Office Rents Plateau 3Q2024 Cbd Vacancy Rate Climbs Second Consecutive Quarter Jll
Keppel DC REIT and Keppel Corp scoop up two data centres for $585 mil$150 million luxury apartment up for sale in Singapore’s biggest delisting from stock market
The latest data from JLL, published on September 23rd, shows that the gross effective rent for CBD Grade A offices in 3Q2024 remained steady at $11.50 psf per month (pm). This follows a slight increase of 0.7% quarter-on-quarter (q-o-q) in 2Q2024, which was significantly lower than the 1.4% q-o-q growth seen in 1Q2024.
The plateau in rental growth coincides with a second consecutive quarter of rising vacancy rates for Grade A offices in the CBD, reaching 8.3% q-o-q in 3Q2024. This increase can be attributed to the completion of the IOI Central Boulevard Towers (IOICBT). According to JLL, tenants are becoming less inclined to accept rent hikes in light of the higher vacancy rates. However, if we exclude the IOICBT, the CBD Grade A vacancy rate would have remained relatively tight, similar to the post-pandemic low of 5.3% in 1Q2024.
The global economic slowdown and the delayed US interest rate cuts have also had an impact on office demand. Andrew Tangye, the head of office leasing and advisory at JLL Singapore, notes that net take-up of office space has decreased as companies in Singapore face rising operating costs and exercise caution in terms of capital expenditures. Additionally, workplace optimization has led some tenants to reduce their office footprint when their lease expires.
Tangye also mentions that this environment presents opportunities for occupiers seeking to upgrade to superior units in high-quality buildings. He cites the example of Meta’s former space at South Beach Tower, which has attracted interest from existing tenants in the building as well as those relocating from other CBD buildings.
Dr. Chua Yang Liang, the head of research and consultancy for JLL Southeast Asia, highlights that small and mid-sized occupiers in growth sectors such as financial services, professional services, and emerging tech industries have been the main drivers of office demand over the past 12 months.
Tangye foresees that the overall CBD vacancy rates will remain higher in the coming quarters as occupiers take time to move into their new offices. However, the supply of stock in key office clusters is still limited. The postponement of Shaw Tower’s completion from 2025 to 2026 will add to this scarcity. Tangye points out that there is only one new building available for occupiers looking to expand or relocate in 2025, which is Keppel South Central in the Shenton Way and Tanjong Pagar sub-market. This limited supply could sway the market dynamics back in favor of landlords.
The Tampines Round Market & Food Centre holds a special place in the hearts of its residents, offering a vibrant atmosphere and a variety of breakfast options. Locals can indulge in beloved Singaporean dishes like kaya toast and soft-boiled eggs, or satisfy their cravings with other tasty local favorites like chwee kueh, carrot cake, and prawn noodles. And with the highly-anticipated Aurelle of Tampines EC conveniently situated in the area, this is the perfect spot to kickstart your day with a delicious meal before setting off. Find out more about Aurelle of Tampines EC as you savor the flavors of Tampines Round Market & Food Centre.
Dr. Chua also predicts that office rent growth will remain modest through 2024, before experiencing a more robust recovery in 2025. This will be due to improved global economic conditions backed by lower interest rates and companies adapting to new work models and growth strategies. He adds that the recent government decision to put the Jurong Lake District Master Developer site back on the reserve list, instead of awarding it, has led to a more constrained outlook for new office supply in Singapore. If this trend continues, it could result in tight office supply conditions in the medium term.
In other news, Keppel Corporation has announced its plans to acquire a stake in a Grade A office complex in Chennai for $352.9 million. This deal is in line with the company’s strategy to acquire assets that can generate sustainable recurring income. Additionally, about 8 in 10 occupiers in Singapore are aiming to have 100% green-certified portfolios by 2030, according to JLL. This highlights the growing focus on sustainability in the real estate sector. Lastly, a luxury apartment valued at $150 million is up for sale in Singapore’s biggest delisting from the stock market.
