SINGAPORE COMMERCIAL OFFICE MARKET: Q1 2025 INSIGHTS
by Desmond Ng • 12th April 2025
Executive Summary: Resilience & Quality Focus
Singapore’s commercial office market demonstrated notable resilience in Q1 2025. The CBD Grade A sector saw rents grow by 0.6% QoQ to S$11.00 psf/month, despite a vacancy increase to 5.8% due to new supply. A strong "flight to quality" continues, with businesses prioritizing premium spaces. The outlook remains cautiously optimistic, supported by limited future supply and Singapore's strong fundamentals.
Key Takeaways:
- Modest rental growth in CBD Grade A offices.
- Vacancy up due to new supply, but positive net absorption.
- "Flight to quality" is a dominant trend.
- Constrained future supply to support rental levels.
Market Overview & Economic Context: Navigating Global Shifts
Singapore's economy is projected for moderated growth (1-3% YoY for 2025), influenced by global factors. However, key office-using sectors like ICT and Finance & Insurance are expected to remain steady. Singapore’s status as a safe and neutral global business hub continues to attract investment, underpinning office demand despite higher interest rates.
Key Market Trends – Q1 2025: What’s Driving Change?
- Resilience & Cautious Optimism: The market shows strength despite global uncertainties.
- Persistent Flight to Quality: Demand for high-quality, amenity-rich spaces is strong.
- Nuanced Leasing Activity: Mid-sized deals and activity from financial firms and co-working operators are notable.
- Impact of New Supply: New completions like Keppel South Central have temporarily increased vacancy but show healthy pre-commitment.
Sector-Specific Analysis: CBD Shines, Decentralised Grows
- CBD Grade A: Rents grew 0.6% QoQ to S$11.00 psf/mo. Vacancy rose to 5.8% with new supply, but net demand was positive at 0.2 msf. Marina Bay commands the highest rents (S$12.71 psf/mo).
- Decentralised Offices: Rents edged up 0.5% QoQ. Vacancy increased to 6.7% due to new completions. These areas offer cost-effective alternatives.
Supply Pipeline & Future Developments: A Constrained Outlook
The CBD Grade A new supply is limited, averaging ~0.4 msf annually from 2026-2028, well below the 0.9 msf ten-year historical net demand. This tight pipeline is expected to support rental values. Keppel South Central, the main 2025 completion, shows strong pre-commitment.
Investment Market Highlights: Selective Capital Deployment
Investor interest remains, focusing on quality assets. Notable Q1 2025 sales include strata floors at 20 Collyer Quay. Singapore's strong fundamentals attract capital, but investors are cautious, prioritizing resilient income and ESG credentials.
Forecast & Outlook: Cautious Optimism Prevails
CBD Grade A rents are expected to remain firm with modest growth, supported by limited supply. Vacancy may stabilize as new stock is absorbed. Key factors include global economic recovery, interest rates, and return-to-office trends. The medium-term outlook is positive due to strong fundamentals and constrained supply.
