Offices, retail take lead in Singapore property deals

Prime commercial assets gain favour as tight supply supports rents and yields.

Falling borrowing costs and constrained supply are making office and retail assets the focus of Singapore’s property investment market, attracting buyers seeking stable income.

Office and retail accounted for 33% and 18% of first-half investment sales, respectively, shifting from 2025, when residential and industrial properties led the market, said Wong Xian Yang, head of research for Singapore and Southeast Asia at Cushman & Wakefield Plc.

“This shift reflects growing investor confidence in offices and retail, which offer strong income visibility, underpinned by limited new supply and resilient tenant demand, particularly for high-quality assets such as CBD Grade A offices and Tier 1 retail malls,” he said in an emailed reply to questions.

Wong said office and retail yield spreads over the government’s 10-year bond have widened beyond pre-pandemic levels, improving their appeal for investors seeking income and potential capital appreciation.

Catherine He, head of research at Colliers International (Singapore) Pte Ltd., said capital is concentrating in prime commercial assets. Retail, office and residential properties led second-quarter activity, excluding government land sales, she added.

Prime office and retail assets are trading at net yields of about 3.5% to 4.5%, with capital values remaining stable, He said.

Office remains the standout sector, with capital shifting towards the segment on favourable supply-demand conditions, said Chua Yang Liang, head of research and advisory for Southeast Asia at Jones Lang LaSalle, Inc. (JLL).

Retail and food-and-beverage properties are also attracting local and regional capital as tenant turnover creates value-add opportunities, whilst stronger owners continue to recycle capital and realign their portfolios, he added.

Singapore’s investment market has exceeded expectations this year. Cushman & Wakefield said transaction volumes reached $35.2b in the first half, exceeding the $33b recorded for all of 2025.

Falling borrowing costs have supported the increase. The three-month Singapore overnight rate average had fallen to about 1.08% at end-June from about 1.18% at the start of the year, Wong said.

“At current borrowing costs, many office, retail and industrial assets are able to generate positive cash-on-cash returns whilst operating fundamentals remain resilient,” he said.

The market is also benefiting from a constrained supply pipeline, expectations of rental growth, and Singapore’s appeal as a safe haven amid war and macroeconomic uncertainty, Wong said.

Colliers recorded $15.6b in investment sales in the second quarter, down 5.9% from a record $16.6b in the first quarter but more than double the level a year earlier.

“The tone has shifted from broad recovery to disciplined, income-focused deployment concentrated in prime assets,” He said.

Alan Cheong, executive director for research and consultancy at Savills Singapore Pte. Ltd., said commercial property continues to benefit from lower borrowing costs and capital raised in recent years that is seeking investment opportunities.

Demand for private commercial real estate is also supported by limited supply of Grade A offices in the central business district and relatively attractive retail yields, Cheong said.

Investment restrictions affecting private residential property and JTC Corporation-managed industrial properties have also directed capital towards commercial assets, he said.

Chua cited Hongkong Land Holdings Ltd.’s Singapore Central Private Real Estate Fund as a standout transaction. The fund, which debuted in February, is the city-state’s biggest office-focused private investment vehicle, backed by $8.2b in assets.

Savills expects 2026 investment sales of $55b to $60b, with Cheong saying the second half is likely to maintain the growth trajectory seen in late 2025, although first-quarter volumes are unlikely to be repeated.

Government land sales could provide another boost. The Town Hall Link white-site tender, scheduled to close in November, could generate a multibillion-dollar transaction before year-end, Cheong said.

Colliers expects full-year investment sales to exceed $40b, potentially making 2026 the highest-volume year since 2007.

Interest rates remain the main uncertainty, Wong said. A sustained increase in global borrowing costs could raise domestic financing costs and affect asset pricing.

Investors are likely to favour high-quality, income-producing properties with strong tenant demand and limited supply risk, where rental growth can help offset higher borrowing costs, he said.