Prime office rents in Raffles Place and Marina Bay grew by 1.7% over a period of time to $10.69 per sq ft in 4Q2022, according the data from Knight Frank. The full-year increase of prime office rental at 5.5%, exceeding Knight Frank’s prediction for three% or 5% at the beginning this year.
According to the firm the rents were influenced by the limited inventory of new office space and the constant demand for co-working and traditional office space. “The office market has turned into an investment market for landlords,” says Calvin Yeo the managing director of occupier strategy and solutions for Knight Frank Singapore.
The occupancy rates in areas like the Raffles Place as well as the Marina Bay precinct stood at 95.5% as of end-2022 The overall occupancy of the CBD has increased by 93.6% to 94.2% in the last quarter. Yeo says this is due to companies searching for offices of high-quality that will allow for the complete return of operations prior to the outbreak.
The reason for this is that more workers are working full-time from their office The proportion of workers working remotely expected to range between 10% to 15% which is lower that the previous 20% previously projected. “The long-term use of hybrid working may not be as widespread and long-lasting in Singapore as it was initially portrayed during the peak of the pandemic” says Yeo. Therefore leasing markets remain active, with office workers looking for higher high-quality space.
Additionally, Knight Frank highlights that more flexibility and choices are offered by co-working spaces located in the CBD. For instance, Trehaus at Funan incorporates preschool and childcare services and preschool services, while Japanese co-working space One&Co is located at Twenty Anson supports Japanese companies expanding into Singapore. “Occupiers who aren’t sure whether to relocate or renew are able to choose an interim co-working spaces, particularly those with smaller spaces,” says Yeo.
For the future, he predicts lower rental growth by 2023 for offices that are prime quality driven by the macroeconomic downturn and the fluctuations in the tech industry which has resulted in the sacking of employees. However, Singapore’s position as a safety-first flight location is likely to help boost the demand for office space, with multinational companies opening their doors in Singapore, or moving operations from other regions of Asia.
Additionally, Yeo notes that despite the layoffs in tech the employment rate have risen because non-tech businesses like those in the financial and banking sectors, are absorbing talents available to build their technology platforms. A report of the Ministry of Manpower states that the rate of unemployment among executives, professionals, managers and technicians fell by 3.4% in 2021 to 2.6% in 2022.
Due to the consistent level of demand, and an insufficient supply of new office space Yeo expects rents to rise approximately 3% over the course of 2023, subject to any major pre-termination or reduction in office space for technology firms.