Singapore’s Central Business District (CBD) saw a notable decrease in office vacancy rates, dropping to 6.9% in the fourth quarter of 2024, reversing the two-quarter increase earlier in the year. This improvement follows a peak of 8.3% in Q3 2024. The data, released by JLL Research, also showed that the gross effective rent for Grade A office spaces in the CBD rose by 0.3% quarter-on-quarter (qoq), reaching SGD 11.53 per square foot per month in Q4 2024. This marks an overall 2.4% increase in office rents for the full year, a significant improvement compared to the 0.7% growth recorded in 2023.
Dr. Chua Yang Liang, Head of Research and Consultancy for JLL Southeast Asia, attributed this positive trend to landlords’ focus on tenant retention and maintaining occupancy amidst heightened market uncertainty. He noted, “The strategy to retain tenants and manage occupancy effectively helped reverse the upward trend in vacancy rates, bringing the CBD vacancy down to 6.9% in Q4 2024.”
Andrew Tangye, Head of Office Leasing and Advisory for JLL Singapore, highlighted that leasing activity in new office developments has picked up in the latter half of 2024, with expectations that this momentum will extend into 2025. For instance, IOI Central Boulevard Towers is projected to be over 80% leased in the first half of 2025, while Keppel South Central, completing in early 2025, is already in advanced negotiations for its first leases.
The demand for office spaces between 2,000 and 5,000 square feet remains strong, particularly from tenants in sectors such as investment management, professional services, and emerging technology. Many landlords are responding to this demand by offering “capex light” leasing options, including ready-fitted units or capital expenditure subsidies, to accommodate tenants with budget constraints.
Raffles Place, a key sub-market in the CBD, outperformed other areas in Q4 2024 in terms of rent performance. This success is largely attributed to its prime location and landlords’ flexibility in subdividing larger spaces to meet the needs of smaller tenants.
Looking ahead, Tangye anticipates that vacancy rates may fluctuate in the short term as new developments like Keppel South Central are completed and tenants move into their newly leased spaces. However, excluding the impact of new stock, the CBD vacancy rate is expected to remain tight, with the Prime Grade sector likely seeing even lower vacancies below 4%. The vacancy rate is expected to continue its decline, driven by the ongoing flight-to-quality trend and the return-to-office movement. Additionally, moderate economic growth and business expansion could further fuel office demand in the medium term.
Dr. Chua echoed this sentiment, predicting that while rents may remain stable for the next quarter or two, they are likely to recover in the second half of 2025 as global demand strengthens. He emphasized that the current rental environment presents a brief window of opportunity for occupiers to expand or upgrade their office spaces before supply tightens between 2H25 and 2027.
On the investment front, Singapore’s office market exceeded expectations in 2024, with two high-profile transactions surpassing SGD 500 million each. In November 2024, Capitaland Integrated Commercial Trust sold 21 Collyer Quay to a third party, reportedly linked to the Haidilao co-founders’ family, for SGD 688 million. This transaction follows the May 2024 sale of the Mapletree Anson for SGD 775 million. The exit yield for both properties was reportedly below 3.5%.
Ting Lim, Head of Capital Markets for JLL Singapore, observed that developers are becoming more willing to divest their assets, contributing to a new pipeline of office projects set for sale in 2025. He expects that investors will become more active in the latter half of 2025, driven by successful capital raising efforts, potential interest rate adjustments, and improving market conditions.
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