Older office buildings struggle to keep tenants as rents dip

Shenton Way properties were particularly hard hit.

Tenants are picking newer buildings over older properties as rental growth slows in Singapore, according to a report by JLL.

The report highlighted that higher quality properties in the Raffles Place and Marina Centre attracted new tenants in Q3 despite declining demand.

This came at the expense of properties in the Shenton Way submarket, which is home to relatively older, lower-quality buildings.

"Tenants looking to relocate continued to show a preference for dels which offered lower rents in higher quality buildings. These deals were especially attractive to tenants who occupied space in older buildings," the report said.

The overall CBD vacancy rate increased slightly to 6.1% in the third quarter, while year-on-year rental growth dropped to -7.1%. JLL expects vacancy to continue increasing as more tenants give up space.

"With much of this space large in size, landlords may find it difficult to re-lease vacated space given that most demand is currently for smaller requirements," JLL said