Overall Outlook
Strong take-up in 2H24 driven mainly by pre-commitments at IOI Central Boulevard. The Singapore office market remained resilient in FY24, with demand concentrated within the Core central business district (CBD) Grade A offices. This was largely fuelled by the continued flight-to-quality trend, as tenants sought newer, more sustainable office spaces that offered enhanced amenities and workplace efficiencies. Leasing activity in the first half of the year was subdued, but a rebound in the latter half led to a total net demand of c.0.9mn sqft, driven primarily by the strong pre-commitment rates at IOI Central Boulevard Towers and Labrador Tower. However, excluding these developments, net demand would have been marginally negative, reflecting limited large occupier activity as companies prioritised lease renewals over relocations due to CAPEX constraints. The Fringe CBD market also saw steady take-up, particularly in City Hall and Beach Road, while City Fringe and Suburban office spaces maintained stable occupancy levels.
Looking ahead, new supply in FY25 is expected to be limited, with the completion of Keppel South Central adding c.650,000sqft of office space to the CBD fringe market. While supply-side pressures remain modest, occupiers are expected to continue favouring premium office developments, reinforcing a two-tier market where older, less efficient buildings in the CBD could experience rising vacancies as secondary stock increases.
Rents of Grade A offices in the Core CBD are expected to grow 2%-3% in FY25. Singapore’s office rental market exhibited measured growth in FY24, with Core CBD Premium and Grade A office rents rising by 0.1% q/q to SGD11.68psf in 4Q24, marking an annual increase of 1.7%, according to Colliers. This growth was an improvement from the 0.8% y/y growth registered in FY23, supported by limited new supply and lease renewals at higher rates, as tenants sought to secure space in premium developments. It was further underpinned by the ongoing flight to quality, as businesses prioritised efficiency and sustainability in their real estate strategies.
Among different office submarkets, Fringe CBD Grade A rents increased by 0.3% q/q to SGD10.14psf, while City Fringe rents saw a marginal dip of 0.2% due to softer demand. The suburban office market remained stable, with rents holding at SGD5.29psf, reflecting steady demand for non-CBD office space. According to Cushman, CBD Grade A rental growth is expected to accelerate to 2%-3% in FY25, driven by tighter supply conditions and potential relocations as some occupiers have fully amortised their fit-outs after several cycles of renewals at their current locations. Nonetheless, landlords of older non-Grade A buildings may face rising vacancies, requiring them to offer more incentives to attract tenants.
Pick up in leasing of smaller spaces of below 10,000sqft. One of the key trends in FY24 was the shift in leasing preference towards more flexible and sustainable office solutions. While the banking, finance, and technology sectors took a more cautious approach, previously overlooked sectors such as legal and professional services saw an uptick in leasing activity, particularly for office spaces below 10,000sqft. Occupiers remain sensitive to cost, leading landlords to offer incentives such as longer fit-out periods and flexible lease structures to attract tenants. However, landlords of ageing office assets must adapt to changing occupier expectations by investing in upgrades or risk rising vacancies.
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The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). This report is intended for “Accredited Investors” and “Institutional Investors” (defined under the Financial Advisers Act and Securities and Futures Act of Singapore, and their subsidiary legislation), as well as “Professional Investors” (defined under the Securities and Futures Ordinance of Hong Kong) only. It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose.
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DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 13 th Floor One Island East, 18 Westlands Road, Quarry Bay, Hong Kong Tel: (852) 3668-4181, Fax: (852) 2521-1812
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DBS Bank Ltd
12 Marina Boulevard, Marina Bay Financial Centre Tower 3
Singapore 018982
Tel. 65-6878 8888
Company Regn. No. 196800306E