Prime office rents see marginal growth in 2Q2023, but occupancy rates stay resilient

With tight inventory in the CBD and tenancy levels maintained by flight-to-safety plus flight-to-quality patterns, Knight Frank anticipates probably much higher rents than formerly forecasted. It forecasts prime workplace leas to expand in between 3% and also 5% this year, an improvement from the approximated 3% growth projection made by the end of 2022.

Rents for prime workplaces in the CBD neighborhood viewed minimal growth in 2Q2023, based upon properties tracked by consultants. In a June 26 press release, CBRE notes that reliable gross rental fees for Quality An offices in the main CBD place signed up 0.4% development q-o-q to reach $11.80 psf monthly. The company adds that openings costs for the segment remained low at 4%, underpinned by steady net absorption and no new source.

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The development in 2Q2023 takes rentals rise for Grade A core CBD offices to 0.9% for 1H2023. David McKellar, CBRE co-head of office solutions in Singapore, states the total office space market still sees healthy demand, added by the maritime sector, exclusive wealth and property management firms, law practice, professional services, along with government companies. The quarter also found restored growth in renting demand by flexible work area providers, who have noticed boosted occupancy prices in their centres.

Knight Frank says occupancy degrees in Raffles Place and Marina Bay remained healthy, coming in at 95.8% and even 94.4%, respectively, in 2Q2023, as companies remained to seek high quality places in the CBD.

Knight Frank is taking a much more confident shorter-term view, mentioning that Singapore’s labour market stays tight, with a re-employment price of 71.7% in 1Q2023, greater than the pre-pandemic level of 65.9%, while general unemployment stayed low at 1.8%.

In its 2Q2023 workplace industry record, Knight Frank Research found that rental fees for prime grade workplaces it monitor in the Raffles Place and Marina Bay precinct rose 1.2% q-o-q to standard at $10.96 psf per month. It adds that this brought rental growth to 2.5% in the first part of 2023 amidst growing geopolitical stress, cost-push inflations and also prevailing economic gloom.

CBRE notes that sentiment stays cautious in the middle of the existing high-interest rate setting and easing economic growth projections. It includes that shadow workplace in the marketplace stays “rather high” and can likely raise in the second half of the year. CBRE’s head of research for Singapore and Southeast Asia, Tricia Song, states that occupants in technology, cryptocurrency and even consumer banking may think about quiting workplace because of difficult business conditions.

CBRE expects Quality A CBD office rents to remain fairly flat for the remainder of the year before recouping in 2024. “With a solid trend of air travel to quality, in the middle of a diminishing pool of high quality workplaces in the CBD, Core CBD (Grade A) rental fees are keyed for lasting development,” adds Track.

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