CapitaLand Integrated Commercial Trust - Annual Report 2023

fully embraced hybrid work, others are encouraging more workers to return as pandemic worries fade and concerns over innovation and culture heightened. Islandwide net absorption was negative 0.4 million sq ft for the whole of 2023, below the five-year historical islandwide office average annual net absorption (2019 – 2023) of positive 0.3 million sq ft. This was also a significant decrease from the 1.1 million sq ft overall take-up in 2022. The drop was mainly due to the lack of new supply and removal of older buildings that have been scheduled for redevelopment in 2023. Accounting for the net removal of stock, the overall office demand remained resilient with a positive net absorption of 85,000 sq ft. In addition, 2022's higher take-up was due to a significant large project – Guoco Midtown, which achieved healthy commitment rates prior to its completion in 2022. Islandwide office vacancy rate declined by 0.1 percentage points from 5.0% in 4Q 2022 to 4.9% in 4Q 2023. Grade A office vacancy in the CBD Core dropped from 4.2% in 4Q 2022 to 3.5% as at 4Q 2023. Similarly, vacancy in the CBD Core inched down from 5.3% in 4Q 2022 to 5.2% in 4Q 2023. In the near term, occupiers could growmore cautious in their expansion plans in anticipation of global economic uncertainties, fewer visible demand drivers and an above historical average completion pipeline in 2024. Rental Values Overall, office rents grew steadily in the first half of the year but eased in the second half as firms prioritised business continuity and operational stability. Grade A CBD Core rents increased by 0.4%QoQ in 4Q 2023 and grew by 1.7% YoY to reach S$11.90 per sq ft/month. The YoY rental growth rate outpaced the projected GDP growth of 1.2% but was lower than the 8.3% annual rental growth in 2022. On the other hand, Grade B CBD Core rents remain resilient despite flight-to-quality trend as rents remain constant with no YoY growth at S$8.50 per sq ft/month. Going forward, office rents are expected to hold firm in 2024, barring increases in service charges because of rising utility costs and inflationary pressures. Source: CBRE Singapore, 4Q 2023 CBD CORE OFFICE SUPPLY AND DEMAND 1.5 1.2 0.9 0.6 0.3 0.0 -0.3 CBD Core (million sq ft) 1Q 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 3Q 2020 4Q 2020 1Q 2021 2Q 2021 3Q 2021 4Q 2021 1Q 2022 2Q 2022 3Q 2022 4Q 2022 1Q 2023 2Q 2023 3Q 2023 4Q 2023 Net Absorption (million sq ft) (LHS) Net New Supply (million sq ft) (LHS) Vacancy Rate CBD Core (%) (RHS) Vacancy Rate Grade A (%) (RHS) Vacancy Rate Grade B (%) (RHS) 15 12 9 6 3 0 -3 Vacancy Rate (%) 102 CAPITALAND INTEGRATED COMMERCIAL TRUST INDEPENDENT MARKET REVIEW

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