The office rental market in Singapore continued to remain strong in 1Q2023, despite the continuing economic uncertainty caused by the pandemic. Knight Frank’s report found that the prime-grade office rents in the Raffles Place and Marina Bay precincts grew to an average of $10.83 psf per month, recording a 1.3% q-o-q growth.

Occupancy levels in Raffles Place, Marina Bay and the overall CBD precinct remained steady at 95.4% and 94.1%, respectively. These figures were broadly unchanged from 95.5% and 94.2% in the previous quarter.

Calvin Yeo, managing director of occupier strategy and solutions at Knight Frank, attributes this to the selected office buildings commencing asset enhancement initiatives (AEIs) or redevelopment, thus removing stock from the market. Furthermore, quality office spaces remained full as businesses relocated their headquarters to Singapore.

As employees start to return to the office, Yeo says that occupiers are increasingly looking for quality office spaces that offer vibrant activity-based workplaces. He cites the example of the mixed-use development Guoco Midtown, completed in January, which has Grade A offices and a variety of communal facilities and lifestyle amenities. Upon completion, the project’s office component was reportedly 80% filled.

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Smaller users have also been moving from older office buildings in a “flight-to-quality” move, and have filled up the office shadow space that has emerged from layoffs impacting major tech firms. Yeo explains that “In Singapore, while technology firms are no longer expanding as they were before the pandemic, neither is the pre-termination quantum significantly affecting the market at this point”.

The recent banking market turmoil, including the collapse of Silicon Valley Bank and the bailout of Credit Suisse, has clouded economic sentiment further. Knight Frank believes that Singapore is “poised to stay resilient by offering a destination of stability”. Demand for office space is expected to stay underpinned by flight-to-quality and cautious expansion.

Knight Frank predicts that prime office rents are expected to remain stable with an increment of 3% this year. Yeo says that “As overall CBD rents rose moderately in 1Q2023, the office sector in Singapore remains on an even keel due to predominantly flight-to-quality demand in a stable ecosystem of cautious expansion amid wider uncertainty”.