As the demand for premium office spaces continues to rise, prime grade office rents in the Raffles Place-Marina Bay area have seen a modest increase of 0.2% quarter-on-quarter in the second quarter of 2025, averaging $11.38 per square foot per month. This slight uptick reflects a nuanced but positive trend within Singapore’s commercial real estate landscape, particularly in the Central Business District (CBD).
The total rental growth for the first half of 2025 was also recorded at 0.2%, a decrease from the more robust growth of 1.3% experienced during the same period in the previous year, indicating a cautious but steady recovery in the office rental market.
Key factors contributing to this growth include a significant number of lease renewals by occupiers, which have played a crucial role in minimizing relocation costs. By opting to renew their leases rather than seeking new spaces, companies have effectively stabilized their rental expenditures, thereby exerting a stabilizing influence on the overall rental growth in the CBD.
This tendency to renew rather than relocate has allowed businesses to avoid the often unpredictable costs associated with moving, including renovations, fit-outs, and potential downtime.
Moreover, the flight-to-quality trend among businesses has been a driving force behind increased leasing activity. Companies are increasingly prioritizing high-quality office spaces that offer superior amenities and environments conducive to productivity.
This has led to heightened demand for premium office spaces, resulting in a tightening market for quality offerings. As organizations seek to attract and retain talent, the importance of an appealing work environment has never been more pronounced, further fueling this trend.
The core CBD Grade A office vacancy rate, which declined from 5.9% in the first quarter of 2025 to 5.3% in the second quarter, underscores the competitive nature of the market for quality office spaces. A decreasing vacancy rate suggests that businesses are actively seeking out these sought-after properties, further driving up demand and contributing to the rental growth observed in recent months.
As the supply of prime office spaces tightens, landlords may be in a stronger position to negotiate rents, potentially leading to further rental increases in the future.
While the modest growth in rental rates may not mirror the more aggressive increases seen in prior years, it signifies a cautious optimism within the market. The interplay between lease renewals and the flight-to-quality trend suggests that businesses are adapting to the evolving landscape of work and seeking environments that foster collaboration, creativity, and innovation.
This adaptation may yield a more sustainable growth trajectory for office rents moving forward.
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News Source: Edgeprop
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