Please revise the attached article based on a report by Knight Frank, which states that prime office rents in the Raffles Place and Marina Bay precinct have risen by 0.6% q-o-q in the third quarter of 2024, reaching an average of $11.35 psf per month. This represents a slightly slower growth compared to the previous quarter’s 0.7%. However, the year-to-date increase of 2% is lower than the 3.4% recorded during the same period last year.
The moderate rise in rents can be attributed to the absence of expansion plans from major occupiers like tech companies. This could be due to the slowdown in the tech sector and the uncertain economic climate. Calvin Yeo, Knight Frank Singapore’s managing director of occupier strategy and solutions, notes that these companies are choosing to delay expansion plans.
Instead, many tech firms have opted to downsize their office space. For instance, Facebook’s parent company, Meta, did not renew its lease for seven floors at South Beach Tower after global layoffs. The affected staff were relocated to Meta’s offices at Marina One. This trend of downsizing or relocating to more efficient spaces is also seen among other occupiers who are adapting to flexible work arrangements.
Yeo mentions that while some occupiers are reducing their office footprint, the majority are choosing to renew their leases upon expiry. Landlords are becoming more flexible as they strive to retain occupancy in the CBD amidst the uncertain economic climate, further encouraging lease renewals. As a result, the occupancy rate in the Raffles Place and Marina Bay precinct remains high at 93.4% as of September, only slightly lower than the 95% recorded in the previous quarter.
The demand for office space is being driven by smaller occupiers, as observed throughout the year. While larger occupiers have been hesitant to lease due to the uncertain economic environment, smaller tenants have been actively taking up space. This includes international companies in the investment and wealth management sectors, drawn to Singapore’s stability, infrastructure, and position as a gateway city. For example, in July, US-based electronic trading company Millennium Advisors opened its first Asia Pacific office at Marina Bay Financial Centre Tower 1.
The rise in the number of single-family offices in Singapore has also contributed to demand for smaller office spaces. According to Yeo, as of August 2024, there were 1,650 single-family offices in Singapore, an increase from 1,400 at the end of 2023. While these firms typically occupy small spaces of less than 5,000 sq ft, their presence has led to a rise in boutique demand in the office leasing market.
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However, leasing activity by larger occupiers, both domestic and cross-border, has been subdued. This is partly due to companies adopting a wait-and-see approach amidst the uncertain economic climate. Additionally, the limited availability of large floorplate office spaces is also hindering occupiers’ plans to consolidate their business functions under one roof.
Yeo anticipates that the office market will remain relatively unchanged for the remainder of the year. He believes that, apart from natural lease expiries, there will be limited relocation activity among domestic companies. As for rents, Yeo expects them to remain stable, with a projected 3% growth for the entire year. Upcoming office supply includes Labrador Tower along Labrador Villa Road and Pasir Panjang Road, covering 807,293 sq ft, as well as Paya Lebar Green on Jalan Afifi with a total area of 388,879 sq ft.
Additionally, Yeo mentions that the recent interest rate cuts should have a positive impact on the services sector, particularly finance and insurance industries. This, in turn, will support economic growth, which is projected to be between 2% to 3% for 2024.