Companies prioritise quality and efficiency as AI and flexible work reshape office demand
Office rents in Singapore’s Central Business District (CBD), particularly in Raffles Place and Marina Bay, held steady at $11.36 per square foot per month in the first quarter of 2025. While unchanged from the previous quarter, this reflects a 1.4% year-on-year increase, as reported by Knight Frank.
The rental stability is attributed to companies renewing leases and a growing preference for premium office spaces. Many businesses are shifting towards high-quality workplaces, with AI-driven efficiencies reducing the need for large office footprints. As firms adopt more flexible layouts, smaller yet high-end office spaces are becoming increasingly viable.
Despite steady rents, the CBD’s occupancy rate saw a slight drop of 0.2 percentage points to 93.5% quarter-on-quarter, influenced by the completion of Keppel South Central, where half of the space is either leased or under negotiation. However, overall demand remains resilient, with landlords focusing on maintaining strong occupancy levels amid global uncertainties.
Knight Frank’s managing director for occupier strategy, Calvin Yeo, noted that landlords are prioritising tenant retention. “With economic uncertainties in play, maintaining occupancy remains a key focus,” he said.
The near-term office supply in the CBD is expected to slow after the completion of IOI Central Boulevard Towers and Keppel South Central. Other than the ongoing Shaw Tower redevelopment, no significant new office projects are set to launch soon. This supply constraint poses challenges for companies seeking large premium-grade spaces of 30,000 square feet or more.
However, relocation activity is expected to continue as leases expire, with a measured shift towards higher-quality office spaces. Given these market dynamics, Knight Frank projects a rental growth of 0% to 2% across the CBD in 2025.
With businesses adapting to changing workplace needs and a limited pipeline of new office developments, Singapore’s prime office sector remains in a state of cautious optimism.
