Singapore office rents fall in 3Q2023 on weaker demand: JLL
Rent correction in Singapore’s office market is underway, with 3Q2023 marking the first quarterly decline in rates following nine consecutive quarters of rental growth. JLL’s research shows gross effective rent for Grade A office space in the CBD fell 0.3% q-o-q to an average of $11.29 psf per month this past quarter, down from $11.32 psf per month in 2Q2023.
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Andrew Tangye, head of office leasing and advisory for JLL Singapore attributed the lower rents to more supply from office stock being returned to the market “at an increasing pace” as more occupiers right-size upon lease renewal to manage costs.
Tay Huey Ying, JLL Singapore’s head of research and consultancy, added that office rent correction became more widespread in 3Q2023, noting that more than 15 assets polled lower rents this past quarter compared to 2Q2023. She anticipates downward pressure on office rents to intensify, with rents correcting further in the coming months amid the current macroeconomic environment.
The influx of three office projects over the next two years – IOI Central Boulevard Towers (1.3 million sq ft), Keppel South Central (0.6 million sq ft) in 2024, and the redeveloped Shaw Tower (0.4 million sq ft) in early 2025 – is posing a challenge with over 1.5 million sq ft remaining uncommitted.
Despite the short-term headwinds, the medium-term outlook for Singapore’s Grade A CBD office leasing market is still positive. Demand is expected to be supported by Singapore’s growing international reputation as a global hub and a lack of greenfield sites and URA’s focus on injecting more live and play spaces downtown will help keep supply of office space in the CBD constrained.