Singapore’s Central Business District (CBD) Grade A office rents could remain stable in 2025, despite potential challenges posed by artificial intelligence (AI) on service sector employment, according to Savills Singapore’s latest report. The office market showed signs of recovery in the second half of 2024, although this was from a low base earlier in the year when leasing activity was subdued.
The report highlights that most leasing activity in the latter half of 2024 occurred in new buildings and those with higher vacancies. Despite a slow office investment market, with only one block transaction and a few strata transactions, the total transaction value in Q4 2024 increased due to higher-value block transactions. However, strata transaction values fell by 69.5% quarter-on-quarter.
Vacancy rates for CBD Grade A offices rose by 1.8 percentage points to 8.0% in Q4 2024, the highest since Q1 2018. This increase was largely due to the addition of IOI Central Boulevard Towers to the office stock. Despite this, landlords have maintained asking rents, resulting in a 0.6% quarter-on-quarter rise in average monthly rents to S$9.79 per square foot. For the entire year, office rents grew by 1.1%, slightly down from 1.2% in 2023.
Layoffs in 2024 were mainly concentrated in tech companies located in business parks, with CBD Grade A office tenants largely unaffected. However, the rollout of AI services by tech companies could impact office employment by late 2025, potentially keeping rents flat after a 1.1% rise in 2024. Alan Cheong, Executive Director of Savills Research, noted, “CBD Grade A office rents may hold up in 2025 with some downside risk associated with AI’s implications for service sector employment.”
