Office tenants in Singapore’s central business district push back on landlords’ attempt to raise rental charges

Some office tenants in Singapore’s central business district (CBD) are resisting further increases in rents, following nine consecutive quarters of increase in grade A office rents in the business area, according to a market report by Colliers International. Cumulatively, grade A office rents in the CBD have risen by 27 per cent since the second quarter of 2017, driven by tightening supply.

Average monthly grade A office rents in the CBD have climbed 1.5 per cent to S$10.08 (US$7.36) per square foot in the third quarter, slower than the 3 per cent increase recorded in the previous quarter. But it was a jump of 9.6 per cent from a year ago, Colliers said.

On the back of a weakening economic outlook, most occupiers will exercise more caution regarding their space needs and real estate cost, Colliers said. This could curtail further sharp increases in office rents over the coming quarters.

“We are starting to see ‘flight to value’ in the market where some tenants eschewed higher lease renewal rate and opted to relocate to another building with a lower rent,” said Tricia Song, head of research for Singapore at Colliers International. “Whether this trend would become more widespread will depend on market dynamics and the state of the economy.”