Office rents rise 0.3% as CBD demand holds firm

Office rents edged up 0.3% QoQ, ending two consecutive quarters of decline.

Singapore's office market showed early signs of recovery in the first quarter of 2025, with rents posting a modest increase and overall demand remaining resilient despite new supply and a slight dip in occupancy levels.

According to ETC Research, office rents edged up 0.3% QoQ, ending two consecutive quarters of decline. The improvement was supported by continued interest in premium and Grade A spaces, particularly in the Central Business District (CBD).

However, island-wide office occupancy dipped slightly by 0.3 percentage points to 94.5%, largely due to the completion of major developments such as Keppel South Central and Paya Lebar Green, which are still in the early stages of tenant occupation with pre-commitment rates of around 30% and 25%, respectively.

The CBD experienced a decline in occupancy to 93.6%, down from 94.1% in the previous quarter. Decentralised areas also dropped, falling to 94.0% from 94.9%.

In contrast, non-CBD areas such as City Hall/Bugis and Bras Basah registered stronger performance, with occupancy climbing to 96.7%.

Net absorption, a key indicator of demand, rose to 518,000 sq ft, with the CBD accounting for 214,000 square feet, largely due to new supply from Keppel South Central. Non-CBD areas added another 146,000 sq. ft., whilst decentralised locations posted a net loss of 35,000 sq. ft., primarily from space give-backs in the Alexandra area.

Meanwhile, shadow office space, vacant space still under lease, fell by 14.4% quarter-on-quarter to 373,000 sq. ft., reversing four straight quarters of growth.

Analysts attribute this decline to increased uptake of space in the CBD, as companies continue repositioning toward higher-grade offices.

Looking ahead, rental growth is expected to remain moderate, with limited new supply on the horizon. Only Shaw Tower and Newport Tower are expected to be completed by the end of 2025.

Whilst demand is likely to be underpinned by tenant flight to quality, potential risks include global trade tensions and continued caution in corporate leasing strategies.