Prime office rents holding up despite slowing economy: Knight Frank

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Occupancy levels in the Raffles Place and Marina Bay precinct of Singapore’s CBD stayed resilient despite a slowing economy in 3Q2023, clocking in at 96% and 94.4% respectively, according to a quarterly office report by Knight Frank. Prime grade office rents in the Raffles Place and Marina Bay precinct rose 0.8% q-o-q to average at $11.05 psf per month.

Some of the factors for the rental growth included occupiers renewing their rental contracts as it is more cost-efficient compared to relocating, a number of banks sourcing for “modest expansion space” and international firms continuing to set up offices in the city-state.

Knight Frank noted that office rents have grown a moderate 3.4% in the first nine months of 2023 and are expected to hold steady in the remaining months of the year due to the lack of new inventory completion’s in the CBD until 2024. This is supported by a stable labour market, with a survey by the Manpower Group indicating 48% of respondents expect to increase headcount in the next few quarters.

“With no new office inventory expected to complete in the CBD until 2024, occupancy levels will remain firm, with very marginal rental upside,” said Calvin Yeo, managing director, occupier strategy and solutions at Knight Frank Singapore.

Knight Frank is maintaining its projection for office rents to grow between 3% to 5% for the whole year, with tenants continuing to take holding positions by renewing or relocating their leases cautiously. “Undergirded by a tight labour market, office tenants will continue to take holding positions by renewing or relocating their leases cautiously,” Yeo concluded.