The shortage of office space and the growing back-to-office enthusiasm have aided in an increase in the overall CBD Grade A office market’s sentiment as stated by CBRE in a Sept. 25 press announcement. The firm reports that leasing activity has risen in this sector and CBRE’s figures show an increase in net absorption of 0.11 million square feet in 3Q2023, as compared to 0.03 million sq feet 1H2023.
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Along with the increase in lease activity in the market, CBRE’s data show that the gross effective rents of Grade A office buildings in the central CBD have risen to 0.4% q-o-q in 3Q2023 to $11.85 per month. The rate of vacant spaces fell by 4.2% in 2Q2023 to 3.2% from 2Q2023 down up to 3.2% in 3Q2023. CBRE defines the central CBD zone in terms of Raffles Place Marina Bay, Marina Centre and Shenton Way.
The increased demand in the market comes from the reduction in shadow space as a result of the slowdown in the technology sector, according to David McKeller, CBRE’s co-head of office services in Singapore. In the 3rd quarter of 2018, shadow space was 0.33 million square feet which was a half-inch decrease from the record-breaking 0.7 million square feet in January-February of this year, CBRE research shows.
“Occupiers of co-working spaces and asset management are among the numerous businesses that have taken large portions of these spaces in shadow taking advantage of the opportunity to relocate into office areas in most sought-after Marina Bay and Raffles Place areas,” Keller says. He says that the increase in utilization of offices is also contributing to the rising demand, as more employees are returning to work.
Despite a cautious outlook on the economic landscape and a high rate of interest, CBRE states that the office market in Grade A has exceeded estimates, and rents rising 1.3% since the start of the year. “The delay in the conclusion of IOI Central Boulevard Towers to 1Q2024 is likely to keep market vacant and increase confidence in landlords throughout the rest of 2023,” states Tricia Song. CBRE director of research in Singapore as well as Southeast Asia.
CBRE estimates that core CBD grade A office rents could increase to 1.5% to 2% in 2023.