URA’s headline office rental index registered a 4.9% increase qoq in 3Q2023, which was double the 2.3% growth qoq in the previous quarter.

URA’s statistics on real estate showed that, based on leases signed in 3Q2023, median rents had fallen for the first time in 5 quarters in Category 1 office space. URA defines this as buildings located in the Core Business District including the Downtown Core, Orchard Planning Area. The rents were down by 2.3% from one quarter to the next.

Rents fell by 4.5% quarter-on-quarter for the first time since eight quarters, for office space in Category 2, which URA defines to be all other areas of office outside of Category 1.

This is in line with JLL findings that CBD Grade A office rents decreased in 3Q2023, ending a nine-quarter streak of growth. JLL’s average gross effective rents tracked for CBD Grade-A offices fell by 0.3% from 2Q2023, to $11.29 per square foot (psf) per month.

According to Wong Xian Yang of Cushman & Wakefield, head of research in Singapore and Southeast Asia, the Downtown Core was the main driver of net demand for 3Q2023. Net office demand there reached 398.264 sq ft. He adds that it was the highest q-o q growth of net demand since 1Q2020.

Wong said that financial and professional services were the main drivers of demand for office space in the CBD. They accounted for 58% of the new leases signed in the CBD during the first nine-month period of 2023. This is up from just 26% in 2022.

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Tricia Song is the CBRE’s head of research in Singapore and Southeast Asia. She says that more diverse demand drivers have compensated for the slack caused by the slowdown within the tech sector. In 3Q2023, the most active sectors were private wealth, asset-management and consumer goods.

The tighter market conditions caused by project redevelopments and the consequent stock removals have also contributed to an increase in occupancy from 89.2% to 90% from 2Q2023.

URA data shows that in the 3Q2023, about 0.45m sq ft of space was removed from inventory. This could be attributed to redevelopments at Faber House and Central Square, as well as Central Mall.

The Central region is expected to see a moderated rental growth over the next few quarters, due to an anticipated higher interest rate regime for a longer period of time and global economic uncertainty.

JLL predicts that islandwide office completion will reach a seven-year peak in 2024. In the CBD, close to 1.9m sq ft (1.3m sq ft and 0.6m sq ft respectively) of Grade-A offices are scheduled for completion.

JLL estimates that as of 3Q2023, close to 1.1m sq ft was still uncommitted.

In the Central Region in 3Q2023, only 57 transactions were made for office strata, which is the lowest number since 3Q2020 when only 47 transactions were made.

CBRE Research predicts that Grade-A Office Rents in the Core CBD will grow between 1.5% and 2% over the course of the year. This is faster than projected GDP growth but slower than 8.3% in 2022.