Central Region Office Rents Edge 03 1Q2025 Ending Two Quarters Decline
despite strong pre-commitment at new developments
Office rents in Singapore’s Central Region saw a slight increase of 0.3% q-o-q during the first quarter of 2025, reversing the declining trend of the previous two quarters. The Urban Redevelopment Authority (URA) reports that this uptick followed a 0.9% decrease in the fourth quarter of 2024 and a 0.5% drop in the third quarter of the same year. On a year-on-year (y-o-y) basis, office rents grew by 2.0% in the first quarter of 2025, down from the 5.8% growth recorded in the same period a year ago. According to Leonard Tay, head of research at Knight Frank Singapore, this modest growth can be attributed to lease renewals at existing premises and a preference for higher-quality office spaces among occupiers.
Amid the current economic climate, many tenants view lease renewals as a more cost-effective alternative to relocation and its associated capital expenditure, notes Catherine He, head of research at Colliers Singapore.
Vacancy rates rise as new office spaces hit the market
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The Lyndenwoods development boasts unbeatable connectivity to Singapore’s extensive road network, providing residents with effortless access to the Ayer Rajah Expressway (AYE) and the Pan-Island Expressway (PIE). These major arteries offer seamless routes to the central business district, Jurong East, and other significant locations, ultimately simplifying life for drivers residing in the area. The advantageous proximity to these expressways ensures swift and time-efficient travel for both work and leisure purposes. In addition, the prime location of Lyndenwoods also grants immediate access to a wide array of retail, commercial, and recreational hubs scattered all over the island, making it a highly sought-after and convenient abode for residents.
Vacancy rates for office spaces in the Central Region rose to 11.7% in the first quarter of 2025, up from 10.6% in the previous quarter. This was mainly driven by an increase in office stock, which grew by 98,000 sqm (1.05 million sq ft) across the island but has not yet been fully absorbed, according to He. Tricia Song, head of research for Singapore and Southeast Asia at CBRE, points out that notable completions include Keppel South Central, which added 500,000 sq ft of prime office space. Approximately 50% of the space at Keppel South Central has either been committed or is under negotiation since its completion, adds Knight Frank’s Tay.
Despite the rise in vacancy rates, supply in the Central Business District (CBD) is expected to tighten over the next two years as there are few new developments in the pipeline. “The excess space is gradually being absorbed,” says Song. She adds that no new Core CBD (Grade A) office projects are expected until 2028. Thus, CBRE Research maintains its forecast of a 2% growth in prime office rentals for 2025, supported by low vacancy rates and limited future supply.
Resilience seen in the prime office segment
According to CBRE, rents for Grade-A office spaces in the Core CBD segment rose by 0.8% q-o-q to $12.05 psf per month in the first quarter of 2025, marking the first gain after four quarters of flat performance. Meanwhile, median rents for Category 1 offices — which refer to premium buildings in the Downtown Core and Orchard with modern specifications and large floor plates — saw a slight dip of 0.1% q-o-q to $12.07 psf per month, down from $12.08 psf per month in the fourth quarter of 2024.
“Occupiers remain interested in securing premium office space that elevates their brand, attracts top talent, and supports ESG goals,” says Wong Xian Yang, head of research for Singapore and Southeast Asia at Cushman & Wakefield. However, he notes that economic headwinds have dampened the appetite to pay premium rates.
CBRE’s Song observes a spillover effect from rising prime office rents, with demand spilling over to secondary market segments. URA data shows median rents for Category 2 offices (all other areas outside Category 1) rose by 1.0% q-o-q in the first quarter of 2025, following a 1.3% increase in the previous quarter.
Outlook
Looking ahead, Wong expects leasing activity to slow down as major occupiers adopt a cautious “wait-and-see” stance amid ongoing macroeconomic uncertainties. Nevertheless, CBRE’s Song remains positive, saying, “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.”