Singapore Central Office Rents Edge Up 0.8% in Q2 as Vacancy Climbs

Modest Rent Recovery After Q1 Decline

Office rents in Singapore's central region climbed 0.8 per cent in the second quarter of 2026 compared to the previous three months, reversing a 0.2 per cent decline recorded in the first quarter, according to Urban Redevelopment Authority data released July 24.

The uptick comes as the city-state's office market continues to navigate a period of elevated vacancy, with the islandwide rate reaching 11 per cent by the end of Q2, up from 10.8 per cent at the close of Q1. The vacancy increase reflects supply growth outpacing demand, even as occupiers continued to absorb space across the island.

Net absorption totalled 8,000 square metres of net lettable area during the quarter, a sharp deceleration from the 26,000 square metres absorbed in Q1. Meanwhile, the stock of office space expanded by 19,000 square metres of NLA in Q2, more than double the 8,000 square metres added in the prior quarter.

Price Index Gains Momentum

The URA price index for central region office space rose 0.4 per cent quarter-on-quarter in Q2, doubling the 0.2 per cent gain recorded in the previous quarter. The sequential improvement suggests landlords have regained some pricing power, though the pace of appreciation remains subdued by historical standards.

The divergence between rental growth and price appreciation points to a market where transactional pricing is firming faster than lease renewals, a dynamic often seen when investor expectations for future demand improve ahead of tenant sentiment.

Pipeline Supply Eases Slightly

The supply of office space in the pipeline stood at approximately 848,000 square metres of gross floor area as at end-Q2, down from 867,000 square metres at the end of the previous quarter, according to URA figures. The decline suggests completions are beginning to chip away at the forward pipeline, though the quantum remains substantial relative to the existing stock.

With net absorption trailing new supply additions this quarter, the market's ability to tighten vacancy hinges on sustained demand from both financial services and technology tenants, two sectors that have historically driven space take-up in Singapore's core business districts.

What the Numbers Signal

The combination of positive rental growth and rising vacancy is not inherently contradictory. Rents can edge higher in pockets of prime inventory even as overall availability increases, particularly when flight-to-quality dynamics favour newer or better-located buildings. The 0.8 per cent rental gain suggests that landlords in trophy assets or tightly supplied submarkets have maintained pricing discipline.

However, the slowdown in net absorption from Q1 to Q2 bears watching. If the trend continues into the second half of 2026, landlords may need to recalibrate incentives or concessions to sustain occupancy, particularly in secondary locations where competition for tenants is more acute.

The office market's trajectory in the coming quarters will likely depend on the pace of economic expansion across Asia's financial hubs and the extent to which multinational corporations continue to consolidate regional operations in Singapore. With pipeline supply moderating but still elevated, the balance between landlord and tenant leverage remains fluid.