Grade-A office rents in the CBD soften to 0.2% q-o-q growth in 2Q2023

The office rental market in Singapore’s Central Region has experienced slower growth in the second quarter of 2023, following two-quarters of strong growth. The average monthly rents for Grade-A offices in the CBD have flattened out, indicating a cooling market. Economic uncertainty and cautious occupiers have led to a slowdown in leasing activity, with many opting to renew or downsize to manage costs. Challenges in obtaining approval for capital expenditure have also curtailed relocation and expansion activities, particularly for US and EMEA firms. However, some occupiers are upgrading to quality premises or optimizing their space. Leasing enquiries have been scarce since the start of 2023, especially from large office occupiers. Office demand from the tech sector has slowed down while demand from the finance sector has increased. The supply of office space is set to rise with new completions, which could lead to higher vacancy rates if demand does not keep up. Landlords may need to lower rents to attract or retain tenants, and there is a possibility that Grade A office rents may enter a “correction mode” in the second half of 2023. The sale of strata-titled office floors at record prices has contributed to an uptick in property prices.

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