_Office Market Update Q1 2023

Highlights

• Prime Grade office rents in the Raffles Place / Marina Bay precinct increased to an average of S$10.83 psf pm, recording a 1.3% q-o-q growth in Q1 2023. As supply of new office inventory continues to remain tight especially in the Central Business District (CBD), the upward rental trend continued to reflect a resilient market.
• Occupancy levels in the Raffles Place / Marina Bay precinct and in the overall CBD remained steady and healthy at 95.4% and 94.1% respectively in Q1 2023, broadly unchanged from the corresponding 95.5% and 94.2% in the previous quarter.
• The unchanged occupancy rates were largely due to selected office buildings commencing asset enhancement initiatives (AEIs) or redevelopment, removing stock from the market. Quality office spaces remained full as businesses continued to relocate headquarter functions to Singapore, with the city state a “flight-to-safety” hub amid seemingly unrelenting global disruptions.
• The fallout in the technology sector continues to hog the headlines with messages of business contraction and layoffs. However, in Singapore, while technology firms are no longer expanding as they were before the pandemic, neither is the pre-termination quantum significantly affecting the market at this point.
• In the CBD, the supply of major pre-termination space by technology firms was relatively benign at approximately 100,000 sf. Shadow spaces that emerged were seized upon by smaller users in flight-to-quality moves from ageing office buildings upon lease expiry.
• As overall CBD rents rose moderately in Q1 2023, the office sector in Singapore remains on an even keel due predominantly to flight-to-quality demand in a stable eco-system of cautious expansion amid wider uncertainty. Prime office rents are thus expected to be stable with an increment to be around 3% for the whole of 2023.

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