CBD office rents continue subdued growth trajectory in 1Q2025
Situated in Tanjong Pagar, Keppel South Central was finished in very early February. During the time, Keppel revealed that almost 50% of the space had been committed or was under negotiation. The structure has also secured its initial anchor tenant, reportedly insurance company Manulife.
The trip to quality is set to drive demand for brand-new workplace. Andrew Tangye, head of office leasing and advisory at JLL Singapore, notes that IOI Central Boulevard Towers, completed last year, is nearing 80% commitment. As a result, he expects demand will spill over to Keppel South Central and the upcoming advancement of Shaw Tower.
Due for completion in 2026, the development lately obtained its first renter, co-working company The Great Room. The company introduced earlier this month that it will open a 36,000 sq ft office in the building following year.
The marginal development continues the subdued trajectory in office rentals over the last four quarters. CBD leas increased 0.4%, 0% and 0.7% q-o-q in 4Q2024, 3Q2024 and 2Q2024. “This marks the lengthiest duration of modest variation in rents since we started tracking this information collection,” claims JLL in a March 26 press release.
Calvin Yeo, head of occupier strategy and options at Knight Frank, states that in the middle of international unpredictability, several occupiers are choosing to restore rent at existing properties. At the same time, others are beginning to look for quality office as part of prospective flight-to-quality relocations.
A different record by Knight Frank found that prime grade workplace rents in the Raffles Place and Marina Bay precinct stayed unmodified from the previous quarter, at $11.36 psf per month in 1Q2025. At the same time, the CBD occupancy level decreased marginally from 93.7% in the last quarter to 93.5% in 1Q2025, which Knight Frank connects to the newly completed Keppel South Central.
Offices in other locations islandwide presented q-o-q adjustments ranging from -0.3% to 3.4%.
He predicts that most major global firms with offices in Singapore are going to stay in a holding pattern until higher quality emerges on the international landscape. Nonetheless, flight-to-quality actions may happen amongst some businesses upon lease expiration as they seek to right-size or decrease prices. Knight Frank also expects prime workplace rental growth to range in between -1% to 2% for the whole of 2025.
“Although this moving pattern is not yet widespread, tenants are increasingly considering cost-neutral options that include right-sizing and moving to even more modern office centers in order to minimise price,” notes Yeo. Additionally, inhabitants may be incentivised to move as landlords supply subsidised fit-out costs or other advantages in a bid to keep tenancy levels.
Local office rents presented little adjustment in Q1 2025, based upon data collected by JLL. The research discloses that CBD Grade An offices tracked by the consultancy recorded a gross effective lease of $11.60 psf per month for the very first quarter, edging up simply 0.5% q-o-q.
On The Other Hand, Knight Frank’s Yeo notes that in addition to Shaw Tower, no contributions to the market are expected in the nearby term. This might position an obstacle for large-footprint occupiers, making relocations amongst such tenants unlikely in the brief to medium term.
Tangye is positive about office space demand, noting that MNCs in Singapore are gradually taking on a full return-to-office model while the financial services market is rebounding. Last November, Barclays disclosed plans to establish Singapore as its second booking centre for Asia Pacific personal financial operations, while Standard Chartered announced a growth of its wealth management programs in the city-state.
The forecasted development in demand will accompany a decrease in new office space source following the completion of IOI Central Boulevard Towers and Keppel South Central. “Supply of new office space is set 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 moderate but sustained development in office leas during this duration”, he includes.
