Central Region Office Rents Ease 01 Demand Stays Firm Amid Tight Supply

IMF forecasts slower growth for Singapore in 2024: 2.1% instead of 2.3%

Singapore’s Central Region office rents saw a slight decrease in the third quarter of 2025, as landlords adjusted their expectations in light of a strong demand for office spaces and a limited supply of new properties.

Based on data released by the Urban Redevelopment Authority (URA) on 24 October, office rents in the Central Region declined by 0.1% quarter-on-quarter, mainly driven by a 0.1% decrease in the Central Area. On the other hand, the Fringe Area recorded a 0.2% increase in rents.

According to Wong Xian Yang, head of research for Singapore and Southeast Asia at Cushman & Wakefield (C&W), the marginal decline in rents can be attributed to older offices, as landlords became more flexible in order to retain tenants amid a softer economic backdrop and ongoing flight-to-quality trends.

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The rebound of prime offices was also evident in the third quarter, with Category 1 offices – which are newer, higher-quality buildings located in the Downtown Core and Orchard areas – recording a 2.5% increase in rents quarter-on-quarter. The vacancy rate in this category also improved from 11% in the second quarter to 9.9% in the third quarter.

Wong noted that this reflects the steady take-up of prime office spaces despite concerns over interest rates, as well as a sustained demand for modern and amenity-rich workplaces.

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Meanwhile, Category 2 offices, which are outside of Category 1, recorded stable rents in the third quarter after three consecutive quarters of growth. The vacancy rate in this category also marginally increased from 11.6% to 11.7%, as the market continues to rebalance due to ongoing flight-to-quality activities.

Islandwide office demand remained modestly positive in the third quarter, with a net absorption of around 11,000 square feet. This outpaced the negative net supply of 0.2 million square feet, primarily due to demolitions. This drove the overall vacancy rate to decline from 11.4% in the second quarter to 11.2% in the third quarter.

In the Downtown Core, there was a net demand of 0.2 million square feet, with the vacancy rate improving from 10.3% to 9.8%. Tricia Song, head of research for Singapore and Southeast Asia at CBRE, noted that this reflects a cautious global outlook, with the Core CBD Grade A segment remaining resilient. Rents in this category increased by 0.8% quarter-on-quarter to $12.20 per square foot per month, while the vacancy rate tightened from 5.9% in the first quarter to 5.1% in the third quarter.

Song also pointed out that IOI Central Boulevard Towers in the CBD, which was completed in the third quarter of 2024, was 90% occupied by the third quarter of 2025. Outside the CBD, Paya Lebar Green reached full occupancy due to Visa’s relocation, contributing to a 0.2% quarter-on-quarter and 2.9% year-on-year increase in the URA Fringe Area rental index.

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According to Song, demand for office spaces remains strong, particularly in the banking and finance, transport, government, and flexible workspace operator sectors.

CBRE’s sources said that outside the CBD, Paya Lebar Green reached full occupancy, with Visa relocating to the business park (Photo: DP Architects)

Meanwhile, the URA data showed that there were no new office completions in the third quarter of 2025. There was a net supply contraction of 0.26 million square feet, while the islandwide vacancy rate continued to tighten – from 11.7% in the first quarter to 11.4% in the second quarter and further to 11.2% in the third quarter.

CBRE’s Song noted that the decline in vacancy reflects the continuous absorption of major completions in 2024, such as IOI Central Boulevard Towers, Keppel South Central, and Paya Lebar Green.

Leonard Tay, head of research at Knight Frank Singapore, also noted that while most quality buildings are almost fully occupied, landlords are still focused on retaining current tenants, with a subtle flight-to-quality trend persisting as occupiers opt to right-size or modestly expand upon lease renewals. He also mentioned that this was done to capitalise on stable rents, upgrading into newer buildings that offer better connectivity and amenities. Tay added that flexible coworking spaces continue to attract lifestyle and creative tenants, while older and less connected buildings continue to face growing obsolescence.

Based on sources from URA, Singapore’s office prices in the Central Region declined by 0.2% quarter-on-quarter in the third quarter of 2025. This is the fourth consecutive quarterly decline but at a slower pace compared to the 1.1% drop in the second quarter, indicating that the office capital market may be approaching a trough. Prices have declined by 1.4% since the beginning of the year, and 2.1% since the third quarter of 2024.

C&W’s Wong noted that the median unit price for Central Region office transactions declined to $1,995 per square foot, down from $2,127 in the previous quarter, reflecting a higher proportion of lower-priced deals. However, the strata office segment remains resilient, as there were 280 transactions lodged as of the end of the third quarter, which is already 84% of 2024’s entire year-total.

A low pipeline is expected until 2026/2027Looking at the pipeline for CBD Grade A offices, there will be limited supply, with only Shaw Tower (in mid-2026) and Newport Tower (in 2027) expected to contribute about 0.6 million square feet of net leasable area over the next two years. That is roughly one-third of the average historical demand.

C&W noted that shadow spaces in CBD Grade A offices have also decreased to 0.1 million square feet, which is a nine-year low. This underscores the healthy interest from potential occupiers.

However, despite some negative net demand in the Outside Central Region (OCR) and Rest of Central Region (RCR) due to stock removals from demolitions, C&W’s Wong expects relocation activity to increase from 2026. He added that despite the cautious global outlook, demand for Grade A offices remain strong as occupiers prioritise modern and well-located developments. He concluded that since lower global interest rates are expected, expansion activity is also expected to pick up alongside improvements in business confidence.