The Latest URA Data Reveals A Growing Divide In Singapore’s Commercial Property Market — Here’s What It Means

The latest real estate statistics published by URA suggest that existing trends in the office and retail markets are continuing, influenced by flight-to-quality trends for offices to resilient retailer demand for suburban malls.

In the office market, the pipeline of new supply has dwindled due to the absence of land for development in the Central Business District (CBD). As business weighed expansion moves against relocation costs, occupier behaviour leaned towards stability over expansion.

Meanwhile, global instability over the first six months of this year turned out to be a double-edged sword. While it prompted corporate real estate tenants to tread cautiously, it also bolstered Singapore’s position as a safe-haven business hub, attracting multinational occupiers seeking a stable regional base away from conflict zones.

Traditionally, financial services occupiers have been, and are expected to remain, a key source of Grade A office demand. But the proliferation of Artificial Intelligence (AI) firms and start-ups means that this group is becoming a growing occupier segment, drawn by Singapore’s deep talent pool and supportive innovation ecosystem.

Cognisant of Singapore’s stability, investors have been actively acquiring office buildings in the first half of 2026. Earlier in May, the Stacked editorial team reported that office investment deals surged to a record quarterly high of $14.73 billion worth of transactions in 1Q 2026 alone.

Over in the retail market, increased cost and overhead pressures have led to F&B and retail outlet closures, such as Encore by Rhubarb, Wing Seong Fatty’s Restaurant and Jumbo Seafood’s flagship at East Coast Seafood Centre. There is also a good chance that a wave of mall ownership changes could see retail rents trend higher after asset enhancement initiatives (AEIs) by landlords and asset owners.

Some malls that have recently changed hands include Paragon’s $3.9 billion sale to CapitaLand Integrated Commercial Trust (CICT), Delfi Orchard which was acquired by City Developments (CDL) for $439 million, and the rear block of The Centrepoint. Other older malls in the area including Tanglin Shopping Centre, Ming Arcade and Concorde Hotel and Shopping Mall were sold for redevelopment.

In the next phase of Orchard Road’s evolution, retailers must go beyond retail options, and provide fun and differentiated experiences for everyone. (Illustration: URA)

While there are ongoing efforts to turn the Orchard Road shopping belt into a more holistic mixed-use precinct, Singapore’s increasingly decentralised urban structure and connectivity could be a challenge.

Unlike a few decades ago, today consumers can commute seamlessly between residential and commercial nodes, resulting in little need to depend on a central location for social gatherings.

For the purpose of redeveloping older buildings with bold and innovative concepts, initiatives such as the Strategic Development Incentive (SDI) scheme will support several developments to create diversity in Orchard’s lifestyle, arts and cultural offerings.

Office market

In 2Q2026, office rents went up by 0.4% q-o-q compared with 0.2% q-o-q increase in 1Q2026. Rentals increased by 0.8% q-o-q, compared with 0.2% q-o-q decline in the previous quarter.

Office space overview. Source: URA

Islandwide occupancy in the office market slipped marginally by 0.2 percentage points (pp) from 89.2% to 89.0%. Nevertheless, the upward trend in the office rental index reflected consistently stable demand by office space occupiers.

At the end of 2Q2026, the total supply of office space was about 9,127,796 sq ft in terms of gross floor area (GFA), compared with 9,332,310 sq ft GFA of office space in the previous quarter.

Property Price Index of office space in the Central Region. (Credit: URA)

In the second quarter of this year, occupied office space increased by 86,111 sq ft, compared with the increase of 279,862 sq ft in the previous quarter. Office space stock increased by 204,514 sq ft, compared with the increase of 86,111 sq ft in the previous quarter. As a result, the islandwide vacancy rate of office space increased from 10.8% in 1Q 2026 to 11.0% as at the end of 2Q 2026.

Generally, office lease renewals were done more out of necessity rather than as the result of expansion plans by companies. Rather than a capital-intensive step up to a larger space, rental increments that are broadly in tandem with inflation are more palatable to corporate tenants.

Carrying on the momentum from the previous year, flight-to-quality continues to shape selective leasing decisions, which means competition for prime space will remain robust. Companies seeking a strategic office foothold that shapes company culture, innovation, and talent retention remain drawn to well-located, newer Grade A buildings in the CBD.

