Office Rents Slip 03 Q O Q 2Q2025 Wiping Out Gains Previous Quarter
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Singapore’s office market saw overall rents fall by 0.3% q-o-q in 2Q2025, erasing the marginal quarterly gain of 0.3% from earlier this year. This was reported in the latest URA statistics published on July 25.
Compared to the same period last year, the rental performance of the office market also contracted in YoY terms, by a total of 1.4%. This marks the first annual decline for the office market since 3Q2021.
Leonard Tay, head of research at Knight Frank Singapore, noted that the first half of this year saw a trend of rental stabilization for office rents. He added that many occupiers chose to renew leases instead of expanding or looking for new locations in order to avoid the high cost of office fit outs.
According to the latest URA figures, the Downtown Core and Orchard Road Planning area saw office rents decline by 3.2% q-o-q to $11.68 psf/pm in 2Q2025, down from $12.07 psf/pm in the first quarter of the year. This drop is attributed to a slight improvement in vacancy rates, which is largely due to the strong take-up rate at IOI Central Boulevard Towers, which is currently about 85% leased.
In contrast, office rents outside of the Downtown Core and Orchard Road saw their third consecutive quarterly increase, with median rents rising by 2.7% q-o-q in 2Q2025, following a 1% q-o-q increase in 1Q2025. Tricia Song, head of research, Southeast Asia at CBRE, noted that this opposing trend in the two submarkets reflects the cautious sentiment among tenants and landlords in light of ongoing macroeconomic uncertainty. She added that cost-efficient buildings are becoming more popular among tenants.
CBRE Research has reported that core Grade A office rents have increased by 1.3% over the first six months of the year, despite concerns that global economic headwinds could dampen rentals. CBRE predicts that office rents may rise by 2%-3% for the whole of 2025.
The global uncertainties that have arisen have caused landlords to focus on maintaining high occupancy rates. As a result, office occupancy levels, particularly in high-quality Grade A buildings, have remained tight and rents have not increased significantly, according to Tay.
Office occupancy levels across the island reached 88.6% in 2Q2025, an improvement of 0.3 percentage points from 88.3% in 1Q2025. However, this figure is slightly lower than the 89.2% occupancy rate recorded in 2Q2024.
Landlords have begun to offer smaller spaces for rent or incentives to bridge the gap in rental expectations in order to maintain occupancy rates, says Catharine He, head of research, Singapore, at Colliers. “Such strategies have proven to be effective in driving momentum for take-up in new developments like IOI Central Boulevard that is near full occupancy,” she adds.
While large corporations are unlikely to make significant office relocation plans in the near future, small- and medium-sized companies may make selective moves to higher-quality spaces in order to take advantage of the rental environment, says Tay.
Corporate real estate managers are moving away from static space strategies and focusing on more flexible arrangements that can support business disruption without impacting operations, says Tay.
In line with this, He adds that businesses are likely to hold off on leasing decisions until there is more clarity on the US-China trade war and monetary policies in key economies.
Looking ahead, the supply of new office space is expected to remain limited until 2028 when about 3.08 million sq ft is set to enter the market. Overall vacancy rates are expected to tighten over the next two years, creating an attractive investment environment amid falling interest rates, says He.
The latest extension to the CBD Incentive scheme and Strategic Development Incentive scheme also opens up the possibility of some office space leaving the market and being redeveloped into mixed-use projects in the future, she adds.