Raffles Place/Marina Bay office rents slow to a crawl in Q4 as global uncertainty dampens demand

SINGAPORE: In the final quarter of 2024, the rental growth in the Prime Grade office market within Singapore’s Raffles Place and Marina Bay precincts saw a notable slowdown, recording a modest 0.1% quarter-on-quarter increase.

According to Knight Frank data published by Real Estate Asia, rents in the area averaged S$11.36 per square foot per month, reflecting a significant dip compared to earlier periods in the year.

On a year-on-year basis, rents rose by 2.1% in 2024, a sharp deceleration from the 4.1% growth observed in 2023.

This more restrained expansion in rents was largely driven by businesses choosing to renew leases in existing offices, reflecting a cautious outlook amid ongoing global uncertainty.

The occupancy levels across the Raffles Place/Marina Bay area and the broader Central Business District (CBD) remained resilient, with prime buildings maintaining an occupancy rate of 93.6%.

While this figure represents a slight dip from 94.8% in 2023, much of the shift can be attributed to the completion of the IOI Central Boulevard Towers, which now fills about 75% of its 1.2 million square feet of office space.

Despite this adjustment, many high-quality office spaces in the CBD remain in high demand, with landlords prioritizing occupancy in a market where most tenants are hesitant to commit to large-scale expansions.

 Caution in a changing market

Business decisions around office relocations have been markedly cautious in recent months, largely due to the ongoing inflationary pressures that make moving costly.

However, some office users have seized the opportunity to move into newer, higher-quality buildings, often opting for spaces that align with hybrid work models or right-sizing needs.

These businesses are taking up either the same amount of space or making strategic adjustments to their office configurations. Should these companies experience growth, they have the flexibility to adjust their hybrid work practices to accommodate increased headcount.

In response, landlords have become more flexible in their leasing negotiations, offering incentives such as office fit-outs for smaller tenants, aiming to attract and retain occupiers.

This shift has created a delicate balance between landlords and tenants, where neither side holds a dominant position. Landlords are now more open to adjusting rental expectations, particularly in buildings with available space or those where larger tenants have downsized.

Unlike in previous years, no single dominant industry, such as finance or technology, has led the charge in large office take-ups.

Instead, smaller legal, finance, and consultancy firms have gradually moved into spaces vacated by larger occupiers. As interest rates continue to fall, cautious optimism may contribute to modest business growth and drive demand for high-quality office spaces into the year ahead.

Co-working space shift

The co-working space market has also seen some shifts, with WeWork announcing its exit from two office buildings. The company ceased operations on three floors at Manulife Tower and will close the remaining three floors at UE Square in the coming year.

Despite WeWork’s pullback from these locations, demand for flexible office spaces remains strong, particularly from smaller occupiers, signaling ongoing resilience in this market segment.

As the office market navigates an uncertain landscape, landlords and tenants alike adapt to new dynamics, with cautious optimism shaping the outlook for the year ahead.