Singapore office market faces modest growth amidst economic uncertainty

Leasing activity has been weighed down by high fit-out costs and the shift to hybrid work arrangements.

Singapore’s office market showed modest performance in 2024, despite a projected GDP growth of 3.5%, according to CBRE.

Leasing activity has been weighed down by high fit-out costs, the shift to hybrid work, and unclear demand drivers, along with potential delays in interest rate cuts.

The completion of IOI Central Boulevard Towers contributed to a rise in vacancy rates in the Core CBD (Grade A) office market, doubling from 3.6% in Q1 2024 to 7.8% in Q3 2024—the highest since Q3 2017.

Vacancy improved slightly to 7% in Q4 2024 with increased leasing in IOI Central Boulevard, but still remains high.

Core CBD (Grade A) office rents remained flat at $11.95 per square foot per month in Q4 2024, marking the third consecutive quarter without change. For the year, rents grew by 0.4%, a slowdown compared to 2023’s 1.7% increase.

David McKellar, CBRE’s Head of Office Services in Singapore, said landlords are offering more incentives, including speculative fit-outs, extended rent-free periods, and capital expenditure contributions to increase leasing activity.

Premium office spaces continue to attract demand, with businesses prioritising locations like Marina Bay and Raffles Place, particularly in sectors like private wealth management, insurance, and legal services.

Sustainability is also a growing factor, with tenants increasingly seeking buildings with green certifications and eco-friendly features.

By the end of 2024, shadow space dropped from a peak of 0.7 million square feet in Q1 2023 to 0.2 million square feet in Q4 2024.

CBRE expects Core CBD (Grade A) rents to rise by around 2.0% in 2025, driven by a stronger GDP forecast, limited supply, and continued demand for premium office spaces.

However, the firm remains cautious, citing global economic uncertainty and rising costs that could lead to more renewals and fewer relocations.

Vacancy in the Core CBD (Grade A) has likely peaked with no significant new supply expected in the next three years, Tricia Song, CBRE’s Head of Research for Singapore and Southeast Asia, said. Rental growth is expected to accelerate in the second half of 2025 once excess space is absorbed.

McKellar also advised tenants to act quickly, as the average supply of office space will be 34% lower from 2025 to 2029 compared to the last decade. The reduced supply, combined with sustained demand, will likely drive rents up and limit available options.

Song added that hybrid work is expected to remain dominant in Singapore, with 32% of companies expecting increased office usage over time, particularly in the Technology, Media, and Telecom (TMT) sector.