Office rents plateau in 3Q2024 as CBD vacancy rate climbs for second consecutive quarter: JLL
Gross effective lease for CBD Grade A workplaces in 3Q2024 remained the same at $11.50 psf per month (pm) in 3Q2024, according to data from JLL published on Sept 23. This follows a 0.7% q-o-q development in 2Q2024, a stagnation from the 1.4% q-o-q development in 1Q2024.
The rental growth plateau coincides with a second succeeding quarter of increasing vacancy rates for Quality An offices in the CBD, that reached 8.3% q-o-q in 3Q2024. This increase is mainly as a result of the recent completion of the IOI Central Boulevard Towers (IOICBT). JLL details that tenants are becoming ever more insusceptible to rent increases in the middle of this uptick in job. Excluding the IOICBT, the CBD Grade A vacancy price might have continued to be fairly tight, similar to the post-pandemic low of 5.3% in 1Q2024.
Nevertheless, the world-wide economic slowdown and the ongoing delay in US rates of interest cutbacks have influenced need. Andrew Tangye, head of office leasing and advisory at JLL Singapore, notes that net take-up of workplace has decreased as companies in Singapore face increasing operating expense and activity caution regarding capital expenditures. On top of that, workplace optimisation has led to some occupants minimizing their business footprint upon lease expiration.
The pushback in Shaw Tower’s conclusion from 2025 to 2026 will certainly further worsen scarcity. “Occupiers aiming to expand or relocate in 2025 only have one brand-new property to select from: Keppel South Central (0.6 million sq ft) in the Shenton Way and Tanjong Pagar sub-market. This restricted supply might change industry dynamics back in landlords’ favour,” Tangye says.
Dr Chua Yang Liang, head of study and consultancy for JLL Southeast Asia, feature that minimal and mid-sized inhabitants in growth sectors including financial services, professional solutions, and developing tech industries have actually primarily driven workplace need over the past year.
He adds that the current authorities decision to not honor the Jurong Lake District Master Developer site and place the site back on the reserve lineup has led to a “more constrained overview” for brand-new office supply across Singapore. If this pattern persists, it can bring about limited office supply situations in the medium term, he includes.
Dr Chua even expects business office lease growth to “remain modest” throughout 2024, ahead of a much more robust healing in 2025 due to improved global economic conditions backed by lower interest rates and firms adjusting to new work models and growth approaches.
Tangye anticipates whole CBD opportunity prices to stay raised over the following few quarters as occupiers take some time to move into their new office spaces. However, the actual physical availability of stock in some major workplace clusters continues to be limited.
The setting offers opportunities for occupants wanting to upgrade to superior units in top quality structures, states Tangye. “For instance, a substantial portion of Meta’s former space at South Beach Tower has been re-let or is currently in advanced arrangements,” he adds. The space has attracted attraction from existing tenants in the structure in addition to occupants relocating from many others CBD properties.
