The high-end office market in Singapore is showing signs of softening, with the increase in new space pushing the vacancy rate to the highest level in over two years, while the rent surge has also lost momentum.

Real estate consulting firm jones lang lasalle's data released on Monday shows that the vacancy rate of Grade A office buildings in Singapore's Central Business District has risen for the second consecutive quarter, reaching 8.3% in July-September. This is the highest level since the first quarter of 2022.

The institution stated that the total effective rent for these spaces remained unchanged at S$11.50 per square foot per month (approximately $8.90) compared to the previous three months, representing a 0.7% increase from the previous quarter.

The main reason for the increase in vacancy rates is the opening of the new office building, IOI Central Boulevard Towers, which has approximately 1.26 million square feet of office space. However, jones lang lasalle stated that the "global economic slowdown" and the USA's delay in interest rate cuts have also affected demand. The Fed cut the benchmark interest rate by 50 basis points last week.

Although Singapore's office market has avoided the downturn seen in other major cities worldwide, the shrinking of the main sources of office space demand (including the finance and technology industries) has also affected Singapore. Andrew Tangye, Head of Leasing and Consulting at jones lang lasalle Singapore, said in a statement that as companies strive to cope with higher operating costs, the vacancy rate may remain high in the coming quarters.

jones lang lasalle's Tangye pointed out that while there is still interest in premium office spaces, the situation is particularly challenging in locations outside of Singapore's city center. In a high-end office building vacated by the US technology giant Meta, a large portion of the floors is being re-leased or attracting potential tenants for negotiations. Authorities recently rejected a bid by a consortium of large developers to construct a new commercial district in the west of Singapore, citing that they considered the bid to be too low.