CBD office rents face pressure with no new supply until 2027

Colliers forecasts annual rental growth in the Prime CBD segment to fall between 0-2% for 2025.

Singapore’s central business district (CBD) office market is bracing for further rent increases, driven by a tightening supply pipeline and steady demand for premium space.

According to Colliers’ Q2 2025 Office Report, no new supply is expected in the Core CBD Premium and Grade A segment until 2027, placing upward pressure on rents despite cautious sentiment among landlords and occupiers.

Colliers forecasts annual rental growth in the Prime CBD segment to fall between 0-2% for 2025. The outlook is underpinned by resilient demand and limited availability of high-specification space.

“Despite prevailing macroeconomic and geopolitical risks prompting a conservative stance among landlords and occupiers, the structural imbalance between limited new supply and resilient demand for top-tier office space is anticipated to sustain rental levels and occupancy rates in this segment,” said Tridiana Ong, Executive Director and Head of Tenant Representation at Colliers Singapore.

Vacancy in the Core CBD Premium and Grade A segment tightened to 5.3% in Q2, down from 7.6% the previous quarter, with net absorption rising to 464,000 square feet.

Average gross effective rents in this category increased by 0.3% QoQ, reaching $11.71 per square foot per month.

Landlords are responding to tenant demand by offering more flexible lease terms, including rent-free periods and smaller space configurations. The growing popularity of fitted spaces—especially amongst budget-conscious tenants—has also helped backfill previously surrendered units.

Despite a growing preference for lease renewals over relocations, some occupiers are still relocating to newer, more efficient buildings. Colliers attributed this “flight to quality” to the need to enhance the employee experience and optimise space use amidst ongoing hybrid work arrangements.

On the capital markets front, the largest deal this quarter was City Developments’ sale of its 50.1% stake in the South Beach mixed-use development to IOI Properties. The sale was part of a broader strategy to reduce bank borrowings and recycle capital.

Meanwhile, strata units at 108 Robinson traded at $3,915 per square foot—underscoring investor appetite for freehold CBD assets with potential for capital appreciation.

Looking ahead, the extension of the CBD Incentive Scheme (CBDI) and Strategic Development Incentive (SDI)—now covering the Cecil and Anson Road areas—is expected to further reduce the CBD’s office stock as more properties undergo redevelopment into mixed-use projects. Combined with easing interest rates, Colliers expects these factors to support continued investor interest in institutional-grade office assets.

“Singapore office assets present a safe and attractive proposition with their stable prices and yields,” the report concluded.