Singapore posts 1.4% QoQ rise in net effective cost of office market: report

It ranked fifth highest in growth.

There is an increase in rents for Singapore office market in the second quarter (Q2) of 2023 following the lack of supply, Savills said.

With high-costs of fit outs - an increase of 20% from 2019 days - and the increase of rental lease terms from the three-year tenure to the five-to-seven-year term, rents of Singapore’s CBD Grade A offices are still on an upward trajectory. 

“There is also an increasing trend of tenants opting for lease renewals instead of relocating or expanding. Additionally, with no appetite to incur capital expenditure for fit-outs, many tenants are choosing to stay in their current premises,” said Savills.

Across Savills’ data, Ho Chi Minh City is reported to have the largest proportional increase in Q2 with net effective cost increase 4.6% as economic growth has increased occupier demand, and fit-out cost has also risen. 

Next is Paris with a growth of 3.7% and Dubai by 2.7%. Whilst in New York, one of the office markets frequently examined in the media, net effective prime office costs in the Downtown area grew 0.9% on the previous quarter and in Midtown they were up 1.6%.

Alan Cheong, Executive Director, Savills Research & Consultancy, said globally, whilst the overall occupational price for offices has tapered, for Singapore, the issue is slightly different. 

“Owing to a relative lack of new supply and that tenants having signed on long leases, Grade A CBD office rents in Q2/2023 still eked out a 0.5% QoQ increase,” he added.