard Towers obtained its Phase 2 Temporary Occupation Permit in Q3 2024, resulting in two consecutive quarterly rises in office vacancies. However, vacancies should fall in the coming quarters as tenants move into the new building.
• Shaw Tower’s completion has been delayed from 2025 to 2026 due to construction delays. This postponement may alleviate near-term supply pressure. Keppel South Central will be the sole office completion in 2025.

Office rent and capital value growth pauses in Q3 2024

• Office rent growth plateaued in Q3 2024 as occupiers’ resistance to rent hikes intensified amid the uptick in vacancy.
• Investor sentiment in Singapore’s office market improved in Q3 2024 amid the anticipated US Federal Reserve rate cut in September. However, this optimism has yet to lift office sales transactions or capital values.

Outlook: Rents and capital values to remain subdued in 2024 but are poised for an upturn in 2025

• Rent growth should stay modest through 2024. A more robust recovery in 2025 is expected as the global economy improves while companies adapt to new work models and adopt new growth strategies amid lower interest costs.
• Mirroring rental trends, capital values are expected to show restrained growth for the rest of 2024. However, capital values could rebound in 2025, driven by improving occupier market conditions and a more favourable interest rate environment.