Despite macroeconomic uncertainties that dampen demand for office space causing large space users to “generally press the pause button” for expansionary and relocation plans, Grade A office rents in Singapore’s Central Business District (CBD) saw a 1% q-o-q increase in 1Q2023 to an average of $11.30 psf per month (psf pm). This marks a second consecutive quarter of slowed growth following five straight quarters of growth previously.

Andrew Tangye, Head of Office Leasing and Advisory at JLL Singapore, attributes the current cautious mood of occupiers to the macroeconomic environment. Leasing activity in 1Q2023 was mainy driven by small-to-medium-sized space occupier with immediate requirements such as new market entrants and those looking to accommodate new workplace design or increased hirings that took place in 2022. Such occupiers include Munich Re and Corney & Barrow.

Despite the current cautious mood, occupancy of Grade A office space remains tight, with some occupiers seizing the opportunity to upgrade to better office space at new and upcoming complexes. Examples include Guoco Midtown in Bugis-Beach Road and IOI Central Boulevard Towers in the Marina Bay financial district, both of which are due to be completed in 3Q2023. It is estimated that 80% of Guoco Midtown’s space and 45% of IOI Central Boulevard Towers’ space are either pre-committed or under advanced negotiation.

Outside the CBD, the Labrador Tower along Pasir Panjang Road is expected to be completed in 2024, with Prudential taking up around 150,000 sq ft of space – the lease of which comes with a 15-year tenure expiring in November 2024.

Given the current macroeconomic environment, JLL Singapore’s Head of Research and Consultancy, Tay Huey Ying, predicts that office demand will remain more muted and rent growth will likely stay modest for the rest of 2023. She believes that office leasing activity for recent or soon-to-be completed projects will still maintain good traction while backfilling of vacated spaces may take a little longer.

Tangye on the other hand expects rental growth to speed up again post-2024, with a dip in new completions and the return of economic growth. “This window offers occupiers, especially large space users, a good opportunity to lock in spaces in quality new office buildings before rent growth kicks in.”