Office rents to soften next year on the back of record building completions: Savills Singapore

The outlook for office rental rates may soon be trending downwards, according to an October report from Savills Singapore. While a tight supply of Grade A office space has underpinned office rental rates in 2023, a downward adjustment in rents is likely on the horizon.

Savills Research forecasts office rents to soften in 2024 due to record levels of CBD and non-CBD building completions. This is despite office rental growth showing signs of tempering, with the average monthly rents of the basket of CBD Grade A offices tracked by Savills edging up just 0.1% q-o-q in 3Q2023 to $9.64 psf.

Rental numbers in 3Q2023 appear to reflect the general economic uncertainty, global tensions and the high interest rate environment that have led to many occupiers adopting a ‘wait and see’ approach and delaying their expansion plans.

Despite this, Savills is maintaining an expected growth of 2% y-o-y for CBD Grade A office rents in 2023, a result of the reduction in net supply registered in 2022.

However, the Grade A office vacancy rate in the CBD increased in 3Q2023 to 7.1%, up 0.6 percentage points from the previous quarter. This was primarily driven by the addition of Guoco Midtown to its stock.

With office market sentiment looking to remain stagnant through 2024, Savills is predicting a further slowdown in leasing activity resulting in a decline in CBD rents of between 2% to 3% y-o-y. This comes as islandwide office supply is expected to see an influx of projects such as IOI Central Boulevard Towers, Keppel South Central, Paya Lebar Green and Labrador Tower next year.

Though the impact of the new supply may be strong enough to ‘convincingly turn rents around’, Alan Cheong, executive director of research and consultancy at Savills Singapore, cautions that rising business and global political risks may hinder rental growth. He referenced recent attacks on Israel’s soil as an example of a possible Middle East flashpoint that could spill over into the economic realm.

The building also features a restaurant, gym, and a pool. Residents have the opportunity to take advantage of the amenities and events offered at the clubhouse. Maintenance services, security features, and even pet-friendly services are all included in the monthly fee. Residents can count on a hassle-free living experience at Champions Way Condo. With its modern and sophisticated design, Champions Way Condo promises to be the perfect home for those who seek a luxurious and comfortable living.

The outlook for office rental rates in Singapore may be trending downwards according to an October report from Savills Singapore. This is due to record levels of CBD and non-CBD building completions. Despite a tight supply of Grade A office space in 2023 having thus far underpinned office rental rates, a downward adjustment in rents is likely on the horizon.

Savills Research is forecasting office rents to soften in 2024. This is despite office rental growth showing signs of tempering in 3Q2023 with the average monthly rents of the basket of CBD Grade A offices tracked by Savills edging up just 0.1% to $9.64 psf.

The ‘wait and see’ approach undertaken by many occupiers due to the continued economic uncertainty, global tensions and high interest rate environment has likely contributed to the softening of the market. Savills is nevertheless maintaining an expected growth of 2% y-o-y for CBD Grade A office rents in 2023 provided by the reduction in net supply registered in 2022.

The Grade A office vacancy rate in the CBD has however also increased in 3Q2023 to 7.1%, up 0.6 percentage points from the previous quarter. Caution is advised in light of rising business and global political risks. Alan Cheong, executive director of research and consultancy at Savills Singapore referred to recent attacks on Israel’s soil as an example of a possible Middle East flashpoint that could spill over into the economic realm.

With office market sentiment looking to remain stagnant through 2024, Savills is predicting a further slowdown in leasing activity resulting in a decline in CBD rents of between 2% to 3% y-o-y. Nonetheless, islandwide office supply is expected to see an influx of projects in 2024 such as IOI Central Boulevard Towers, Keppel South Central, Paya Lebar Green and Labrador Tower. The impact of the new supply may be strong enough to ‘convincingly turn rents around’ however any such shift remains to be seen.