Office landlords are offering more incentives to attract tenants; Vacancy rate to climb to 4.8% by year-end

SINGAPORE: Office landlords are offering more incentives to attract tenants. Colliers, a property agency, says prime office rents in downtown areas stayed steady in the first quarter, although landlords need to be more proactive with more competition for tenants.

Singapore Business Review reported that according to Colliers, rents for top-quality office spaces increased slightly by 0.7% from the previous quarter. This follows two quarters of decline. The demand is driven by businesses looking for quality workspace. Some landlords are even able to charge higher rents in renewals as businesses find it more affordable to stay in their office than relocate.

Colliers also notes that landlords are offering more incentives to attract tenants due to increased competition.

Colliers said, “Due to increasing competition, landlords should prioritize retaining tenants and consider more flexibility in rental negotiations; or offer more incentives to attract new tenants.”

On the other side, businesses should negotiate their lease terms now, as market uncertainties could lead to higher rents later.

According to Colliers, the demand for office space comes mainly from consumer goods, law, and financial sectors. However, tech companies have slowed down their leasing activity.

“Rents in the Core CBD Premium and Grade A segment will likely be range bound and recover more meaningfully in the later part of the year with the economy,” Colliers explained.

For the entirety of 2024, prime office rents are forecast to notch up a modest 0% to 2% year-on-year growth, settling within the range of S$11.49 to S$11.72 per square foot per month.

About 1.26 million square feet of new prime office space will be added this year, mainly from the completion of the IOI Central Boulevard Towers. Despite delays at Keppel South Central, which will ease some pressure on vacancy levels, Colliers still anticipates the average vacancy rate in prime core CBD office assets to climb to 4.8% by year-end, up from 2.6% in the first quarter. /ITSG

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