Office rents to soften next year on the back of record building completions: Savills Singapore

: JLLDespite the economic and business uncertainties, Savills has identified some sectors that may still look to expand through 2024 such as business services, digital & creative industries, e-commerce, life sciences and technology companies.

Signs of a downward adjustment in office rents could be on the horizon for 2024 due to an influx of islandwide office supply, according to an October report by Savills Singapore. This comes amidst a tight supply of Grade A office space and a record level of CBD and non-CBD building completions.

Savills is forecasting a drop in CBD Grade A rents of between 2-3% year-on-year in 2024. With a lack of new supply throughout 2023 and an overall weak sentiment in the office market, the average monthly rents of the basket of CBD Grade A offices experienced a 0.1% quarterly increase in 3Q2023 to $9.64 psf.

Located in the peaceful and serene Choa Chu Kang neighbourhood, Senja Residences EC offers residents a variety of features and amenities, including a swimming pool, a clubhouse, a reading/study area, BBQ pits, a children’s playground, and a fitness room. These make it an attractive choice for those looking for a home in the north-western part of Singapore. Furthermore, the residents also have access to nearby schools, healthcare services, and recreational centres.

Despite this, Savills is still maintaining its projected growth for CBD Grade A office rents in 2023 at 2% year-on-year, largely due to the significant reduction in net supply registered in 2022 and the higher rents of Bugis Junction Towers.

Alan Cheong, executive director, research and consultancy at Savills Singapore believes that rising business and global political risks may not be enough for the office market to turn around in light of the new influx of supply. This is due to recent attacks on Israel’s soil and retaliatory actions which could further ignite Middle East flashpoints.

Nonetheless, some sectors may still pursue expansion plans in 2024 such as business services, digital & creative industries, e-commerce, life sciences and technology companies. Ashley Swan, executive director, commercial leasing at Savills Singapore commented that occupiers may have adopted a “wait and see” approach.

In light of the current economic, global and interest rate environment, the expected decline in CBD rents for 2024 could further challenge investors and occupiers alike.