COTD: Office rent growth remains flat in Q3 2024 amidst rising vacancies

Overall CBD Grade A office vacancy rate rose to 8.3% in Q3.

Office rent growth remained stagnant in Q3 2024 as occupiers increasingly resisted rent hikes amidst the short-term uptick in overall vacancy, JLL reported.

Gross effective rent for Central Business District (CBD) Grade A office space for the period remained unchanged at $11.50 per sq ft (psf) per month, following a 0.7% quarter-on-quarter (QoQ) growth the previous quarter.

In the same period, the overall CBD Grade A office vacancy rate rose for the second consecutive quarter to 8.3%. 

“Companies in Singapore continue to grapple with higher operating costs and remain cautious about capital expenditure, requiring a stronger justification for relocation. In addition, workplace optimisation has led to some tenants reducing their office footprint upon lease expiration. Both factors have reduced the net take-up of office space,” Andrew Tangye, Head of Office Leasing and Advisory for JLL Singapore said.

JLL also said that global economic sluggishness combined with the prolonged delay in US interest rate cuts has weighed on demand.

“Rent growth is expected to stay modest through 2024 but is poised for a more robust recovery in 2025, as global economic conditions should improve on the back of lower interest rates and companies adapt to new work models and growth strategies,” Dr. Chua Yang Liang, Head of Research and Consultancy for JLL Southeast Asia said.
 
However, Chua noted the government's recent decision to not award the Jurong Lake District Master Developer site and to return it to the reserve list has created a more constrained outlook for new office supply across Singapore. If this trend continues, it could result in tight office supply conditions in the medium term.