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Singapore office market stands out with strong fundamentals


Real estate investors and businesses entered 2023 on a cautious note, after a roller coaster ride of head-to-head events - from a global pandemic to persistent inflation and interest rate hikes, alongside the energy crises, geopolitical conflicts and looming climate deadlines.

On recovery mode today, and as the brighter side unfolds, the spotlight is on markets like Singapore, that have not only weathered the storm but have managed to stand out stronger with solid fundamentals and continued growth potential in the years ahead. 

With strong investor appetite and healthy transaction volumes, Singapore emerged as a preferred investment destination for offices in our 2023 Global Investors Outlook. What sets the Gateway City apart?

We see six major market dynamics that make Singapore’s CBD office market stand out among others. 

1. Optimistic rental growth outlook

Rents for Singapore’s Grade A office buildings at the core CBD have surpassed pre-pandemic levels with vacancy rates hovering around just 3%. Amid moderate new supply and tight occupancy rates, rents and capital values are expected to remain well-supported. This, in combination with decreasing current supply and steady demand growth, is expected to fuel the continued rental upswing in the short to medium term. While the average CBD Grade A office rent in 2022 grew 5.9%, it is expected to increase by around 3% in 2023, yoy.

2. Steady demand for prime offices

Demand for Grade A offices at core central CBD outweighed supply in 2022, reaching pre-pandemic (2020) levels (at 513,000 sqf). So far, Singapore largely remains unaffected by the major layoffs seen across other global markets. In fact, many new companies are mushrooming. Consider this: the number of family offices in Singapore jumped fivefold between 2017 and 2019, and almost doubled from 400 at the end of 2020 to 700 a year later.
Premium office demand is expected to grow at a steady pace as businesses continue to lure talent with more innovative and collaborative workspaces, powered with intelligent building systems, biophilic designs, large open floor plates among many impactful core and flex features. Case in point is the group of prime buildings coming up over the next three years, including Guoco Midtown, IOI Central Boulevard, Shaw Tower and the new Keppel Tower Development.

3. Restricted supply over next 3-4 years

The new prime CBD office supply over the next 3-4 years will be substantially lower than the previous 10 years' average. The average annual office supply in the central area over the next 5 years (0.84mil sf pa) will be 17% lower than the past 10-year average (1.02mil sf pa).

4. Urban renewal 

Photo Credit: Handout
The current URA Redevelopment scheme is causing the withdrawal of existing office buildings for redevelopment, which will take around 4-5 years on average to complete. An estimated 2.2 million sf of office space in the CBD has been or will be withdrawn soon, due to landlords’ redevelopment plans announced in 2019-2022. These include prominent office buildings such as AXA Tower, Fuji Xerox Towers, and potentially some others to follow.
Moreover, the new developments are largely planned as mixed-use, potentially resulting in less office square footage compared to before. Well-regulated planning and development laws in Singapore make greenfield land speculation in the CBD and the office market practically impossible, as developments need to be completed within a certain timeframe after URA awards the tender for the specific land plots. 

5. Well-supported capital values and yields

Although most global investors are generally underwriting yield expansion over the next quarters as they adjust to a period of slower growth and higher capital costs, Singapore Grade A office capital values are likely to remain well-supported by the strong holding power of institutional landlords, tight occupancy, rental growth, as well as keen investor interest in quality core assets here due to their safe status. With the rise in borrowing costs and narrowing of yield spreads, office transactions will likely be dominated by strata and smaller sized offices, where the price quantum is more palatable, and could attract mainly private wealth where typically minimal leverage is deployed.
Buoyed by positive rental growth and restricted supply, the average capital values for Core CBD Premium & Grade A offices grew by 5.2 % in 2022 to SGD 3,050 PSF. Net yields were maintained at 3.51 %, demonstrating the stability of the market.

6. ESG, the game changer for Singapore office market


Singapore’s Green Plan 2030 envisages the greening of 80% of Singapore’s buildings by 2030. The lion city has set clear targets for private sector companies to ensure absolute alignment with its sustainable development goals by 2030. This will result in assets that are future-proof and aligned with the ESG targets set by office occupiers globally.

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Bastiaan VB

Managing Director | Singapore

MD's Office


Bastiaan is the Managing Director for Colliers in Singapore. His responsibilities include the strategic direction of the Singapore office, to lead the growth and diversification initiatives, ensure superior service delivery and develop market leading teams. He oversees all business lines including Capital Markets, Investment Sales, Occupier Services, Valuations & Advisory, Industrial Services, Hotel Advisory, Research, as well as Marketing & Communications and the Human Resources and Finance Teams.

Pertinent to this assignment Bastiaan was the Head of Occupier Services in Singapore and has led complex transaction projects for diverse global multinationals and investors throughout the entire Asia-Pacific region.

In Asia - Pacific, Bastiaan lived and worked in; Singapore, Hong Kong, South Korea, Malaysia and Australia.

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