Demand for office spaces to cool down in 2023: C&W

Rents are expected to increase by 2%-4% YoY next year.

Property expert Cushman & Wakefield expects a slower office rental growth to cool in 2023 as firms assess their expansion plans due to economic headwinds.

In 2023, C&W forecasts that CBD Grade A office rents will grow by 2% to 4% YoY, down from its 6.1% YoY expected growth for 2022.

C&W, however, said tight supply will underpin rental growth for 2023.

“Take-ups at new CBD developments have been healthy. Guoco Midtown,  poised to be completed by the end of 2022, is expected to be more than 60% pre-committed by completion,” C&W said. 

“The only new CBD Grade A development in 2023, IOI Central Boulevard Towers, would deliver about 1.2 msf of office space and is 30% pre-committed by e-commerce giant Amazon,” C&W added.

The CBD Grade A office supply pipeline is limited over the mid-term, with an expected 0.7 million sf (msf) of new stock per annum from 2023 to 2027, lower than the ten-year annual average of about 1 msf. 

Potential redevelopments in the CBD could also tighten office supply and drive displacement demand in the market and the progressive expiry of transitional office sites over the next few years would accentuate this trend. 

“This could bolster pre-commitment rates at upcoming new developments,” C&W said.