NAVIGATING CHOPPY WATERS
Singapore’s economic growth may come in at the lower end of the initial 2.0-4.0% forecast for 2026, amid heightened uncertainty surrounding energy prices
following the escalation of conflict in the Middle East. A prolonged rise in energy costs could exert upward pressure on inflation, potentially slowing or reversing
the pace of anticipated interest-rate cuts. While Singapore’s safe-haven status is expected to continue attracting investors and occupiers, some businesses
may adopt a more cautious stance and defer decision-making until greater clarity emerges on geopolitical developments.
RENTS ROSE ON SUSTAINED DEMAND
CBD Grade A office rents rose 1.4% qoq in Q1 2026 amidst a tightened supply and sustained flight-to-quality demand landscape. CBD Grade A office vacancy
rates fell to 4.1% in Q1 2026 from 4.4% in Q4 2025. Marina Bay led office net demand in the CBD and drove 0.1 msf of CBD Grade A net demand, driven by
backfilling activity at Marina Bay Financial Centre. Vacancy rates edged lower across most CBD Grade A developments, reinforcing the persistence of the
flight-to-quality trend as occupiers continue to gravitate towards newer, higher-specification assets.
RENTS TO HOLD AMIDST HIGH UNCERTAINTIES
Given ongoing global uncertainty, office demand might moderate in the near term as some occupiers defer decision making. However, the city’s structurally
tight office supply is expected to underpin CBD Grade A rent levels. New CBD Grade A completions will average just 0.4 msf annually in 2026-2027, well below
the 10-year net demand of 0.9 msf. Against this backdrop, CBD Grade A vacancy rates are expected to fall below 4.0% by the end of 2026.
Also, a prolonged increase in energy prices would have inflationary effects across the market over the longer term. With higher energy costs, building operating costs would increase and might prompt building owners to raise service charges. Excluding the anticipated supply surge in 2028, Grade A office completions are expected to remain limited through to 2030. Against this backdrop of constrained supply, occupiers seeking large, contiguous Grade A office spaces may need to adopt a more proactive and forward-looking approach to real estate portfolio planning to secure their preferred office space.
