'Severe' supply crunch to persist for premium offices; leasing demand led by renewals

Tight supply in Singapore’s CBD premium or Grade A office market looks set to continue, with the next wave of major new projects coming onstream only from 2028 onwards.

At the same time, demand from occupiers in the second quarter of 2026 was mainly driven by lease renewals rather than expansions, while the flight to quality showed no signs of abating.

These factors supported higher office rents during the period, with further rental growth expected in the coming quarters, analysts said in separate research reports released in late June 2026.

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Rising rents and 'persistently high' occupancy

Singapore’s CBD Grade A office market has entered its sixth year of rental growth — the longest upward cycle on record — as vacancy neared a nine-quarter low, JLL Research highlighted.

It found that gross effective rents rose 1.1% q-o-q to $12.19 psf per month in the second quarter this year, accelerating from the 0.5% growth seen in the first quarter.

Excluding new supply, vacancy fell to 5.6%, the lowest level in nine quarters, as sustained occupier demand absorbed quality space faster than landlords could deliver it, JLL said.

Average CBD Grade A office rents

Shaw Tower's completion added new stock, pushing up overall CBD vacancy slightly to 6.7%, from 6.3% previously.

“However, the underlying market dynamic remains firmly supply-constrained, with Marina Bay remaining the primary demand driver as IOI Central Boulevard Towers and other prime buildings near full occupancy,” JLL added.

Recent high-profile occupiers completing moves to Marina Bay included global data and AI company Databricks, which quadrupled its Singapore footprint to 32,000 sq ft. Other notable occupiers completing relocations to the area include leading international firms A&O Shearman, Franklin Templeton, and Virtu Financial.

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And in the Shenton Way/Tanjong Pagar sub-market, Keppel South Central benefitted from tenants needing to relocate from 79 Anson Road ahead of the latter’s redevelopment. JTB Singapore, OOCL, and Wan Hai Lines are among those taking up space in the new building, JLL said.

The impending completion of the Prince Edward Road MRT station on the Circle Line, as well as the new Keppel and Cantonment stations completing the full loop in July 2026, is further enhancing accessibility in the Shenton Way/Tanjong Pagar sub-market. JLL expects this to support landlords’ ability to raise rents in the area.

Knight Frank Singapore’s analysis found that rents of prime-grade office space in the Raffles Place/Marina Bay area grew by 1% q-o-q to an average of $11.69 psf per month in 2Q2026.

Occupancy in the Raffles Place/Marina Bay precinct also saw a slight dip of 0.3 percentage point to 96.7%, as compared to 97% in the first quarter, the real estate consultancy’s data showed.

Overall, CBD occupancy increased by 0.6 percentage point q-o-q to 95.3% in the second quarter this year.

“The persistently high occupancy levels highlight the enduring appeal of the CBD for office tenants,” Knight Frank noted.

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Average office rentals by key precincts in 2Q2026

Newmark observed that premium or Grade A rents in Raffles Place and New Downtown touched $12.18 psf per month in 2Q2026, up 0.4% q-o-q.

Selected premium office buildings have already seen rents exceeding $13.70 psf per month, which reflects firm demand for better and more premium space in core CBD locations, said June Chua, Newmark’s senior managing director, head of Singapore leasing.

Meanwhile, in Shenton Way, Tanjong Pagar and Robinson, premium office rents rose by 0.4% q-o-q to $10.07 psf per month.

“The severe premium/Grade A office supply crunch in 2025–2027 has firmly turned conditions in landlords’ favour,” Chua said.

Leasing demand to widen further

Office occupiers are generally favouring stability over expansion, with relocation costs a major barrier to expansion moves, according to Knight Frank.

“In many cases, renewals were executed more out of necessity than expansion, as it is easier to justify rental increments that are broadly in tandem with Singapore’s inflation levels than to commit to significant rental step-ups,” said Tridiana Ong, head of occupier strategy and solutions at Knight Frank Singapore.

The lack of justifiable relocation budgets has resulted in a corresponding lack of urgency among corporates to change premises, she added.

Despite the low churn, AI-related firms have been reported to be either setting up offices or expanding.

Putting it in perspective, Ong pointed out that the take-up of office space by growing AI enterprises should be “weighed against ongoing rightsizing” by other established technology firms and financial institutions.

JLL likewise reckoned the breadth of leasing demand will continue to widen in the near term, with more AI and technology firms joining occupiers in the financial services and professional services sectors as active movers.

Tenants across sectors — from AI and fintech to professional services and insurance — are increasingly committing to premium, well-located spaces ahead of need. This comes as the window to secure contiguous, large floor plates is closing fast, noted Michael Glancy, the firm’s country CEO for Singapore and Southeast Asia.

For instance, Shell’s pre-commitment of about 100,000 sq ft at Asia Square Tower 1 and Databricks’ expansion at IOI Central Boulevard Towers reflect this shift.

“We expect the flight to quality to remain the dominant occupier theme through 2H2026, as companies compete for a shrinking pool of premium, large-format spaces,” said Chua Yang Liang, head of research and advisory for JLL Southeast Asia.

Upcoming supply in 2028

Singapore’s office supply shortage shows no signs of easing, with Shaw Tower — the only major Grade A completion in 2026 — already substantially leased.

In 2027, Newport Tower will be the sole non-strata new development to complete.

JLL highlighted that the next wave of meaningful new supply will not arrive until 2028 — limited to The Skywaters, The Clifford, One Comcentre and Union Square Central, with the broader development pipeline remaining thin thereafter.

The increased sophistication of upcoming projects could support continued office rental growth. JLL maintained its forecast of the 2026 full-year CBD Grade A rents at about 4%, and projected a cumulative five-year increase of around 15% through 2030.

Selected upcoming office supply islandwide

For Knight Frank, the market dynamics seen in the first six months of this year could prevail in the remaining half, and likely into 2027.

It projected rents to increase by 3–5% for the whole of 2026 given the tight CBD supply.

Decentralised spaces may capture spillover demand when CBD occupiers require lower-cost options to accommodate much-needed growth, Ong said.

Newmark foresees rents for premium and Grade A office space to rise 3–5% this year, while q-o-q growth may moderate in the coming quarters.