AI-DRIVEN ECONOMIC GROWTH
Singapore's economy recorded strong growth in H1 2026, with GDP expanding by 6.1% yoy, supported by robust global AI-related demand. Labourmarket conditions remained healthy, with unemployment holding at 2.0%. Reflecting the stronger-than-expected performance, MTI upgraded its 2026 GDP growth forecast to 4.5%-5.5%, from 2.0%-4.0%. Continued AI-related capital expenditure and business investment are expected to support demand across the technology, financial services and knowledge-based sectors, notwithstanding ongoing geopolitical, trade and financial market uncertainties.
RENTS GREW AS VACANCY TIGHTENS
CBD Grade A office rents rose 1.0% qoqin Q3 2026, supported by limited supply of high-quality space and continued flight-to-quality demand. Overall CBD Grade A vacancy declined to 3.9% from 4.7% in Q2 2026, marking its lowest level since Q1 2024. Net demand reached 0.3 msfduring the quarter, with the Raffles Place and Shenton Way/Tanjong Pagar submarkets accounting for about three-quarters of quarterly net absorption. Leasing activity was driven largelyby relocations requirements from financial services, professional services and technology occupiers, including a growing number of global AI firms establishing or expanding their presence in Singapore. Should OpenAI's reported commitment at Shaw Tower materialise, CBD Grade A vacancy could decline further, further constraining the availability of large contiguous spaces in the CBD.
POSITIVE OUTLOOK
Following a 3.8% increase in the first nine months of 2026, CBD Grade A rents remain on track to achieve our full-year growth forecast of 4.0%-5.0% yoy. With no major completions expected in Q4 2026 and only Newport Tower (0.2 msf NLA) scheduled for completion in 2027, upcoming supply is expected to remain below the historical average net demand, with 2028 representing the only significant addition to the pipeline. While rental growth may ease slightly amid geopolitical and interest rate uncertainties, market fundamentals remain supportive, with vacancy rates expected to remain tight. The combination of limited new supply and sustained occupier demand continue to support healthy leasing conditions. Demand from AI-related occupiers remains a potential source of upside as Singapore further strengthens its position as a regional hub for finance and innovation.
