![](jpg/sg_buildings_03d98.jpg)
Core CBD premium office rents in Singapore snap 2-year growth streak in Q3
Rents dipped by 0.1% in Q3, the first decline since Q1 2021.
A recent release by Colliers revealed Singapore’s core CBD Premium & Grade A office rents ended their nine consecutive quarters of growth (-0.1% QOQ) during 3Q 2023 to reach SGD 11.51 per sq ft, a reversal from the 0.6% QOQ growth during the previous quarter and marking a tepid start to 2H 2023.
This decline in rents was driven by the Premium segment, particularly those in Shenton Way / Tanjong Pagar. According to Colliers, rents for the Core CBD Grade A segment have sustained due to resilient demand and limited supply, amidst a continued flight to quality. Meanwhile, Grade A rents in the Fringe CBD and City Fringe appear to be catching up as tenants seek financially attractive options near the CBD.
Mr Bastiaan van Beijsterveldt, Managing Director | Singapore at Colliers, said "Rents have started softening in line with macroeconomic weakness. However, they remain supported by stable market fundamentals leading to tight vacancy. As near-term market dynamics come into play, such as quality fitted-out spaces coming to market and occupancy pressures, opportunities may arise for occupiers to take advantage of these. As such, they should revisit their real estate strategies and plan their needs tactically.”
In light of global market volatility and high landlord expectations, leasing has slowed, with demand driven primarily by renewals and smaller spaces. However, market power may shift away from landlords in the near term as more secondary spaces are coming to market. Consequently, landlords may have to offer more incentives to secure new tenants, or be more flexible in rental negotiations; flexibility and openness will be key in securing both renewals and new leases, as high costs and space optimization are factored into tenants’ budgets.
The trends of refining workplace utilisation and flight to quality have continued, with vacancy tightening across the Grade A submarkets, but increasing across the Grade B submarkets. However, as shadow and secondary spaces build up, vacancy and rents may come under further pressure from the increasing amount of available space.
Due to the lack of comparable transactions and the strong holding power of asset owners, the average capital values for Core CBD Premium and Grade A offices remained flat QOQ at SGD3,050 per sq ft during Q3 2023. As such, net yields have contracted slightly, to 3.54%.