According to Cushman & Wakefield’s 2Q2026 market report, CBD Grade A office rents are forecasted to grow 4-5% in 2026. Similarly, office rents are expected to maintain their upward momentum through the rest of 2026, having risen 2.2% in the first half of the year.

What this means for older, less competitive buildings, especially those without sheltered connectivity to mass transit nodes or with obsolete specifications, is a combination of increased vacancy risks and mounting downward pressure on rents.

The current CBD market has also prompted some to consider decentralised locations, albeit at a nascent stage.

Stock and vacancy of office space. (Credit: URA)

Leonard Tay, Head of Research at Knight Frank, says that as the global economy navigates through uncertainties brought on by political tensions, trade disagreements and conflict, Singapore’s appeal as a safe haven underpins its long-term attractiveness.

“Looking ahead, market conditions should remain resilient but measured. The pre-existing market dynamics observed in the first six months of the year is expected to prevail in the remaining half, and likely into 2027. Rents are projected to increase by 3% to 5% in 2026 given the tight CBD supply, with decentralised spaces capturing spillover demand when CBD occupiers require lower cost options to accommodate much needed growth.”

Retail market

Over in the retail segment of the real estate market, Singapore’s affluent consumer base, recovering tourism, and strong position as a regional business hub has helped the city-state attract international brands and new physical store entrants, such as Molly Tea, Lotteria, Torikizoku and Subdued.Prime mall openings were driven largely by F&B businesses, who accounted for 53% of new retail openings in 1H2026, meanwhile Lifestyle and Fashion brands contributed to 16% and 14% of new store openings, respectively, according to data from Cushman & Wakefield.In 2Q2026, the price of retail space increased by 0.8% q-o-q, compared with the 2.2% q-o-q increase in the previous quarter. Meanwhile, retail rentals increased 0.6% q-o-q, up from 1Q2026’s 0.6% q-o-q decline.

Property Price Index of retail space in the Central Region. (Credit: URA)

In terms of vacancies, islandwide vacancy rose to 7.0%, from 6.4% in 1Q2026, with all submarkets recording higher vacancy rates.

Retail space overview. Source: URA

In the second quarter of this year, the amount of occupied retail space decreased by 398,265 sq ft, compared with the increase of 64,584 sq ft in the previous quarter. As at the end of 2Q 2026, total supply was about 6,501,402 sq ft GFA of retail space in the market, compared with the 6,512,166 sq ft in the previous quarter. Along the prime Orchard Road shopping belt, retail vacancy rose from 7.1% in 1Q2026 to 7.2% in 2Q2026, while vacancy at the Rest of Central Region (RCR) and Outside Central Region (OCR) rose to 8.3% and 5.2%, respectively. As a result, the islandwide vacancy rate of retail space increased to 6.5% at the end of the second quarter, from 6.3% as at the previous quarter.

Stock and vacancy of retail space. (Credit: URA)

Wong Xian Yang, head of research at Cushman & Wakefield notes that a two-tier market continues to characterise the retail segment, a direction that has continued since the start of this year. With limited new supply in the pipeline, many retail landlords are expected to remain focused on AEIs to unlock value from existing assets.

For instance, planned upgrades at City Square Mall, West Mall, Hougang Mall, NEX and Plaza Singapura reflect ongoing efforts to optimise space utilisation, refresh tenant mixes and enhance the overall shopper experience. These initiatives are expected to strengthen the positioning of top-tier assets characterised by strong connectivity and curated tenant mixes, further widening market bifurcation.

Wong Shanting, Head of Research at Newmark notes that while business sentiment has turned more cautious, new retail and F&B formations continue to sprout.

Two key factors are likely to underpin retail activity. First, tourist arrivals are expected to remain stable with higher per capita spending in the second half of the year. Second, the government has released the latest tranche of household vouchers in June to ease cost pressures, potentially lifting discretionary spending.

With online channels such as TikTok shops and other e‑commerce platforms expanding, retailers find themselves in a more diversified retail ecosystem with more options to reach customers beyond traditional brick‑and‑mortar stores.

Wong foresees that along prime Orchard Road, retail expansion is likely to become more selective with performance largely driven by top‑tier luxury malls. Conversely, well‑located suburban malls are expected to lead growth in this segment with strong residential catchments, driven by everyday domestic demand.

In spite of the retail sector’s ongoing challenges, Tay of Knight Frank projects that retail rents will remain stable and register growth of approximately 2-4% for the rest of 2026.