Central Region Office Rents Edge 03 1Q2025 Ending Two Quarters Decline
, leaving investors unperturbedApartment rents in RCR and OCR up in April, month-on-month
Singapore’s Office Rents Show Slight Uptick in 1Q2025
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Office rents in Singapore’s Central Region saw a marginal increase of 0.3% quarter-on-quarter in 1Q2025, reversing two consecutive quarters of decline. According to the Urban Redevelopment Authority (URA), this uptick follows a 0.9% drop in 4Q204 and a 0.5% dip in 3Q2024. On a year-on-year basis, office rents have increased by 2.0% in 1Q2025, although this is a slight decrease from the 5.8% growth recorded in the same period a year ago.
The modest growth in office rents can be attributed to lease renewals at existing premises and a flight to quality among occupiers, according to Leonard Tay, head of research at Knight Frank Singapore. In the current economic climate, 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.
However, vacancy rates for offices in the Central Region have risen to 11.7% in 1Q2025, up from 10.6% in the previous quarter. This can be attributed to 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. Notable completions in the past quarter include Keppel South Central, which added 500,000 sq ft of prime office space. Despite this increase in vacancy, supply in the Central Business District (CBD) is expected to tighten over the next two years, with few new developments in the pipeline.
CBRE Research maintains its forecast of a 2% prime rental growth for 2025, supported by low vacancy and limited future supply. Rents in the Core CBD Grade-A office segment rose 0.8% quarter-on-quarter to $12.05 psf per month (pm) in 1Q2025, marking its first gain after four quarters of flat performance. However, 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% quarter-on-quarter to $12.07 psf pm, down from $12.08 psf pm in 4Q2024.
According to Wong Xian Yang, head of research for Singapore and Southeast Asia at Cushman & Wakefield, despite occupiers being interested in securing premium office space that elevates their brand and attracts top talent, economic headwinds have dampened the appetite to pay premium rates.
However, CBRE’s Tricia 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, which includes all other areas outside Category 1, increased 1.0% quarter-on-quarter in 1Q2025, following a 1.3% rise in 4Q2024.
Looking ahead, Wong expects leasing activity to slow, as major occupiers adopt a cautious “wait-and-see” stance amid ongoing macroeconomic uncertainties. However, Song is optimistic, stating that 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.