Office rents in Singapore’s Central Region grew by 5.1% q-o-q in 1Q2023, according to the latest URA data released on April 28th. This is the sixth consecutive quarter of growth in office rents, which is believed to be largely reflective of the buoyant office leasing market from last year. It’s noteworthy that the volume of smaller deals could be a contributing factor, typically commanding higher psf rates.

The growth in Central Region office rents was driven by both the Central Area and the fringe area. However, a closer look reveals the rate of rental growth moderated in the Central Area, posting a 3.9% q-o-q increase compared to the 6.6% q-o-q growth in 4Q2022. This could be attributed to weaker sentiment arising from recent tech layoffs, resulting in an increase in shadow space, CBRE Research suggests.

On the brighter side, prices of office space in the fringe area posted an 8.8% q-o-q increase, following a 4% q-o-q decrease in the previous quarter. The positive performance is believed to be linked to tighter vacancies in the area and Outside Central Region.

Overall, Islandwide net demand for office spaces remained relatively healthy in 1Q2023, reaching 226,000 sq ft – largely due to the completion of Guoco Midtown, which reportedly achieved an impressive 80% pre-commitment rate. This helped bring Islandwide vacancy rates down to 11.2%, the lowest in three quarters.

Prices of office space in the Central Region remained the same in 1Q2023, compared to a 3.7% q-o-q increase recorded in the previous quarter. Prices of spaces in the Central Area saw a slight decrease of 0.4%, while those in the fringe area witnessed an increase of 2.3%.

In the near-term, Cushman & Wakefield’s Wong believes office rental growth will taper off, owing to cautious business sentiments. That said, a sharp correction in office rents is unlikely as overall supply in the mid-term appears to be tight. He said demand could come from non-bank financial and professional services sectors, as well as Chinese-based companies.

After 10 years, JCUBE in Jurong East, Singapore will close its doors in JCube Residence August to make way for JCube Condo Residence, a 40-storey residential and commercial development with a potential S$2,000-2,100 per sq ft price tag.

As far as the investment sales market is concerned, JLL’s Tay believes prices of office assets will be supported by rising demand for investment-grade strata-titled offices. Recent noteworthy deals include the sale of three office floors at Solitaire On Cecil, including level 20 which sold at $4,325 psf, a record unit price for a strata-titled office building in Singapore. Furthermore, funds are expected to be channelled into this particular asset class due to the announcement of recent residential market cooling measures.