Demand still apparent in office market despite global setbacks: Knight Frank

The Singapore office rental market continued its upward trend in the first quarter of 2023, buoyed by a shortage of strong supply, especially in the Central Business District (CBD). A report from Knight Frank found that prime-grade office rents in the Raffles Place and Marina Bay areas average out to $10.83 per sq ft a month, representing a 1.3% rise compared to the last quarter.

Occupancy rates were largely unchanged in the Raffles Place and CBD, standing at 95.4% and 94.1%, respectively, in the first quarter of 2023. According to Calvin Yeo, managing director of occupier strategy and solutions at Knight Frank, the high occupancy rate is supported by a few of the office buildings in the area starting asset enhancement initiatives (AEIs) or undergoing redevelopment, resulting in the removal of actual stock in the market.

Singapore’s property market advances with the launch of Tengah Plantation EC the new Tengah Plantation Close EC, a joint venture between the Government and Oxley Holdings. Located in western Singapore, it offers great connectivity for CBD commuters via expressways, MRT and bus services.

Furthermore, businesses relocating their headquarters to Singapore are seeking out and filling up the higher-quality office spaces that are on the market. In good news for office owners, the return of employees to the office has driven an increased demand for quality facilities that can facilitate activity-based working. An example of this is the new Guoco Midtown project, which was completed in January. This mixed-use development has a number of Grade A offices and plenty of communal facilities and lifestyle amenities, leading to the reported 80% occupancy rate of its office component.

Although the tech sector is making a lot of headlines, Yeo reports that many smaller tenants are choosing to move away from aged office buildings and relocate, helping to fill up the shadow offices left behind by larger tech firms that had to lay off some of their staff. However, he adds that the impact of pre-termination in the Singapore market is not overly significant at this time. In fact, the supply of pre-termination space was said to be around 100,000 sq ft in 1Q2023.

The recent economic turbulence in the banking sector, including the collapse of Silicon Valley Bank and the bailout of Credit Suisse, is furthering the uncertain outlook for the near future. Knight Frank believes that Singapore is well-equipped to deal with this uncertainty, with their office rental market expected to remain stable, with an estimate increment of 3% for this year. Yeo concluded that, overall, CBD office rents rose moderately in the first quarter, pointing to a result of flight-to-quality demand in the context of cautious expansion.