Savills Research shares that the vacancy rate of CBD Grade A offices in Q4/2024 rose 1.8 percentage points (ppts) quarter-on-quarter (QoQ) to 8%, the highest since Q1/2018 when it reached 8.8%. This surge can be attributed to the addition of IOI Central Boulevard Towers to the office stock.

On a year-on-year (YoY) basis, vacancy rate of both Grades AA and AAA offices grew 1.8 ppts and 2.6 ppts respectively, while that of Grade A offices contracted 1.5 ppts. Net demand had remained positive, at a moderated pace, for the third consecutive year, at 285,000 sq ft for 2024. This was lower than the 622,000 sq ft in 2022 and 444,000 sq ft in 2023.

The submarkets recorded quarterly increases in vacancy rates in Q4, except for Raffles Place, City Hall and Orchard Road, where the vacancy rates declined QoQ. The largest growth was from Marina Bay, rising 7.6 ppts to 12% due to the addition of newly completed IOI Central Boulevard Towers.

Vacancy rates in the other submarkets rose between 0.7 of a ppt and 0.9 of a ppt in Q4/2024. This was the second consecutive quarter of increase for Beach Road/Middle Road which was led by increases in vacancy rates in Duo Tower and Gateway West.

Overall, the average monthly rents of CBD Grade A offices in Savills basket continued trending up for the third consecutive quarter, increasing at a faster pace of 0.6% QoQ, to S$9.79 psf. On a YoY basis, office rents increased at a slightly moderated pace to 1.1% in 2024, compared to 1.2% in 2023.

QoQ growth was recorded for offices of all grades for the third consecutive quarter. Growth was fastest in Q4/2024. Rents of Grade AA offices jumped the most, by 1% QoQ to S$10.73 psf. This was larger than the 0.4% growth in Q3/2024 and the fastest increase since Q2/2019 when rents rose 1.3% on a QoQ basis.

Rents of Grade AAA offices rose by 0.7% QoQ, slightly faster compared to 0.6% in Q3/2024, to S$12.91 psf, the highest since Q1/2020. Similarly, rents of Grade A offices grew 0.3% QoQ to S$8.68 psf. For 2024, rents of Grade AAA offices grew 1.6%, the largest increase across the three grades.

The submarkets registered quarterly increases in rents, apart from Orchard Road which showed no change in office rents for the fourth consecutive quarter. Rents of offices in Marina Bay recorded the largest growth of 1% to S$12.83 psf in Q4/2024, marking the third consecutive quarter of increase. Following closely behind was Raffles Place, where rents rose 0.8% QoQ to S$10.12 psf, the highest since Q1/2020. The other submarkets registered quarterly increases between 0.4% and 0.7%. For Shenton Way, the increase in Q4/2024 came after five consecutive quarters of no rental movement. (See Table 1)

Ashley Swan, Executive Director, Commercial, Industrial & Logistics, Savills Singapore says, ““Much like the previous quarter, Q4 saw an increase in leasing activity with IOI Central Boulevard leading the way in terms of transactions. We expect some of this momentum to continue into 2025 with more occupiers looking to possibly upgrade from their current building or look to move to accommodate modest expansion. Having said that, the uncertainties and headwinds that we experienced in the beginning of 2024 have not been fully resolved and will have a continued impact on net demand for the foreseeable future along with re-structuring that some companies are going through. In the face of this, the office market will continue to be supported by a lack of new CBD supply which points to rents remaining flat or inching upwards slightly in 2025.
Overall, we expect occupiers to continue sourcing for buildings with superior specifications and connectivity as these organisations lure employees back into the office all the time.”
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Alan Cheong, Executive Director, Research & Consultancy at Savills Singapore adds, “With new supply in 2025 at a low of just 553,000 sq ft, and IOI Central Boulevard expected to be fully let by mid-2025, CBD Grade A office rents may still be able to hold its ground. We may also see demand upgrade from companies wanting a better building from lower than Grade A to Grade A buildings. This may help backfill any further shadow space or new vacancy in the premium class of office buildings.
So far, layoffs in 2024 have centred mainly on tech companies mostly based in business parks. CBD Grade A office tenants have largely been left unscathed. However, we could see the impact of AI services to substitute office workers only towards the end of the third to fourth quarter of 2025. Under this scenario, we believe that CBD Grade A office rents may remain flat in 2025, after having risen 1% in 2024.”

click here to view table 1