APPD Market Report Article


September 4, 2023

Tay Huey Ying, Head of Research, Singapore


SGD 11.33


Occupiers stay cautious amid ongoing economic headwinds

  • Persistent macroeconomic uncertainties have continued to dampen office demand, prompting occupiers to put on hold expansion and relocation plans and renew their current office premises instead. To manage cost, some firms have also opted to right-size and return their excess space to their landlords upon lease expiry. 
  • However, some occupiers have taken a longer-term view and proceeded to upgrade to quality premises. They include Morgan Stanley’s pre-commitment of five floors (100,000 sq ft) at the upcoming IOI Central Boulevard Towers and Publicis Groupe’s lease of 55,000 sq ft of office space at Guoco Midtown.

Near-term supply will likely outpace demand

  • No new office projects were completed or withdrawn in the CBD in 2Q23.
  • The completion of IOI Central Boulevard Towers in the coming months will introduce over 1 million sq ft of additional office space to the CBD inventory. As of 2Q23, an estimated 50% of its space is either pre-committed or under advanced negotiations, up from 45% as of 1Q23. However, there remains a substantial amount of over half a million sq ft of space waiting to be taken up.

Office rents flattening out while asset value continues to fall

  • Overall CBD investment grade office rent growth came to a near standstill in 2Q23. Landlords of buildings with significant vacant or shadow space yielded to the pressure and lowered rents in order to boost occupancies.
  • CBD investment grade office capital values continued to decline in 2Q23 although at a decelerating pace.

Outlook: Rents to correct in 2H23

  • Rents are poised to enter a correction phase in 2H23 as near-term demand is expected to fall short of supply. The limited pipeline of leasing deals and the longer business approval process will keep demand for office space subdued while the growing new and secondary office stock will intensify competition for tenants. However, rents could rebound in 2024 on brighter economic prospects.
  • The impending rent correction is likely to add to the dampening effect of high interest rates on asset prices.

Note: Singapore Office refers to Singapore's CBD Grade A office market in Marina Bay, Raffles Place, Shenton Way and Marina Centre.

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