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[SINGAPORE] After two consecutive quarter-on-quarter declines, the Urban Redevelopment Authority’s (URA) office rental index for Singapore’s central region rose 0.3 per cent in the first quarter of 2025.

The index had posted drops of 0.9 per cent in Q4 2024 and 0.5 per cent in Q3 2024. The latest index reading reflects a year-on-year increase of 2 per cent.

Knight Frank Singapore research head, Leonard Tay, said the Q1 2025 rental growth was backed by occupiers renewing leases at existing premises, coupled with some flight-to-quality movement.

Catherine He, research head at Colliers Singapore, said in agreement: “Amid the current economic uncertainties, most tenants would consider renewing (to be) a more economical option, even at a slightly higher rent, than relocating and incurring additional capital expenditure.”

Despite the rental growth, the islandwide vacancy rate of office space climbed to 11.7 per cent as at the end of Q1 2025, from 10.6 per cent as at the end of Q4 2024, URA data released on Friday (Apr 25) showed.

The amount of occupied office space across Singapore fell by 10,764 square feet (sq ft) of net lettable area (NLA) in Q1 2025, contrasting with the increase of about 247,570 sq ft in Q4 2024.

On the other hand, the stock of available office space expanded by 1.05 million sq ft NLA in Q1 2025, against the contraction of 64,583 sq ft in Q4 2024.

Tricia Song, head of research, Singapore and South-east Asia at CBRE, highlighted two new completions in the first quarter: Keppel South Central (with about 500,000 sq ft of offices) in the fringe Central Business District (CBD) and Paya Lebar Green (with about 320,000 sq ft of offices). These are apart from asset enhancement works to the existing Cross Street Exchange.

Manulife has been secured as the anchor tenant at Keppel South Central. “Although more leasing deals are currently under negotiation at both Keppel South Central and Paya Lebar Green, the uncommitted space in these buildings contributed to a higher islandwide vacancy,” said Song.

According to Tay of Knight Frank, occupancies in the CBD were “generally healthy as office landlords continued to prioritise occupancy in their buildings amid global uncertainty”.

Tight CBD supply

Colliers’ He expects office supply in the CBD to tighten over the next two years with limited new completions and as excess space given up by occupiers is gradually absorbed. “Vacancy is expected to ease, and rental growth may pick up.”

As at the end of Q1 2025, there was a total supply of about 9.2 million sq ft of gross floor area (GFA) of office space in the pipeline islandwide, lower than the 9.8 million sq ft in the previous quarter. The bulk of the pipeline supply is expected to be completed in 2028 and beyond.

Knight Frank’s Tay said that in light of the unfolding trade war and the growing confusion in the global economy due to the US import tariff announcements, most major global corporations with regional headquarters in Singapore are likely to adopt a wait-and-see approach this year until there is more clarity before deciding on expanding or relocating their workplaces.

“Although some businesses are expected to relocate in measured flight-to-quality moves when leases expire, these might now be put on hold as a result of the emerging global trade war,” he added.

Cushman & Wakefield’s head of research for Singapore and South-east Asia, Wong Xian Yang, noted that some tenants may continue to face capital expenditure constraints, opting for lease renewal over relocation. “Fitted-out spaces are expected to remain highly sought after by tenants looking for cost-effective and immediately occupiable options,” he added.

Song of CBRE said: “Singapore’s reputation as a key business hub and safe haven, bolstered by its political neutrality and stable government policies, could support some office demand.”

URA’s price index of office space in the central region dipped 0.2 per cent qoq in Q1 2025, after slipping 0.7 per cent in Q4 2024. For the whole of 2024, the price index appreciated 1.8 per cent.

Retail rents down 0.5%

URA also released the latest data on the Singapore retail property market which showed that the rental index for retail space in the central region fell 0.5 per cent qoq in Q1 2025 after increasing by 0.6 per cent in Q4 2024.

Islandwide, as at the end of Q1 2025, there was a total supply of about 5.6 million sq ft GFA of retail space in the pipeline, lower than the 5.9 million sq ft in the previous quarter.

The amount of occupied retail space fell by 129,167 sq ft NLA in Q1 2025, after increasing by 505,903 sq ft in Q4 2024.

The stock of retail space expanded by 322,917 sq ft NLA in Q1 2025, following an increase of 258,334 sq ft in the previous quarter.

As a result, the islandwide vacancy rate of retail space rose to 6.8 per cent as at the end of Q1 2025, from 6.2 per cent as at the end of the previous quarter.

The price index for retail space in the central region rose 1.9 per cent in Q1 after declining 1.3 per cent in Q4 2024.