Grade A rents to climb up to 5% as supply stays tight

New supply is expected to average 1.0 msf against 1.4 msf in long-term net absorption.

Singapore’s office market is expected to see rental growth in the second half (H2) as constrained supply and demand for higher-specification space shape the central business district (CBD) Grade A segment.

Cushman & Wakefield said in its Singapore Outlook H2 2026 that CBD Grade A office rents are projected to rise 4% to 5% year on year in 2026, after increasing 2.2% in the first half (H1) of the year.

The vacancy rate stood at 4.7% in the second quarter following the completion of Shaw Tower, but is expected to fall to about 3.7% by the end of the year.

The market's supply pipeline is expected to remain below long-term average net absorption through 2031. New supply is forecast to average 1.0 million square feet (msf) a year, compared with long-term net absorption of 1.4 msf.

Flight-to-quality remains the main driver of leasing demand, with tenants seeking higher-specification office space.

Financial occupiers account for much of the leasing activity, whilst artificial intelligence-focused companies expanding their Singapore operations could add to demand.

Shaw Tower, with 435,000 square feet (sq ft) of space, is the only major Grade A office completion scheduled for 2026 and is about 40% committed.

Supply is expected to increase to about 2.4 msf in 2028, with projects including The Skywaters, which has 721,000 sq ft, Keppel South Central with 550,000 sq ft, and Newport Tower with 180,000 sq ft. A significant portion of this future supply is already pre-committed.

Grade A offices are expected to outperform CBD Grade B and decentralised submarkets. As Grade A rents rise, some demand may spill over into more cost-effective segments.

“Beyond quality, some tenants are increasingly prioritising flexibility amidst ongoing uncertainty. This has driven demand for co-working space, with operators steadily expanding their presence in the CBD,” the report said.

CBD Grade A shadow space remains below pre-pandemic averages, pointing to limited downsizing amongst occupiers.

Commercial investment sales, including offices, accounted for 50.7% of Singapore's total investment volumes in H1 2026.

Office property yield spreads had exceeded pre-pandemic levels as of the first quarter, supporting a recovery in core and value-add capital due to healthy cash-on-cash returns.

Major transactions in the first half included the $8.2b launch of the Singapore Central Private Real Estate Fund, which includes assets such as Asia Square Tower 1 and MBFC Towers 1 and 2.

IOI Group acquired Asia Square Tower 2 for  about $2.48b, whilst Allgreen Properties bought 78 Shenton Way for $600m for future redevelopment.