Central Region Office Rents Ease 01 Demand Stays Firm Amid Tight Supply

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Shaw Tower in Beach Road en bloc sold for $475.5 mil

Office rents in Singapore’s Central Region saw a slight easing in the third quarter of 2025, with landlords adjusting expectations in the face of strong demand from occupiers and a limited supply of new units.

The Urban Redevelopment Authority (URA) released data on Oct 24 showing that overall office rents in the Central Region declined by 0.1 per cent quarter-on-quarter (q-o-q). This was driven by a 0.1 per cent decline in the Central Area, while the Fringe Area saw a 0.2 per cent increase.

Wong Xian Yang, head of research for Singapore and Southeast Asia at Cushman & Wakefield (C&W), noted that the marginal dip could be attributed to older offices, as landlords were willing to be more flexible with rents in order to retain tenants. This was in line with the ongoing trend of companies seeking high-quality office spaces and a cautious economic outlook.

Meanwhile, the Prime offices category, which comprises newer and higher-quality buildings in the Downtown Core and Orchard areas, experienced a 2.5 per cent q-o-q growth in rents, after two consecutive quarters of decline. This led to a reduction in the vacancy rate from 11 per cent in Q2 2025 to 9.9 per cent in Q3 2025.

“This reflects steady take-up of prime space amid easing interest rate concerns,” Wong pointed out.

Additionally, C&W’s basket of Grade A CBD offices recorded a strong net absorption of 197,000 sq ft in Q3 2025, up from 185,000 sq ft in the previous quarter. This underscored the sustained demand for modern and amenity-rich workplaces.

In contrast, the category 2 offices, which are located outside of the prime areas, saw a stabilisation in rents after three quarters of growth, and a marginal increase in the vacancy rate from 11.6 per cent to 11.7 per cent. This was consistent with the ongoing rebalancing of the market due to the flight-to-quality trend.

Islandwide demand for office spaces remained modestly positive, with an increase of around 11,000 sq ft in net absorption in Q3 2025. This exceeded the negative net supply of 0.2 million sq ft, which was primarily due to demolitions. As a result, the overall vacancy rate decreased from 11.4 per cent in Q2 2025 to 11.2 per cent in Q3 2025.

In the Downtown Core, net demand remained steady at 0.2 million sq ft, while vacancy improved from 10.3 per cent to 9.8 per cent. Despite a more cautious global outlook, the Core CBD Grade A segment remained resilient with a growth of 0.8 per cent q-o-q, reaching $12.20 psf per month in Q3 2025. This represented an improvement from the 5.9 per cent vacancy rate in Q1 2025 to 5.1 per cent in Q3 2025.

According to Tricia Song, head of research for Singapore and Southeast Asia at CBRE, this was largely due to the completion of IOI Central Boulevard Towers in Q3 2024, which was already 90 per cent occupied by Q3 2025.

In areas outside the CBD, Paya Lebar Green reached full occupancy after Visa’s relocation, contributing to a q-o-q increase of 2.9 per cent and a y-o-y boost of 0.2 per cent in the rental index for the URA Fringe Area.

Song also noted that the occupier demand remained broad-based, driven by companies from industries such as banking and finance, transport, government, and flexible workspace operators.

CBRE’s Song further observed that outside of the CBD, Paya Lebar Green reached full occupancy after Visa’s relocation (Photo: DP Architects).

The URA data also indicated that there were no new office completions in Q3 2025. Net supply contracted by 0.26 million sq ft, while the islandwide vacancy rate continued to tighten, dropping from 11.7 per cent in Q1 2025 to 11.4 per cent in Q2 2025, and further to 11.2 per cent in Q3 2025.

“The decline in vacancy reflects continued absorption of major 2024 completions such as IOI Central Boulevard Towers, Keppel South Central, and Paya Lebar Green,” Song explained.

However, while the majority of quality buildings were almost fully occupied, landlords remained focused on retaining their tenants, said Leonard Tay, head of research at Knight Frank Singapore.

Subtle trends of flight-to-quality persisted, as companies right-sized or modestly expanded upon lease renewals, taking advantage of stable rents to upgrade into newer buildings that offered better connectivity and amenities.

Tay further noted that flexible coworking spaces continued to attract tenants from creative and lifestyle industries, with older and less connected buildings facing growing obsolescence.

Additionally, the Central Region office price index by URA declined by 0.2 per cent q-o-q in Q3 2025 – the fourth consecutive quarterly decline, but at a slower pace than the 1.1 per cent drop in Q2 2025. This indicated that the office capital market may be nearing a trough.

Since Q3 2024, prices had decreased by 1.4 per cent year-to-date (YTD) and 2.1 per cent year-on-year (y-o-y). However, according to Wong, the median unit price for Central Region office transactions eased to $1,995 psf, down from $2,127 psf in the previous quarter, due to a higher proportion of lower-priced deals.

In spite of this, the strata office segment remained resilient, with 280 transactions recorded in YTD – making up 84 per cent of 2024’s full-year total.

Furthermore, the CBD Grade A pipeline remained limited, with only two projects – Shaw Tower in mid-2026 and Newport Tower in 2027 – expected to add approximately 0.6 million sq ft of net leasable area in the next two years, accounting for just one-third of the historical annual demand.

Additionally, C&W also observed that the shadow space in CBD Grade A offices had fallen to 0.1 million sq ft – a nine-year low – indicating that there was strong occupier interest in these properties.

Wong stated that although there was some negative net demand recorded in the Outside Central Region (OCR) and the Rest of Central Region (RCR) due to demolitions, relocation activities were expected to increase from 2026 onwards.

“There is still a strong demand for Grade A offices, as companies prioritise modern and well-located developments. With lower global interest rates on the horizon, we can anticipate an increase in expansion activity along with a return of business confidence,” Wong concluded.