Central Region Office Rents Ease 01 Demand Stays Firm Amid Tight Supply
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The rental market for offices in Singapore’s Central Region saw a slight easing in the third quarter of 2025, as landlords adjusted their expectations to meet strong demand from tenants and the limited availability of new supply.
Data released by the Urban Redevelopment Authority (URA) on Oct 24 showed a 0.1% decrease in Central Region office rents, driven by a 0.1% drop in the Central Area, while the Fringe Area saw a 0.2% increase.
“The marginal decline may have been driven by older offices, as landlords became more flexible with rental rates to retain tenants amid a softer economic backdrop and continued trends of moving to higher-quality spaces,” says Wong Xian Yang, head of research for Singapore and Southeast Asia at Cushman & Wakefield (C&W).
Prime offices experience steady demand
Category 1 offices, which include newer and higher-quality buildings in the Downtown Core and Orchard areas, saw a 2.5% increase in rents after two consecutive quarters of decline, with vacancy dropping to 9.9% from 11% in the second quarter of 2025.
“This reflects a steady demand for prime office space, despite concerns about interest rates,” notes Wong.
C&W’s basket of Grade A CBD offices recorded strong net absorption of 197,000 sq ft in the third quarter of 2025, higher than the 185,000 sq ft in the previous quarter, indicating sustained demand for modern and well-equipped workplaces.
Meanwhile, Category 2 offices, which are located outside Category 1, saw rents stabilizing after three quarters of growth, with vacancy edging up marginally to 11.7% from 11.6%. This shows that the market is still adjusting amid the ongoing trend of moving to higher-quality spaces.
Source: URA
Vacancy rates decrease as demolitions reduce supply
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Overall office demand across the island remained modestly positive, with a net absorption of around 11,000 sq ft in the third quarter of 2025. This exceeded the negative net supply of 0.2 million sq ft, mainly due to demolitions, resulting in an overall decrease in vacancy to 11.2% from 11.4% in the previous quarter.
In the Downtown Core, net demand remained steady at 0.2 million sq ft, while vacancy improved to 9.8% from 10.3%.
Despite a cautious global outlook, the Core CBD Grade A segment remained resilient with rents increasing by 0.8% in the third quarter of 2025, reaching $12.20 psf per month. Vacancy also tightened from 5.9% in the first quarter of 2025 to 5.1% in the third quarter, according to Tricia Song, head of research for Singapore and Southeast Asia at CBRE.
Source: URA
She points to IOI Central Boulevard Towers in the CBD, which was completed in the third quarter of 2024 and was already 90% occupied by the third quarter of 2025.
Outside the CBD, Paya Lebar Green reached full occupancy after Visa relocated to the building, contributing to a 0.2% increase in the rental index for the URA Fringe Area compared to the previous quarter, and a 2.9% increase year-on-year.
“Occupier demand remains broad-based, led by the banking and finance, transportation, government, and flexible workspace sectors,” adds Song.
‘Landlords focus on retaining tenants’
According to URA data, no new office completions were recorded in the third quarter of 2025. Net supply decreased by 0.26 million sq ft, and vacancy continued to decrease across the island, from 11.7% in the first quarter of 2025 to 11.4% in the second quarter, and further to 11.2% in the third quarter.
“The decrease in vacancy reflects the continued absorption of major completions from 2024 such as IOI Central Boulevard Towers, Keppel South Central, and Paya Lebar Green,” says CBRE’s Song.
“While most high-quality buildings are almost completely occupied, landlords are focusing on retaining existing tenants,” adds Leonard Tay, head of research at Knight Frank Singapore.
He also points out that a slight trend of moving to higher-quality spaces continues, as tenants look to right-size or expand modestly when renewing leases, taking advantage of stable rental rates to upgrade to newer buildings with better connectivity and amenities.
“Flexible coworking spaces continue to attract tenants in creative and lifestyle industries, while older and less connected buildings face increasing obsolescence,” he adds.
Source: URA
Prices indicate a potential turnaround
URA’s office price index for the Central Region recorded a 0.2% decline in the third quarter of 2025, the fourth consecutive quarterly decrease, but at a slower pace than the 1.1% drop in the second quarter of 2025, suggesting that prices may be close to bottoming out.
Since the third quarter of 2024, prices have decreased by 1.4% on a year-to-date basis and by 2.1% year-on-year.
According to C&W, the median unit price for office transactions in the Central Region fell to $1,995 psf, down from $2,127 psf in the previous quarter, reflecting a higher proportion of lower-priced deals.
Nevertheless, the strata office market remains resilient, says Wong, with 280 transactions already recorded year-to-date, which is already 84% of the total for the full year of 2024.
Source: URA
Limited supply until 2026-2027
The pipeline for Grade A offices in the CBD remains limited, with only Shaw Tower (to be completed in mid-2026) and Newport Tower (in 2027) expected to add around 0.6 million sq ft of net leasable area over the next two years, which is about one-third of the historical annual demand.
C&W also notes that there has been a decrease in shadow space in Grade A offices in the CBD, which has fallen to 0.1 million sq ft, the lowest in nine years, indicating that there is healthy demand from tenants.
While some negative net demand was recorded in the Outside Central Region (OCR) and Rest of Central Region (RCR) due to the removal of stock through demolitions, Wong expects relocation activity to pick up from 2026.
“Demand for Grade A offices remains strong as tenants prioritize modern and well-located developments,” says Wong from C&W. “With lower global interest rates expected, we should see more expansion activity as business confidence improves.”