Occupiers have generally been cautious about office relocation and expansion plans in recent years, amid uncertainties in the global economy, the high interest rates, and changes in the way of working post-pandemic.

Whether it is to mitigate risks or to manage costs, some businesses have adopted a defensive stance by opting for lease renewal, and perhaps renegotiate for more favourable terms. However, with new prime office buildings coming onstream in the central business district, there may be a good case for a re-think.

Meanwhile, some corporates may be considering how an office relocation - particularly to a top-notch Grade A office space in the city - could potentially be a catalyst to transform their business, improve the employee experience, and increase productivity. With occupiers seeking office locations that will give them a competitive edge, the flight-to-quality phenomenon in the Singapore office market is expected to persist.

Office rents in 1H 2024

Based on the Urban Redevelopment Authority's (URA) office rental index, the rentals of office space in the Central Region rose by 3.1% QOQ in Q2 2024, led by the rental growth in the Fringe Area where rents climbed by 6.9% QOQ. By contrast, office rentals in the Central Area rose at a slower pace of 2.4% QOQ in Q2 2024 (see Table 1).

On a cumulative half-yearly basis, Central Area office rentals rose by just 0.9% in 1H 2024, compared with the 5.5% growth in 1H 2023 (see Table 1). Of note, office rents in the Fringe Area jumped by 17.7% in 1H 2023. With Central Area office rentals generally moving up more gradually, occupiers may wish to explore potential leasing opportunities in the CBD.

Table 1: URA office rental index

Source: PropNex Research, URA

Chart 1: Median office rentals ($PSF PM) in Central Area and Fringe Area

Source: PropNex Research, URA Realis

Although the median rentals in the Central Area ticked up slightly to $7.41 psf per month in Q3 2024 from $7.40 psf pm in the previous quarter, the rental price gap between the Central Area and the Fringe Area has not widened substantially (see Chart 1). The rental price gap of 25.6% in Q3 2024 is still lower than the 32.3% difference in Q1 2024 and the 28.5% rental price gap in Q4 2023.

Why Grade-A offices in the CBD?

Maximising savings is of utmost priority for every business. Rental rates in the Central Area remain the highest among all regions, but why are businesses relocating to Grade-A offices in the CBD?

There are other business priorities and challenges that companies need to contend with. Recent trends have shown that many employees prefer to work in the CBD owing to its excellent public transport connectivity and wider range of amenities near workplaces. With Activity Based Working becoming a mainstay in the industry, businesses are now looking for flexible floor plates and alternative working spaces, which newer offices tend to offer. Grade-A office buildings also boast a plethora of lifestyle amenities that can help to improve the satisfaction of its occupants.

As occupiers continue to prioritise productivity growth, talent acquisition and retention, as well as meeting their own ESG goals, relocating to better quality offices in a central location may be seen as a strategic move. With Central Area offices maintaining a strong foothold in the market, now may be a good time for businesses to consider upgrading to high-quality office spaces in the city.

Here's a quick look at a couple of exciting upcoming buildings in town.

IOI Central Boulevard Towers

Nestled in the prestigious Downtown Area, the hotly-anticipated IOI Central Boulevard Towers (ICBT), which is being completed in phases since April 2024 will inject a whopping 1.26 million sq ft of Grade-A office space into the CBD.

The building is seamlessly linked to the Downtown MRT station on the Downtown Line. It is also connected to the Marina Bay Link Mall, which provides access to Raffles Place MRT and Marina Bay MRT stations.

Each section of ICBT offers a variety of offices spaces to suit the needs of different clients. East Tower and the Ultra Large Floor Plate offices are larger and allow for more flexibility, while West Tower offices offer more compact sizes for greater exclusivity. The rooftop also has meeting pods and spacious viewing decks, where guests can enjoy informal discussions with a picturesque view.

Moreover, the building offers more than just premium office space. Retail, lifestyle and F&B amenities are integrated on the first floor of the building, along with bicycle parking and end-of-trip amenities. Additional wellness amenities like a childcare centre, a rooftop jogging track and sky garden help ICBT stand out from the stiff competition in the CBD. The building was also designed with sustainability and business continuity in mind, and has achieved the Green Mark Platinum Certification with its green fittings and has dual power supply and telecommunication systems.

With these outstanding features, it is no surprise that Amazon and Morgan Stanley have secured their spot as major tenants in the building.

Keppel South Central

Located at the former Keppel Towers, Keppel South Central aims to create a workplace of the future. It is strategically located in Tanjong Pagar - near the future Greater Southern Waterfront precinct - and is a 7-minute walk from the Tanjong Pagar MRT station on the East-West line.

The 33-storey development seeks to be a 24/7 ecosystem of work and play, and will offer 650,000 sq ft of Grade-A office space, flexible workspaces, retail and dining options. Level 1 will feature retail spaces and open-air event space, while levels 2 to 6 will offer shared wellness facilities such as an indoor gym, swimming pool, and family and pet-friendly activity areas. End-of-trip facilities are also provided in the basement to cater to those who cycle or jog to work, for instance.

With Grade-A offices situated on the upper floors of the building, occupants can enjoy scenic, 360-degree view of the city and the sea while working. Those looking more informal spaces to network or recharge can head over to the social kitchen and sky terrace or use the shared meeting facilities on the lower floors.

Keppel South Central also boasts state-of-the-art technology and strong commitment to building sustainability. The BCA Green Mark Platinum Super Low Energy building features 5G integration, facial recognition, smart lighting systems, micro-zoned air conditioning, and generates renewable energy using solar panels to reduce carbon footprint.

Slated for completion in Q4 2024, this is definitely a space businesses could look out for.

Aside from new office buildings, tenants can also consider existing office stock in the CBD or the city fringe. Speak to the PropNex's leasing team to discuss ways to optimise your commercial real estate strategy and identify customised solutions that will cater to your business needs.