How landlords are responding to weakening demand for office

In 3Q23, CBD investment-grade office rents fell for the first time in 10 quarters.

Landlords have taken proactive measures to compete for tenants as demand for office space in Singapore continues to weaken.

According to JLL, more occupiers in Singapore are becoming wary and cost-conscious amidst the prolonged downbeat economic environment. 

In response, landlords have begun subdividing large spaces, providing fitted spaces, and adjusting their rental expectations, amongst others.

Data from JLL showed that rents dropped 0.3% QoQ in 3Q23. In the same quarter, CBD investment-grade office rents fell for the first time in 10 quarters.

“Tenants took advantage of the soft leasing market to negotiate for more favourable rental terms,” JLL said.

“With interest rates remaining elevated alongside a softening leasing market, CBD office assets faced greater reprice pressure in 3Q23,” JLL added.

In the coming quarters, JLL warned that downward pressure on rents will “intensify.”

“Interest rates will remain high and decline in office asset prices will likely be extended,” the real estate expert added.