Prime grade office rents in Raffles Place, Marina Bay up 0.6% QoQ in Q1

There is a possibility of rent stabilization in the second half of 2024.

The prime grade office rents in the Raffles Place/Marina Bay precinct experienced an increase to an average of $11.20 psf pm in the first quarter of 2024, marking a 0.6% quarter-on-quarter expansion, as per Knight Frank.

Occupancy levels in these prime areas, along with the overall Central Business District, have also remained tight, standing at 95.6% and 94.7% respectively during Q1 2024.

The consistency is attributed mainly to the renewal of leases at slightly elevated rates from previous positions. Most businesses occupying quality spaces have shown a preference for continuity over relocation or expansion, thus maintaining tight occupancy levels.

Singapore's allure to the international business community remains robust, with multinational corporations (MNCs) continuing to establish their regional headquarters in the city-state. Factors such as the abundant talent pool, tax incentives, diversified economy, and modern infrastructure contribute to this attractiveness. 

The city-state hosted 4,200 MNCs in 2023, surpassing Hong Kong's 1,336 MNCs in the same period, as per a Bloomberg Intelligence report.

However, Knight Frank said that despite Singapore's strong position as a commercial hub and the persistent tight occupancy rates in premium buildings, there is a possibility of rent stabilization in the second half of 2024.

“Although rents remain supported by renewals as most corporates resist relocation or expansion to avoid capital expenditure, there is a possibility of rents flatlining in the second half of 2024, as corporates such as technology firms and banks restructure, and reduce their footprints,” said Calvin Yeo, managing director and occupier strategy and solutions at Knight Frank Singapore.

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The removal of safe management measures in 2022 resulted in a decline in the proportion of firms offering flexible work arrangements (FWAs), according to the Minister of Manpower (MOM). 

FWAs remain significant, with 80% of surveyed occupiers anticipating a four-day office schedule by January 2025.  

Despite global retrenchment exercises, particularly in the technology sector, Singapore's overall unemployment rate remained low and stable at 1.9% in 2023, according to MOM's labour market report. 

In 2024, businesses are expected to proceed with cautious optimism amidst geopolitical tensions. A two-tier market prevails in the office landscape, with quality buildings maintaining tight occupancy while landlords of older properties explore upgrades to enhance recurring income.

Looking ahead, Knight Frank forecasts moderate rent growth between 1% and 3% for 2024.