Commercial office rents drop by 5.9% during the fourth quarter of 2012, amid pressure to reprice assets

URA’s quarterly report of Jan 25, 2023 showed Singapore’s office property ended on a low note. Commercial office price for 4Q2023 decreased 5.9% qoq, in contrast to the 0.8% qoq increase of 3Q2023. Prices for offices decreased 4.2% by the end of 2023.

JLL observed a weakening of occupier demand in 2Q2023. Head of research and consulting at JLL Singapore. As a result of the gloomy global and local economic outlook, as well as the longer-term interest rate environment, many occupiers have backed off their expansion and relocation projects to save costs.

The Myst

The massive asset repricing that has developed due to the negative yield differential over borrowing costs on most office assets, in a prolonged high interest rate climate, is not surprising.


Tricia Sing, CBRE’s Singapore and Southeast Asia head of research, says that the Central Region office rents grew by only 0.3% in the fourth quarter of 2023. That was the lowest quarterly increase for the year, following a 4.9% jump qoq during the third quarter. In 2023, office rents rose 13.1%, faster than in 2022, when they increased 11.7%.


Song says that due to increased interest rates and capital expenditures, some tenants renewed their existing leases for higher reversionary rental rents than moving. She says space availability is “extremely restricted due to limited supplies”.


Song also notes that premium office space, with its high quality specifications, in the Core CBD, was highly sought after by competing tenants. This led to a rental increase. She notes that tenants who were looking for well-fitted, high-quality offices found shadow spaces in prime areas including Marina Bay and Raffles Place attractive.


Song also said that tech occupiers retained their office spaces, which further contributed to the lack of space. URA statistics show that due to the shortage of supply the market saw an absorption increase of 0.25 million square feet in 3Q2023. The islandwide vacancy in 4Q2023, a slight decrease from 3Q2023, was 9.9%.


CBRE Research states that core CBD (Grade-A), rents have grown by 1.7% annually, down from the 8.3% growth rate in 2022. “The market is likely to face a slowdown in 1H2024 as a result of a higher than average completion pipeline for 2024. There are also potential secondary spaces that could temporarily increase the availability.


It is expected that soft occupant attitudes will continue to exist, as layoffs were announced at the beginning the year by major companies, such as,,,, Riot Games of Tencent Holdings, and Unilever. However, past experience shows that office space demand can bounce back quickly with improved economic conditions.


Singapore’s Economy Showed Signs of a Nascent Recovery, Based on Advanced Estimates by the Ministry of Trade On Jan 2, 4Q2023 growth of GDP was 2.8% yo-yo from 1.0% Yo-Yo in 3Q2023. The continuation of this recovery in 1H2024 may boost confidence among businesses and stimulate demand in the 2H2024. Occupiers that held off on expansion or relocation plans in 2023 can restart discussions about new leases. This could lead to an increase in office rents and a possible trend upwards for 2H2024.


CBRE Song predicts that sentiment will improve in 2H2024 when interest rates and inflationary forces ease. CBRE Research forecasts that rents for Core CBDs (Grade-A properties) will increase moderately by 2%-3% between 2024 and 2026, due to the continued flight to quality.


Investors who were waiting on the sidelines have started to reenter the market as the Fed cycle of rate hikes is ending. The sale in November of VisionCrest Commercial Orchard by TE Capital Partners to a consortium including LaSalle Investments and Metro Holdings could pave a way for future office deal-making. This would support asset prices in the second half of 2024.

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