APPD Market Report Article


February 22, 2024

Tay Huey Ying, Head of Research, Singapore


SGD 11.27


Demand holds up better than expected in 4Q23

  • New set-ups coupled with proactive efforts by landlords to attract tenants have sustained leasing activities from small and medium-sized space occupiers in 4Q23, despite the dearth in demand from large space occupiers. For example, the Queensland Investment Corporation and Bahrain’s Economic Development Board recently opened new offices in Singapore to establish their presence in Southeast Asia.
  • The stock of shadow space also moderated during the quarter, as some of the spaces that occupiers had intended to return to landlords were either successfully re-let or taken back by the occupiers for their own use.

Upcoming completions to spark new wave of flight to quality

  • In 4Q23, no new Investment Grade office buildings were completed in the CBD. The completion of Guoco Midtown in 1Q23 was the only addition to the CBD Investment Grade office supply for the entire year.
  • Over the next 24 months, the CBD will witness the completion of three significant office projects. These include IOI Central Boulevard Towers (1.3 million sq ft) in 2024, followed by Keppel South Central (0.6 million sq ft) and the redevelopment of Shaw Tower (0.4 million sq ft) in 2025. As of 4Q23, over 1.5 million sq ft of office space is still available for tenants seeking flight to quality.

Falls in office rents and capital values moderate in 4Q23

  • Overall CBD Investment Grade office rents dipped for the second consecutive quarter in 4Q23, primarily due to rent adjustments made by some landlords in response to vacancy pressures. However, a few recently refurbished buildings were able to command improved rents, thereby mitigating the downtrend caused by buildings with high vacancies.
  • Commercial mortgage rates remained elevated in 4Q23, maintaining the downward pressure on office capital values, which continued their downtrend for the fifth consecutive quarter, albeit at a more moderated pace.

Outlook: Cautious optimism for recovery in 2H24

  • While office demand is anticipated to remain soft in 1H24, there is cautious optimism for a rebound in 2H24. The expected brighter economic outlook may unleash pent-up demand and encourage new setups, stimulating office take-up and driving rent growth. This has the potential to offset the contraction experienced in the first half and result in modest full-year growth.
  • The extended high interest rate environment could continue to weigh on investment sales activities and keep pressure on office asset prices in the near term. However, the potential for rents to rebound in 2H24 could help redirect capital values towards a trajectory of growth during the year.

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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