CBD Grade A vacancy rates to hit 5.6% in 2023

Cushman & Wakefield said net supply will outpace net demand this year.

Real estate expert Cushman & Wakefield expects CBD Grade A vacancy rate to reach 5.6% in 2023 as net supply outpaces net demand in the market.

In a report, C&W said the increase in supply for this year is mainly due to the IOI Central Boulevard Tower, which will contribute 1.24 million sf.

The expert, however, underscored that since the supply is concentrated in one development, "the influx of new supply is not expected to impact the entire CBD."

"IOI Central Boulevard’s rental premium (>$12 psf pm) over the average CBD Grade A office rent ($10.57 psf pm as of Q2 2023) may deter some occupiers," C&W added.

Morgan Stanely will take up 100,000 sf at the upcoming IOI Central Boulevard Towers.

Financial and professional services firms like Morgan Stanley have partially offset the slowing demand from tech firms whose share of new leases fell to about 20% in H1 2023.

"Asset management, private banking and insurance firms have taken up spaces to capitalise on Asia’s growing wealth," C&W said.

C&W's report showed that financial and non-bank firms contributed to 49% of CBD's new leases, up from 21% in 2021.