Office Rent Growth Flattens in Downtown Singapore as Big Occupiers Grow Cautious

Office rent growth in downtown Singapore nearly ground to a halt in the year’s final quarter as renewals continued to form the bulk of market activity, according to Knight Frank.

Prime office rents in the Raffles Place/Marina Bay precinct rose a mere 0.1 percent compared with levels in the prior quarter to average S$11.36 ($8.37) per square foot per month, the consultancy said in its Singapore office report. Rents climbed 2.1 percent for the full year, slowing from the 4.1 percent growth seen in 2023.

Landlords are prioritising occupancy in a market where most occupiers lack a mandate to expand, according to the report, while tenants are renewing leases at existing premises and adopting a conservative business outlook amid global uncertainty.

“The office leasing market has predominantly been active with renewals throughout the year, and this trend is likely to continue in the first half of 2025,” said Calvin Yeo, head of occupier strategy and solutions at Knight Frank Singapore.

Waiting for Clarity

Occupancy at prime buildings in Raffles Place/Marina Bay and across the central business district remained stable in the fourth quarter at 93.6 percent for each, the report said. The core commercial hub saw occupancy recede from 94.8 percent a year earlier, due to the completion of IOI Central Boulevard Towers, where about 75 percent of the 1.2 million square feet (111,484 square metres) of space has been filled.

Current market activity is characterised by the lack of a dominant sector, as the finance and tech industries that once leased large tracts of office space have become more cautious. In 2024, smaller legal, finance and consulting firms took up some of the space vacated by bigger occupiers, according to Knight Frank.

“Nevertheless, falling interest rates might contribute to cautious business growth and consequent demand for better quality facilities in the year ahead,” Yeo said.

In the flexible office segment, WeWork last month announced the closing of two Singapore locations, with three floors at Manulife Tower near Chinatown having ceased operations and three storeys at UE Square on Clemenceau Avenue set to shut in 2025. Despite the retreat, co-working demand remains supported by smaller occupiers, Knight Frank said.

The consultancy expects global corporations with headquarters in Singapore to adopt a wait-and-see approach before deciding on expanding or relocating workplaces for at least the first half of 2025.

“At the same time, some businesses are expected to continue relocating in measured flight-to-quality moves from ageing buildings as and when leases expire,” Yeo said.

Smaller Units Move Market

JLL reported Monday that Singapore office spaces spanning 2,000 to 5,000 square feet have been leasing faster due to demand from tenants in the investment management, professional services and emerging tech sectors. Raffles Place outperformed other submarkets in terms of fourth-quarter rents, thanks in part to landlords’ willingness to subdivide spaces to cater to smaller tenants, the consultancy said in a release.

Vacancy in the central business district, which JLL calculates at 6.9 percent, is projected to remain tight, with prime-grade properties experiencing even lower rates below 4 percent, said Andrew Tangye, head of office leasing and advisory at JLL Singapore.

“The vacancy rate is expected to continue to decline, driven by the growing flight-to-quality and return-to-office trends,” Tangye said. “Additionally, moderate economic growth encouraging business expansion and hiring could boost office demand in the medium term.”

On the capital market front, two office deals surpassed S$500 million ($368 million) in 2024: CapitaLand Integrated Commercial Trust’s S$688 million divestment of 21 Collyer Quay to an entity reportedly linked to co-founders of the Haidilao restaurant chain and the S$775 million sale of Mapletree Anson to fund manager PAG.

“Developers are now more open to divesting their assets, contributing to a new pipeline of projects slated for sale in 2025,” said Ting Lim, head of capital markets at JLL Singapore. “Investors, on the other hand, are also likely to become more active, especially in 2H25 driven by successful capital raising efforts, potential interest rate corrections and improving conditions in the occupier market.”