Prime office rents see marginal growth in 2Q2023, but occupancy rates stay resilient
The improvement in 2Q2023 takes rentals boost for Grade A core CBD offices to 0.9% for 1H2023. David McKellar, CBRE co-head of office services in Singapore, says the total office market still sees well-balanced interest, contributed by the maritime industry, private wealth and even property management companies, law firms, professional solutions, and state companies. The quarter additionally found restored development in leasing need by flexible workspace providers, that have actually noticed boosted occupancy rates in their centres.
CBRE notes that belief remains cautious amidst the current high-interest rate atmosphere and subsiding financial development estimates. It includes that shadow workplace in the market continues to be “rather high” and can possibly increase in the second part of the year. CBRE’s head of research for Singapore and Southeast Asia, Tricia Song, says that tenants in technology, cryptocurrency along with customer banking may look into quiting office space in light of difficult business conditions.
Knight Frank says tenancy levels in Raffles Place and Marina Bay stayed healthy, coming out at 95.8% and 94.4%, respectively, in 2Q2023, as services continued to seek high quality spaces in the CBD.
Rents for prime offices in the CBD area saw small development in 2Q2023, based on properties tracked by specialists. In a June 26 news release, CBRE notes that efficient gross rental fees for Grade An offices in the center CBD location registered 0.4% progress q-o-q to get to $11.80 psf monthly. The firm adds that openings costs for the segment remained low at 4%, underpinned by steady net absorption and no new supply.
With strict inventory in the CBD and also occupancy levels maintained by flight-to-safety including flight-to-quality patterns, Knight Frank anticipates possibly much higher rents than previously predicted. It forecasts prime office rental fees to expand between 3% and 5% this year, a renovation from the approximated 3% growth projection made at the end of 2022.
CBRE anticipates Quality A CBD office rental fees to remain reasonably standard for the remainder of the year before recouping in 2024. “With a solid pattern of flight to quality, amidst a shrinking pool of high quality offices in the CBD, Core CBD (Grade A) rents are topped for long-lasting development,” adds Tune.
Knight Frank is getting a more positive shorter-term perspective, noting that Singapore’s labour market remains tight, with a re-employment price of 71.7% in 1Q2023, more than the pre-pandemic degree of 65.9%, while overall unemployment remained low at 1.8%.
In its 2Q2023 workplace field record, Knight Frank Research found that rents for top grade offices it tracks in the Raffles Place and Marina Bay precinct rose 1.2% q-o-q to average at $10.96 psf per month. It adds that this brought rental growth to 2.5% in the very first half of 2023 amidst rising geopolitical tensions, inflationary pressures and prevailing economic gloom.