Savills Research notes that the vacancy rate of CBD Grade A offices has risen slightly, by 0.2 of a percentage point (ppt) to 6.2% in Q3/2024. On a year-on-year (YoY) basis, vacancy rate of overall CBD Grade A offices continued trending downwards for the third consecutive quarter, this time, by a larger 0.6 of a ppt compared to the 0.3 of a ppt for the past two quarters.

Quarter-on-quarter (QoQ), vacancy rates of Grades AA and A offices rose in the quarter by 1.1 ppts and 0.3 of a ppt to 6% and 7.6% respectively, whilst vacancy rates of Grade AAA offices declined 1 ppts QoQ to 4.9%. For Grade AA offices, this was the second consecutive quarter of increase.

Except for Raffles Place and Beach Road/Middle Road, most of the submarkets recorded quarterly declines in vacancy rates in the quarter. Vacancy rates of Grade A offices in Raffles Place and Beach Road/Middle Road were seen to increase over 1 ppts QoQ in Q3/2024, with a growth of 1.4 ppts and 1.6 ppts to 8.5% and 7.4% respectively.

The growth in vacancy rate for Raffles Place was due to the relocation of larger tenants into the newly completed IOI Central Boulevard Towers, such as Amazon, which has occupied significant amounts of spaces across various locations. The increase in vacancy rates at Beach Road/Middle Road was a result of higher vacancies from Duo Tower, Bugis Junction Towers and Gateway East.

Vacancy rates in the other submarkets registered QoQ decreases ranging from 0.2 of a ppt and 0.9 of a ppt. The largest decline in vacancy rate was from Shenton Way which contracted 0.9 of a ppt. For Tanjong Pagar, the decrease of 0.6 of a ppt in the quarter was the fifth consecutive quarter of decline.

On a YoY basis, the increase in vacancy rates of three submarkets outweighed the fall in vacancy rates of the other four submarkets, leading to higher vacancy rates of CBD Grade A offices overall compared to Q3/2023. The growth in vacancy rates were between 0.2 of a ppt and 1.4 ppts, while the decline in vacancy rates ranged from 1.4 ppts to 4.6 ppts. The largest YoY increase in vacancy rate came from Raffles Place.

The average monthly rents of CBD Grade A offices in Savills basket rents rose by 0.3% QoQ to S$9.70 psf in Q3/2024. Compared to the same period a year ago, office rents grew by 0.5%.

Across the submarkets, two of the submarkets - Orchard Road and Shenton Way, remain unchanged, while the remaining five submarkets saw rental increase in Q3/2024. These other submarkets registered quarterly increases in office rents, ranging from 0.2% to 0.5. Submarkets with the largest growth were City Hall and Tanjong Pagar, with rents increasing 0.5% QoQ, higher than the 0.4% and 0.2% respective rates of growth in the previous quarter. This was the second consecutive quarter of increase for both submarkets. For City Hall, the two consecutive quarters of growth came after a slight dip of 0.1% in Q1/2024.

Ashley Swan, Executive Director, Commercial, Industrial & Logistics, Savills Singapore says, “The Singapore office market remained fairly flat in the third quarter despite a slight recovery in activity levels. This increased level has led to more leases being concluded with several larger tenants committing to new leases or being on the lookout for a potential move. Despite these green shoots, demand remains weak, and we expect this to continue through 2025 supported by a lack of supply with new builds thin within the CBD.”

Alan Cheong, Executive Director, Research & Consultancy at Savills Singapore adds, “There was relatively little activity in the leasing market in the third quarter, with few large leases being concluded. In the Grade A CBD space, although most multinationals that take up large areas have leases that expire in 2025 and 2026, they still do not have the budget for fitouts which would provide them the flexibility to move to new buildings or downgrade to lower grade ones. This is due to the high cost of reinstatement which leaves tenants with the only option of rightsizing.

While demand may remain weak till 2026, rents for CBD Grade A space here may still hold firm. A downside to this could be a limit to the price bottom. The reason is that the vacancy rates for these offices are likely to remain below 8% within these years as new supply in the CBD is expected to spike this year at 1.3 million sq ft Net Lettable Area and thereafter fall to about 1 million sq ft in 2025 and 0.2 million sq ft in 2026. Unless there are unforeseen structural shifts brought on by the adoption of AI, our forecast for CBD Grade A rents for 2024 is 0% to 1% while and -1% to 1% for 2025.”

Click here to view Micro-Market Grade A Office Rents And Vacancy Rates, Q3/2024

Click here to view Q3 Office Briefing 2024