APPD Market Report Article


February 28, 2023

Tay Huey Ying, Head of Research & Consultancy, Singapore


SGD 11.19


Demand moderates in 4Q22 amid more cautious business sentiment

  • Overall CBD investment grade office net absorption slowed in 4Q22 as global economic headwinds intensified and weighed on business sentiment. The ongoing consolidation in the tech sector also moderated the appetite for office space from tech firms, which have been a main driver of office demand over the past three years, as most companies have switched from a focus on growth to profit.
  • Nonetheless, driven by strong Q2 and Q3 occupier demand, net absorption for the full year of 2022 reached the highest level in four years.

New supply in 2023 to be the highest in six years

  • The completion for the office tower at Guoco Midtown (based on the securing of the Temporary Occupation Permit), originally expected in 4Q22, was delayed to 1Q23. The pre-commitment rate for Guoco Midtown rose from close to 50% as of 3Q22 to over 70% as of 4Q22. 
  • IOI Central Boulevard Towers remains on track for completion in 2023. As of 4Q22, around 30% of the space had already been pre-committed.

Rental growth slows while capital values correct in 4Q22

  • Due to prolonged economic uncertainty which dampened demand for office space in 4Q22, the q-o-q growth in rents for overall CBD investment grade office slowed for the first time since turning around in 2Q21.
  • With interest rates climbing further and investors staying on the sidelines in 4Q22, CBD investment grade office capital values fell for the first time since recovering from the COVID-19 pandemic in 2Q21.

Outlook: Office property market to cool further in 2023

  • The downcast economic outlook is expected to inject caution into occupiers over the next 12 months, with rental growth expected to slow significantly in 2023 as compared to 2022.
  • Office investment assets are projected to face greater re-pricing pressure in 2023, with interest rates expected to stay elevated and the global economy as well as the local office leasing market slowing down.

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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