RESILIENCE AMID GLOBAL UNCERTAINTIES
After a robust 4.4% growth in 2024, Singapore’s economy is projected to grow by 1%-3% yoy in 2025, with potential downgrades due to the impact of U.S. tariffs. Key office-using sectors, such as information & communications and finance & insurance, are expected to see steady growth. A combination of low unemployment rate and gradual interest rate cuts would be supportive of office demand. Singapore's reputation as a safe haven and its neutral stance may continue to bolster its appeal as a global business hub amid growing trade tensions and geopolitical uncertainty.
UPTICK IN LEASING ACTIVITIES
CBD Grade A office rents grew 0.6% qoq in Q1 2025, driven by ongoing flight to quality. Recent leasing activities have seen a moderate pickup, characterised by several mid-sized deals, driven by financial firms and co-working operators. This trend indicates cautious optimism in the market, despite some occupiers remain prudent amid global uncertainty. CBD Grade A office net demand reached 0.2 msf in Q1 2025, higher than 0.03 msf in Q1 2024. The rise in CBD Grade A office vacancy rates to 5.8% in Q1 2025, from 4.7% in the prior quarter, can be attributed to the addition of new supply from Keppel South Central.
Decentralised all grades office rents also edged up 0.5% qoq in Q1 2025, despite vacancy rates increased to 6.7% from 5.6% in the prior quarter following the completion of Paya Lebar Green.
SUPPLY CONDITIONS TO TIGHTEN
CBD Grade A office vacancy pressures are expected to ease new office supply tightens. Keppel South Central, the only new development in the CBD this year, has seen an encouraging uptake, with almost 50% of office and retail units is either committed or actively negotiated. Over the next three years, CBD Grade A new office supply is expected to average 0.4 msf annually, well below the tenyear historical net demand of 0.9 msf per year. CBD Grade A shadow space remains at 0.1 msf, at pre-pandemic levels.
The constrained supply pipeline, combined with emerging demand, would continue to support CBD Grade A office rents. While the timing of demand growth is uncertain, office occupiers should consider their options early, as the limited supply pipeline is likely to fuel landlord expectations, barring an unexpected economic downturn.
