Limited supply, back-to-office momentum boost Core CBD Grade A office rents

Grade A office buildings in the CBD saw positive net absorption of 0.11 million sq ft in 3Q23.

Gross effective rents of Grade A offices in the core CBD area – Raffles Place, Marina Bay, Marina Centre, and Shenton Way –- have increased by 0.4% QoQ to $11.85 psf/month in 3Q23.

According to CBRE, limited supply and increasing back-to-office momentum gave Core CBD Grade A office rents a boost.

In the same quarter, the market recorded a lower vacancy level of 3.2% and a positive net absorption of 0.11 million sq ft.

“More diversified demand drivers have made up for the slack resulting from the slowdown in the tech sector, as we have seen shadow space tapering off. Occupiers in co-working and asset management have been among the various businesses that have taken up chunks of these shadow spaces, seizing the opportunities to move into fitted office spaces in the prime Marina Bay and Raffles Place areas,” David McKellar, CBRE co-head of Office Services, Singapore said.

Meanwhile, CBRE also observed that the amount of shadow space in 3Q23 has halved to 0.33 million square feet, from the record high of 0.7 million square feet in 1Q23.

“Increased office usage has likely also contributed to this heightened demand for space that we are experiencing. Anecdotally, many companies have been mandating that employees return to the office for more days in a week. In addition, despite concerns following WeWork’s recent challenges, other flex office operators in Singapore appear undeterred, and have continued to expand their presence within the CBD”, McKellar said.

Looking ahead, CBRE expects rents to eventually grow by 1.5% - 2.0% for the full year – outpacing projected GDP growth but at a more modest pace compared with 8.3% rental growth in 2022.