CBD Grade A office rents show stagnation in 1Q24

Rents for CBD Grade A offices held steady at $9.65 psf.

With new office supply and leases set to expire in 2025 and 2026, office rents for CBD Grade A offices held steady at $9.65 psf in 1Q24, ending eight quarters of increase.

Savills noted that whilst rental increases in high-occupancy offices occurred, some buildings adjusted rents to attract tenants amidst declining occupancies.

In 1Q24, rents for Grade A offices in the micro markets of City Hall and Marina Bay dipped by 0.1% and 0.2%, respectively. The decline is offset by rental increases in Beach Road/Middle Road, increasing 0.2% QoQ due to the higher rents at Bugis Junction Towers.

Savills also reported a drop in transaction values to 95%, totalling $69.7m in the same period due to a lack of block transactions and strata office investment sales.

Meanwhile, Grade A offices in Orchard Road, Shenton Way, Tanjong Pagar, and Raffles Place recorded no rental changes in 1Q24.

Vacancy rates for these submarkets declined except for Raffles Place, which grew 0.2% of a percentage point (ppt) to 7.3%, whilst Shenton Way stayed flat at 6%.

The vacancy rate of CBD Grade A offices fell for the second consecutive quarter by 0.4 of a ppt to 6.1% in 1Q24, whilst Grade AAA and A buildings fell 0.8 ppt to 6.2% and 0.4 ppt to 7.3%, respectively.

For Grade AA buildings, vacancy rates remained at 4.8% after three consecutive quarters of decline.

In addition, other submarkets such as City Hall, Centennial Tower, and Suntec Tower record declines ranging from 0.1 of a ppt to 2.1 ppts.

“If the Grade A CBD market sees greater supply, the resistance would be much lower. However, with the three-year average annual new supply of Grade A CBD space expected at about 808,000 sq ft, versus the annual average ten-year net take up at 696,000 sq ft, landlords may still have that negotiation power and any downward rental adjustments may be mild. Thus, we maintain our Grade A rental forecast at -2% to -3% for 2024,” Alan Cheong, executive director for Research & Consultancy at Savills Singapore, said.