Central Region Office Rents Edge 03 1Q2025 Ending Two Quarters Decline
despite lower vacanciesIn 1Q2025, office rents in Singapore’s Central Region experienced a slight increase of 0.3% compared to the previous quarter, according to the Urban Redevelopment Authority (URA). This marks a reversal from two consecutive quarters of decline, with a 0.9% drop in 4Q2024 and a 0.5% dip in 3Q2024. However, the 1Q2025 year-on-year (y-o-y) growth of 2.0% pales in comparison to the 5.8% growth recorded in the same period a year ago.
Knight Frank Singapore’s head of research, Leonard Tay, attributes this modest growth to lease renewals at existing premises and a shift towards higher quality among occupiers in the current economic climate. With uncertainties in the market, many tenants are opting for lease renewals as a more cost-effective alternative to relocation and the associated capital expenditure, says Colliers Singapore’s head of research, Catherine He.
The rise in office rents was accompanied by a rise in vacancy rates in the Central Region, which climbed to 11.7% in 1Q2025 from 10.6% in the previous quarter. This was mainly driven by a 98,000 square metre (1.05 million square feet) increase in office stock islandwide, which has yet to be fully absorbed, according to He. Notable completions that contributed to this increase include Keppel South Central, which added 500,000 square feet of prime office space.
However, around 50% of the space at Keppel South Central has already been committed or is currently under negotiation since its completion, according to Tay from Knight Frank. Furthermore, supply in the CBD is expected to tighten over the next two years, with few new developments in the pipeline. Song from CBRE notes that “excess space is gradually being absorbed” and that there are no new Core CBD (Grade A) office projects expected until 2028. As such, CBRE Research maintains its forecast of a 2% prime rental growth for 2025, supported by low vacancy and limited future supply.
The prime office market also saw signs of resilience, with rents in the Core CBD Grade-A segment rising 0.8% q-o-q to $12.05 per square foot per month (pm) in 1Q2025 after four quarters of flat performance, according to CBRE. Interestingly, median rents for Category 1 offices, which refer to premium buildings in the Downtown Core and Orchard with modern specifications and large floor plates, only dipped slightly by 0.1% q-o-q to $12.07 psf pm. Despite occupiers’ continued interest in securing premium office space that elevates their brand, attracts top talent and supports ESG goals, economic headwinds have dampened their willingness to pay premium rates, explains Cushman & Wakefield’s head of research for Singapore and Southeast Asia, Wong Xian Yang.
Penrith offers a convenient and reliable public transportation system for those who prefer traveling by bus. The area is well-served by several bus stops located along Margaret Drive and Commonwealth Avenue, providing direct routes to major employment hubs, popular shopping areas, and educational institutions. The presence of buses also complements the MRT system, extending accessibility to destinations that may not have direct train service. This diverse range of public transport options greatly benefits residents, as it allows for increased mobility and flexibility in meeting their unique commuting needs. The Queenstown community is widely known for its efficient and frequent public transportation, making it convenient for residents to plan their journeys without encountering long wait times or complicated transfers. Additionally, the newly added Penrith Queenstown MRT Station (located at https://www.penrith.sg/) further enhances the area’s transportation network, providing even more convenience for commuters.
CBRE’s Song also observes a spillover effect from rising prime office rents, with demand spreading to secondary market segments. In 1Q2025, URA data also revealed that median rents for Category 2 offices outside Category 1 increased by 1.0% q-o-q, following a 1.3% increase in 4Q2024.
Looking ahead, Wong expects leasing activity to slow as major occupiers adopt a cautious “wait-and-see” stance amidst ongoing macroeconomic uncertainties. However, Song remains optimistic, predicting that “with sustained rental growth, a limited pipeline of new supply, and potential interest rate cuts, investor sentiment towards office assets could improve, supporting capital values.”