A Good Run For Office Market

Commercial Market Watch December 2019

Slowing economy

In the first three quarters of 2019, Singapore economy grew by 1.1%, 0.2% and 0.7% when compared to the same period last year. Advanced estimates by the government showed that the economy grew by 0.8% in the final quarter which puts the economy on track for a growth of 0.5% to 1.0% in 2019. 

Singapore’s export-oriented economy hit a snag amid the ongoing trade war between the US and China as well as a cyclical downturn in the electronics sector. Firms took a cautious stance as they weighed their decisions to expand, relocate or stay-put.

The uncertainty in the business environment led to a weakening in office rents, as shown by the 0.6% q-o-q decline in the Q3 URA rental index for Central Region. This was a reversal of the 1.3% q-o-q rise in Q2 2019. As for prices, the URA office price index for Central Region fell by 3.9% q-o-q as opposed to a 0.9% q-o-q rise in Q2 2019. The lower rentals and prices translated to improved occupancy in the Central Region: at 88.9% in Q3 2019, up from 87.8% in the previous quarter.

Active strata office market

The strata office sales market remained active in 2019. Based on caveat data, a total office space of 445,651 sq ft was transacted, higher than the total sales volume of 423,510 sq ft sold in 2018.

In terms of investment value, the total amount invested in 2019 was $1.057 bn, some 22% higher than the $864.82 mil transacted in 2018.

For the distribution of the transactions, there was a significant shift towards space in the Central Area from 19% in 2018 to 43% in 2019. This could be attributed to a higher number of transactions in buildings such as The Central, Peace Centre and The Plaza compared to 2018.

Transactions in the Downtown Core in 2019 was 8% lower than in 2018, probably due to price resistance and limited availability. Nevertheless, transactions in this zone dominates the market because it has the highest concentration of office space among four zones. As at end-September, there was 39.25 mil sq ft of office space in the Downtown Core, or 47% of the total stock.

Downtown Core

As at end-December 2019, the total strata office sales volume in Downtown Core was 205,485 sq ft. This was 8% lower than the amount for the whole of 2018. The decline was reflected in three sub-markets: 24% fall in Tanjong Pagar, 9% fall in Raffles Place and 1% fall in Cecil Street/ Robinson Road/ Shenton Way. City Hall bucked the trend with a 16% increase.

The lower volume of transactions in 2019 could be attributed to two main reasons: firstly, the availability of office space for sale, and secondly, the rise in average prices since end-2018. Based on caveats lodged for strata office sales, the price of office space rose by 12% at City Hall and 11% at Tanjong Pagar sub-markets to $2,390 psf and $2,195 psf respectively. The price at Cecil Street/ Robinson Road/ Shenton Way sub-market was 9% up while the price in Raffles Place saw a marginal rise of 0.3% in the year to $3,336 psf.

Office rents have also been on the rise through the year due to the strong leasing activity. URA’s data for Category 1 space median rents, which encompass good quality buildings with large floor plates in Downtown Core and Orchard Planning Area, has risen by 8.6% from end 2018 to $10.75 psf/month. As for the rest of the island, median rents eased by 0.7% since end-2018 to $5.57 psf/month, due to the flight to quality.

Significant strata office sales

There were 19 strata office deals within the $5 mil-$10 mil price band, up from 13 in 2018 and eight in 2017. Of the 19 deals, 10 were in the popular Suntec City. The unit price of these spaces was in the range of $2,300-$3,300 psf, compared to the range of $2,400-$3,200 psf for the three deals in Suntec City in 2018.

There were a few larger strata office deals in the year. An 18,568 sq ft space spread over three floors (14th , 15th and 17th) of The Octagon within the Cecil Street/ Robinson Road/ Shenton Way sub-market was sold at $2,450 psf or $45.49 mil in Jan 2019. In April, Chinese Chamber Realty bought 13,111 sq ft on the entire level 14 of Samsung Hub in Raffles Place for $3,356 psf or $44.00 mil. Levels 10 and 11 of Southpoint at Cantonment Road, was sold at $78.4 mil in July. The price translated to $2,444 psf on the 32,077 sq ft of strata space.

Commercial building sales

Interest in acquiring office buildings remained strong through the year. Two of the outstanding transactions were the acquisition of Chevron House by Golden Compass (AEW) at $1.025 bn and Duo Tower/ Duo Galleria at $1.575 bn.

Co-working space drives market

The co-working space sector has been flourishing in Singapore. Since it started in 2015, the sector has grown to more than 200 locations comprising around 3 mil sq ft of net lettable area. The top three players are WeWork, IWG and JustGroup and together, they hold some 50% share of the market.

In September, IWG officially launched its first office space under the Signature by Regus, a 71,000 sq ft facility at Asia Square Tower 1. In addition, IWG also opened Spaces One Raffles Place in October, which occupies more than 33,723 sq ft spread over four levels in One Raffles Place.


The Singapore economy is expected to grow by 0.5% to 2.5% in 2020. This modest growth outlook for Singapore could help to lift business sentiments, despite prevailing uncertainties on the global front. Rental growth is likely to be limited as occupiers will be less aggressive about expansion plans while landlords will also be more realistic about their rental expectations.

Singapore continues to be a key market for investors looking to hedge against uncertainty. Investment interest in strata-titled office space in older buildings located within the CBD will remain healthy. Prices are expected to rise as the number of good-quality office buildings remains limited. Prime office rents is expected to remain flat, on the back of subdued economic growth and hazy business prospects.

In the short-term, office leasing demand will likely come from the co working and technology sectors. Firms which are cutting costs may find co working spaces more attractive as they could save from not having to fit out a traditional office. We can expect to see more collaboration between landlords and co-working operators.

To view premium content and download full report