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Prime office rental growth slows in 1H2024, up 0.7% q-o-q in 2Q2024: Knight Frank

Nur Hikmah Md Ali
·3-min read


The increasing number of decanted spaces will continue to pressure landlords to moderate their rent expectations, says Calvin Yeo, managing director of occupier strategy and solutions at Knight Frank (Photo: Albert Chua/The Edge Singapore)

SINGAPORE (EDGEPROP) - Prime-grade office rents are showing signs of slowing growth amid weaker demand and a tepid economic climate, according to Knight Frank Singapore. In a June research report, the consultancy notes that rents for prime offices in the Raffles Place and Marina Bay precinct rose 0.7% q-o-q to reach an average of $11.28 psf per month in 2Q2024.

The growth is only marginally higher than the 0.6% q-o-q increase recorded in the previous quarter. It brings rental growth to 1.3% for 1H2024, slowing down from the 2.5% growth recorded in the first half of last year.

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The slower growth comes as some landlords have started to adjust rental expectations, especially for buildings with pockets of available space, Knight Frank observes. At the same time, the prevailing economic uncertainty has resulted in some businesses putting a hold on expansion, while others are starting to resist high rents and are exploring relocating to more affordable premises once their current lease ends.

Read also: Knight Frank appoints Jackie Cheung as Director of ESG for APAC and Singapore

Occupancy levels dipped slightly in 2Q2024, with offices in Raffles Bay and Marina Bay registering an occupancy of 95%, inching down from 95.6% in 1Q2024. Overall CBD occupancy fell from 94.7% in 1Q2024 to 93.6% in 2Q2024.

More decanted spaces

According to Knight Frank, more decanted spaces have surfaced in the market as companies in the financial and technology sectors have begun consolidating their business functions in a central location.

Earlier this month, Chinese tech firm Tencent relocated staff from its former premises at the WeWork at 30 Raffles Place to CapitaSky on Robinson Road. Tencent is said to have inked a three-year deal for the 28,000 sq ft space at The Work Project’s flexible office space at CapitaSky.

Tencent is also expected to move staff currently based at The Work Project’s space at CapitaSpring in Raffles Place to CapitaSky once the lease ends. CapitaSky is owned by CapitaLand Integrated Commercial Trust and a private fund managed by CapitaLand Investment.

US tech giant Meta has also begun consolidating office space following staff layoffs in 2023. The company is said to be giving up its 115,000 sq ft space across seven floors at South Beach Tower — the mixed-use development on Beach Road owned by a consortium between City Developments and IOI Properties Group — and has started relocating staff to its Marina One offices ahead of the lease expiry in September.

Elsewhere, French bank BNP Paribas is reportedly letting go of some of its space at Ocean Financial Centre when the lease expires at the end of the year. Currently, the company occupies six floors at the 43-storey tower at Collyer Quay which is majority-owned by Keppel REIT.

Read also: Strata office sales dip in 2H2023, but strata retail volume picks-up: Knight Frank

The increasing number of decanted spaces will continue to pressure landlords to moderate their rent expectations, says Calvin Yeo, managing director of occupier strategy and solutions at Knight Frank. In addition, owners of quality office assets are expected to lock in tenants for the next few years to preserve rental income in the face of ongoing global uncertainty.

On the flip side, occupiers are expected to continue being cautious in deploying capital expenditure and resisting substantial increases in rents.

As a result, Yeo anticipates office rental growth to stay muted the rest of the year, with prime-grade office rents expected to stay largely unchanged in the next six months. For the whole of 2024, Yeo estimates prime-grade office rental growth to be between 1% and 3%.

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