[SINGAPORE] The latest government data showed that the median monthly office rental for Category 1 offices – which cover the better-quality buildings in the city area – fell 3.2 per cent in the second quarter of 2025 to S$11.68 per square foot (psf).
In the first quarter of the year, the median rent was S$12.07 psf a month. These rent figures are captured by the Urban Redevelopment Authority (URA) and are based on contract date.
CBRE’s head of research for South-east Asia Tricia Song noted that the rent drop came despite an easing in the vacancy rate for Category 1 offices to 11 per cent as at end-Q2, from 11.7 per cent as at end-Q1.
“The lower vacancy was likely due to the absorption of space at IOI Central Boulevard Towers, which achieved approximately 85 per cent commitment by the end of Q2 2025,” said Song.
Conversely, Category 2 offices – which cover the remaining office space in Singapore – posted a third consecutive quarter-on-quarter (qoq) rise in the monthly median rent, climbing 2.7 per cent to S$6.52 psf in Q2 2025. This followed qoq gains of 1 per cent in Q1 2025 and 1.3 per cent in Q4 2024.
“The opposite directions of rental movements in Category 1 and 2 offices may reflect broader market caution among occupiers, against the backdrop of ongoing global economic and geopolitical uncertainties. Buildings with lower rentals are gaining ground,” she added.
URA’s office rental index for the central region slipped 0.3 per cent qoq in Q2 – reversing from the 0.3 per cent rise in Q1.
The islandwide office vacancy rate fell to 11.4 per cent as at the end of Q2, from 11.7 per cent as at the end of Q1.
Song noted that no new office supply was completed in the second quarter. “Islandwide vacancy rose in Q1 2025 due to new completions: Keppel South Central and Paya Lebar Green. Active leasing in these two developments, along with backfilling of space vacated in older properties, helped to bring down the vacancy in Q2.”
Knight Frank Singapore head of research Leonard Tay said: “While Singapore office vacancy remained tight, rents have not increased in any significant manner as landlords focus on keeping buildings filled amid the ongoing trade tensions and escalating global uncertainty.”
As for occupiers, most continued to prefer renewing at their current location rather than expand or relocate in order to avoid relocation capital expenditure where possible, he added.
While agreeing with this observation, Catherine He, head of research for Singapore at Colliers, said: “Recent relocations have been driven by moves to quality space to attract and retain employees, while rightsizing at the same time for higher efficiency and better value per square footage.”
She added: “To cater to this trend, landlords have been focused on driving occupancy by carving out smaller spaces or offering a variety of incentives to bridge gaps in rental expectations. These include providing longer rent-free periods and contributing to tenants’ fit-out expenditure.”
Property consultants are expecting modest rent growth for their respective Central Business District Grade A baskets, ranging from minus 1 per cent to 3 per cent, for full-year 2025. This will be due to a lack of new office space completions in this segment in the next few years. Leasing demand for Singapore office space has been stable, but things could change.
Waning business confidence
“Leading indicators, both local and global surveys, suggest that business outlook and manufacturers’ confidence are waning,” noted Dr Chua Yang Liang, JLL’s head of research and consultancy for South-East Asia.
“While there has been greater clarity in terms of US tariff rates for some Asian countries in recent days, the effect of these tariffs will eventually feed back into the demand for real estate in Singapore including the office market,” he added.
URA data showed that islandwide, a total supply of about 9.3 million square feet (sq ft) gross floor area of office space was in the pipeline as at the end of Q2 2025, slightly more than the 9.2 million sq ft in the previous quarter.
The amount of occupied office space rose by 96,875 sq ft of net lettable area (NLA) in Q2, in contrast with the drop of 10,764 sq ft in Q1.
On the other hand, the stock of office space fell by 193,750 sq ft NLA in Q2, against the increase of 1.05 million sq ft in Q1.
URA data released on Friday (Jul 25) also showed that the price index of office space in the central region shrank by 1.1 per cent qoq in Q2, after dipping 0.2 per cent in the preceding quarter.
“Despite the price drop, overall transaction volumes gained momentum in Q2 compared with Q1, as the strata office market remains resilient,” said Wong Xian Yang, research head for Singapore and South-east Asia at Cushman & Wakefield.
In Q2, the central region recorded 91 strata office transactions, a 32 per cent increase from 69 deals in the previous quarter.