Office rents in Singapore’s Central Region rose marginally by 0.3% q-o-q in 1Q2025, reversing two consecutive quarters of decline. According to the Urban Redevelopment Authority (URA), the uptick followed a 0.9% drop in 4Q2024 and a 0.5% dip in 3Q2024.
On a y-o-y basis, office rents increased by 2.0% in 1Q2025, easing from the 5.8% growth recorded in the same period a year ago. Leonard Tay, head of research at Knight Frank Singapore, attributes the modest growth to lease renewals at existing premises and a flight to quality among occupiers.
Given the current economic environment, many tenants view lease renewals as a more cost-effective alternative to relocation and its associated capital expenditure, says Catherine He, head of research at Colliers Singapore.
Source: URA
Vacancy rates on the rise
Vacancy rates for offices in the Central Region climbed to 11.7% in 1Q2025, up from 10.6% in the previous quarter. This was driven by an increase in office stock, which rose by 98,000 sqm (1.05 million sq ft) islandwide but has yet to be fully absorbed, says He.
According to Tricia Song, head of research for Singapore and Southeast Asia at CBRE, notable completions include Keppel South Central, which added 500,000 sq ft of prime office space.
Around 50% of the space at Keppel South Central has either been committed or is under negotiation since its completion, adds Knight Frank’s Tay.
Despite the uptick in vacancy, supply in the CBD is expected to tighten over the next two years, with few new developments in the pipeline. “The excess space is gradually being absorbed,” notes Song.
She adds that no new Core CBD (Grade A) office projects are expected until 2028. As such, CBRE Research maintains its forecast of a 2% prime rental growth for 2025, supported by low vacancy and limited future supply.
Prime segment shows resilience
Rents in the Core CBD Grade-A office segment rose 0.8% q-o-q to $12.05 psf per month (pm) in 1Q2025, marking its first gain after four quarters of flat performance, according to CBRE.
Median rents for Category 1 offices — which refer to premium buildings in the Downtown Core and Orchard with modern specifications and large floor plates — dipped slightly by 0.1% q-o-q to $12.07 psf pm, down from $12.08 psf pm in 4Q2024.
“Occupiers remain interested in securing premium office space that elevates their brand, attracts top talent, and supports ESG goals,” says Wong Xian Yang, head of research for Singapore and Southeast Asia at Cushman & Wakefield. However, he notes that economic headwinds have dampened the appetite to pay premium rates, he adds.
CBRE’s Song observes a spillover effect from rising prime office rents, with demand spreading to secondary market segments. URA data shows median rents for Category 2 offices (all other areas outside Category 1) increased 1.0% q-o-q in 1Q2025, following a 1.3% rise in 4Q2024.
Outlook
Looking ahead, Wong expects leasing activity to slow, as major occupiers adopt a cautious “wait-and-see” stance amid ongoing macroeconomic uncertainties.
Still, CBRE’s Song is optimistic: “With sustained rental growth, a limited pipeline of new supply, and potential interest rate cuts, investor sentiment towards office assets could improve, supporting capital values.”
