Office rental rates rise 1.1% in 2023

The 2023 record is smaller than the 2022 growth of 2.2%.

Singapore office rental rates rose 1.1% in 2023, slightly lower than the 2.2% growth in 2022.

Savills attributed the small growth "to the tight market and major leases not expiring until 2025."

The leasing market has been affected by economic uncertainties, a lack of demand for large spaces, and layoffs resulting in the loss of major tenants.

Meanwhile, vacancy rates for CBD Grade A offices dipped 0.4% ppt QoQ to 6.7% in 4Q23 but increased 1.1 ppts in 2023.

Despite higher vacancy levels, the market is still tight and may remain so until larger new buildings get launched this year.

In 2024, Savills expects rental rates of CBD Grade A offices to moderate to 2% - 3% YoY.

Savills also expects a significant market change in 2025 as major leases expire. In addition, landlords may feel pressure in 2024 with the completion of new buildings.

“We expect uncertain economic and geopolitical conditions to continue to weigh down the market over the next quarters with an uptick of 'shadow space' contributing to downward pressure. However, the office leasing market has generally shown its resilience and this is likely to continue over the coming year leading to rents moderating only slightly,” Ashley Swan, executive director for Commercial at Savills Singapore, said.