Office Rents And Prices Recover 31 Q O Q 2Q2024 Pipeline Supply Drop
Singapore sees sharp rise in Grade A office prices despite declining occupancy rates
Office prices and rents in Singapore have shown a positive trend in the second quarter of 2024, with a 3.1% quarter-on-quarter increase in prices and rents, reversing the decline seen in the first quarter. According to Catherine He, head of research at Colliers Singapore, this price increase can be attributed to several high-value deals in the last three months, such as the sale of a 12,465 sq ft strata floor at Solitaire on Cecil for $51.48 million. This increase in demand from private investors for office assets in Singapore, despite the high interest rate environment, indicates a strong market sentiment.
The marketwide occupancy rate dipped slightly by 1.2% quarter-on-quarter, from 90.4% in the first quarter to 89.2% in the second quarter. Meanwhile, Grade A office rents grew by 4% quarter-on-quarter, rebounding from the 1.3% dip in the first quarter, despite a 2.2% rise in vacancy rates to 10.1%. Wong Xian Yang, head of research at Cushman & Wakefield (C&W), attributes this to the continued trend of companies opting for higher-quality spaces.
The flight to quality trend is expected to continue in the second half of 2024, driven by growing investment interest in Southeast Asia from wealth management and tech firms. This could lead to an increase in office demand. Outside the CBD, office rents saw a higher quarter-on-quarter recovery, with a 5.9% increase, while vacancy rates rose slightly to 11.1%.
.
After undergoing a transformation as part of the new Tengah development, Plantation Close will soon be home to a variety of dining options. While specific establishments have not yet been revealed, it is anticipated that the area will offer a diverse selection of cuisine, ranging from traditional local dishes to international fare. These upcoming eateries will serve as convenient dining choices for the residents of Novo Place EC, a nearby housing development. To learn more about Novo Place EC, visit https://www.novo-place.com.sg/.
The market also saw a significant injection of new office space in the second quarter, with about 936,000 sq ft of new office space, mainly from the multi-billion-dollar commercial development, IOI Central Boulevard Towers. However, with plans for upcoming projects such as Keppel South Central and the redeveloped Shaw Tower, there could be over 1.5 million sq ft of new quality office space in the market competing for occupiers.
The recent rebound in rent is in line with JLL research data, which showed that gross effective rent for CBD Grade-A office space is still expanding, although at a slower pace compared to the first quarter. Despite this, the primary challenge facing the office market in Singapore is navigating the near-term supply pressures. According to JLL’s Chua Yang Liang, this could potentially keep rent growth modest for the rest of the year. However, the rejuvenation incentives introduced by urban planners offer an opportunity for asset positioning and enhancement, especially for older and functionally obsolete stock. Overall, the demand for office space in Singapore remains strong, with Grade A rents still 25% lower than the historical peak in 2008.