Prime office rents grow in Q1 on renewals but may plateau in H2 2024: Knight Frank

Citi Commercial Pte Ltd

OFFICE rents in the Raffles Place/Marina Bay area rose in the first quarter of 2024, supported by renewals from businesses occupying quality spaces and demand from multinational corporations. 

In the first quarter of the year, prime grade office rents rose 0.6 per cent quarter on quarter, averaging S$11.20 per square foot (psf) per month. On a yearly basis, rents were up 3.4 per cent, slowing from the 5.7 per cent increase from the year-ago period, Knight Frank Singapore said on Monday (Mar 25). 

Occupancy levels in Raffles Place/Marina Bay remained tight at 95.6 per cent, broadly unchanged compared with the previous quarter. In the overall Central Business District (CBD), occupancy stood at 94.7 per cent in Q1, said Knight Frank.

“The tight occupancy levels in the quarter were supported mainly by renewals at slightly higher levels, as most businesses that already occupy quality spaces resisted relocation or expansion, and instead, continued to operate in existing premises,” the consultancy said. 

Singapore remains an attractive destination to multinational corporations, which continue to locate their regional headquarters in the city-state due to the wide talent pool, tax incentives and modern infrastructure. 

For instance, FedEx recently opened a new regional headquarters occupying 29,000 square feet (sq ft) of space in Centennial Tower, while the International Energy Agency will open in Singapore its first office outside of its headquarters in Paris, to serve as a hub for its activities and engagements in the region.

However, there is a possibility of rents flattening out in the second half of 2024, as some technology companies and banks are in the process of laying off staff and consolidating business functions, Knight Frank said. This could lead to sections of office space being returned upon lease expiry. 

Based on a labour market report released by the Ministry of Manpower, retrenchments rose to 14,590 in 2023 from a record low of 6,440 the previous year. These were mainly from sectors most affected by global economic headwinds such as electronics manufacturing and wholesale trade. 

This year, about 3.4 million sq ft of new office space is expected to be completed in the CBD and city-fringe areas.

New builds, such as IOI Central Boulevard Towers and Keppel South Central, could attract “blue-chip tenants” and provide “flight-to-quality” opportunities for companies to move into better buildings should rents be pegged reasonably, Knight Frank said. 

For the whole of 2024, it expects rents to grow moderately between 1 and 3 per cent. 

“Quality buildings that can command a premium are expected to maintain tight occupancy levels, while landlords of older buildings increasingly have to consider upgrading their assets to unlock more potential recurring income,” the consultancy said.

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