CBD office rents continue subdued growth trajectory in 1Q2025
Located in Tanjong Pagar, Keppel South Central was completed in early February. At the time, Keppel revealed that close to 50% of the space had actually been devoted or was under negotiation. The structure has also protected its very first support tenant, reportedly insurance firm Manulife.
The flight to quality is set to drive need for new office. Andrew Tangye, head of workplace leasing and advisory at JLL Singapore, notes that IOI Central Boulevard Towers, finished in 2024, is nearing 80% commitment. As a result, he anticipates demand will spill over to Keppel South Central and the upcoming development of Shaw Tower.
He forecasts that most major global corporations with workplaces in Singapore will remain in a holding pattern up until greater clarity arises on the global landscape. Nonetheless, flight-to-quality moves might occur amongst some services upon lease expiration as they look for to right-size or lower expenses. Knight Frank also expects prime workplace rental growth to range between -1% to 2% for the whole of 2025.
A different record by Knight Frank spotted that prime grade office rents in the Raffles Place and Marina Bay precinct remained unmodified from the last quarter, at $11.36 psf per month in 1Q2025. At the same time, the CBD occupancy level declined marginally from 93.7% in the last quarter to 93.5% in 1Q2025, which Knight Frank connects to the recently finished Keppel South Central.
Calvin Yeo, head of occupier strategy and remedies at Knight Frank, claims that in the middle of worldwide unpredictability, several occupiers are choosing to restore rent at existing properties. At the same time, others are starting to look for quality workplace as part of possible flight-to-quality moves.
“Although this transfer fad is not yet extensive, occupiers are increasingly thinking about cost-neutral options that include right-sizing and relocating to more modern office centers in order to minimise price,” notes Yeo. Additionally, occupiers might be incentivised to relocate as proprietors offer subsidised fit-out costs or other advantages in a quote to keep occupancy degrees.
The marginal development continues the controlled movement in office rentals over the last four quarters. CBD rental fees increased 0.4%, 0% and 0.7% q-o-q in 4Q2024, 3Q2024 and 2Q2024. “This marks the longest duration of modest variant in rents since we began tracking this data series,” states JLL in a March 26 press release.
The anticipated development in demand will coincide with a decrease in new office space supply following the finalization of IOI Central Blvd Towers and Keppel South Central. “Supply of brand-new office is readied to be constrained between 2Q25 and 2027,” states Chua Yang Liang, head of research study and consultancy for JLL Southeast Asia. This would certainly “assist modest but sustained growth in office rental fees during this duration”, he adds.
Due for finish in 2026, the property development lately secured its first lessee, co-working company The Great Room. The firm introduced earlier this month that it will certainly open a 36,000 sq ft workspace in the establishment next year.
Local workplace rental fees presented little change in Q1 2025, based upon information collected by JLL. The research reveals that CBD Quality A workplaces traced by the consultancy reported a gross effective lease of $11.60 psf monthly for the first quarter, outlining up just 0.5% q-o-q.
Workplaces in other locations islandwide showed q-o-q adjustments varying from -0.3% to 3.4%.
Tangye is positive about office demand, noting that MNCs in Singapore are progressively adopting a full return-to-office model while the financial services field is recoiling. Last November, Barclays showed plans to set up Singapore as its 2nd reservation centre for Asia Pacific personal financial affairs, while Standard Chartered declared an expansion of its wealth management programs in the city-state.
Meanwhile, Knight Frank’s Yeo notes that in addition to Shaw Tower, no contributions to the market are expected in the near term. This could present a difficulty for large-footprint inhabitants, making relocations amongst such renters unlikely in the short to medium term.
