Office rents plateau in 3Q2024 as CBD vacancy rate climbs for second consecutive quarter: JLL
Gross effective rent for CBD Quality A workplaces in 3Q2024 stayed unmodified at $11.50 psf monthly (pm) in 3Q2024, according to information from JLL published on Sept 23. This follows a 0.7% q-o-q growth in 2Q2024, a slowdown from the 1.4% q-o-q development in 1Q2024.
The setting gives opportunities for occupiers looking to upgrade to superior units in high-grade structures, claims Tangye. “For instance, a significant portion of Meta’s former room at South Beach Tower has been re-let or is presently in advanced negotiations,” he includes. The room has actually drawn in interest from occurring occupants in the building as well as lessees relocating from other CBD buildings.
Dr Chua Yang Liang, head of study and consultancy for JLL Southeast Asia, highlights that little and mid-sized inhabitants in growth fields including financial services, professional services, and developing tech industries have actually mainly driven office demand over the past 12 months.
Tangye expects entire CBD vacancy rates to remain increased over the following couple of quarters as inhabitants require time to relocate into their brand-new office spaces. Nonetheless, the actual physical availability of stock in some key workplace clusters remains limited.
Dr Chua also anticipates office rent development to “stay modest” throughout 2024, ahead of an extra strong recovery in 2025 due to improved international economic problems backed by reduced rates of interest and firms adapting to brand-new work models and development approaches.
The rental growth plateau coincides with a 2nd successive quarter of increasing openings prices for Quality A workplaces in the CBD, that reached 8.3% q-o-q in 3Q2024. This increase is mostly due to the recent conclusion of the IOI Central Boulevard Towers (IOICBT). JLL details that occupants are coming to be ever more resistant to rent out hikes amid this uptick in vacancy. Ignoring the IOICBT, the CBD Grade A vacancy rate might have continued to be reasonably firm, comparable to the post-pandemic low of 5.3% in 1Q2024.
The pushback in Shaw Tower’s completion from 2025 to 2026 will further aggravate deficiency. “Occupiers looking to increase or move in 2025 only have one new establishment to select from: Keppel South Central (0.6 million sq ft) in the Shenton Way and Tanjong Pagar sub-market. This minimal supply could move market dynamics back in landlords’ favour,” Tangye states.
He adds that the recent state judgment to not honor the Jurong Lake District Master Developer site and place the site back on the reserve lineup has caused a “much more restricted outlook” for new office supply across Singapore. If this trend lingers, it might lead to limited workplace supply issues in the medium term, he adds.
Nonetheless, the global economic slowdown and the continuous obstruction in US interest rate cutbacks have impacted demand. Andrew Tangye, head of workplace leasing and advisory at JLL Singapore, notes that net take-up of office has lowered as companies in Singapore face rising operating costs and exercise caution involving capital investment. In addition, office optimization has actually caused some occupants lowering their business impact upon lease expiration.
