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Commercial Report Q2 2025

Key Highlights:

Office: CBD Grade A rents remained unchanged at S$9.80 psf in Q2 2025, despite occupancy rates increasing by 0.5 percentage points.​

Industrial: Overall industrial price index increased by 1.4 per cent in Q2 2025. Approximately 4.5 million sq ft of gross floor area was added to the total industrial stock.​

Retail: Retail rents increased across all segments with Orchard/Scotts Road 1st storey rents recording S$41.60 psf in Q2 2025.



Office:

Office rents remained relatively flat for the first half of 2025. According to data from the Urban Redevelopment Authority (URA), office rents in the Central Region declined by 0.3 per cent quarter-on-quarter (q-o-q) in Q2 2025, reversing the 0.3 per cent increase in Q1 2025.

Office prices continued their declining streak for the 4th consecutive quarter. URA’s office space property price index for the central region declined 1.1 per cent q-o-q in Q2 2025 to 111.7 from 112.9 in Q1 2025. On a year-on-year (y-o-y) basis, prices declined 1.3 per cent.


Occupancy rates rose across all market segments in the Central Area (CBD), the broader Central Region, and Outside Central Region (OCR). Realion’s island-wide occupancy rates rose to95.0 per cent in Q2 2025 from 94.5 per cent in Q1 2025, with an island-wide net absorption of 365,000 sq ft in net lettable area (NLA).

More tenants could be looking for opportunities to move or downsize their office spaces. Shadow space rose to 420,000 sq ft NLA in Q2 2025, representing a 12.5 per cent q-o-q increase from the 373,000 sq ft NLA recorded in Q1 2025.


The supply pipeline is expected to stay limited. A total of 1.78 million sq ft gross floor area (GFA) could be added for the rest of 2025 until 2027. ​

Notable projects in the pipeline include Shaw Towers, which will contribute 477,000 sq ft GFA and is expected to be completed in 2026, Newport Tower with 257,000 sq ft GFA in 2027, and Clifford Centre with more than 500,000 sq ft GFA in 2028.



Office Outlook:

The Ministry of Trade and Industry’s (MTI) advanced GDP estimates showed that Singapore’ economy grew by 4.3 per cent y-o-y in Q2 2025. Growth was mainly driven by trade-related clusters. Economic growth for 2H 2025 is expected to moderate as output levels may pull back due to global trade uncertainties.

Nonetheless, interest rates are expected to continue their downward trend for the rest of the year. The 3-month compounded Singapore Overnight Rate Average (SORA) on the Monetary Authority of Singapore (MAS) have continued to decline at a steady rate of 50 basis points per quarter since Q4 2024 to Q2 2025. 

The lower interest rate environment may boost interest in both price and rents within the office sector. Investors are likely to evaluate opportunities based on total returns. We expect prices for central region office spaces to grow by 1 to 2 per cent in 2025.

Office rental demand is expected to remain tepid for the rest of 2025. Tenants may be cautious as they approach office leasing and/or renewals due to the global trade uncertainties. This could be balanced by a limited supply of office space from 2025 to 2027. Therefore, the net impact may see CBD premium and Grade A office space rents holding steady or growing by up to 1 per cent this year.



Industrial:

The manufacturing sector slowed in Q2 2025 with global trade policy and tariffs concerns disrupting supply chains. Based on data from the Singapore Institute of Purchasing and Materials Management (SIPMM), the Purchasing Managers’ Index (PMI) declined to 50.0 in June 2025 from 50.6 in March 2025 (Figure 6), dipping below the 50.0 PMI in April and May 2025. 

A reading below 50 indicates that the manufacturing sector is declining, while a reading above 50 signifies growth.


Industrial rents rose across the board, with the overall JTC rental index for all industrial property increasing by 0.7 per cent q-o-q to 111.5 in Q2 2025. In contrast, rents across our tracked industrial basket remained broadly unchanged over the same period.​

Industrial property prices continued to grow steadily in Q2 2025, notwithstanding the global trade and economic uncertainties. The JTC industrial property price index for all industrial properties increased by 1.4 per cent q-o-q and by 5.5 per cent over the preceding year. The price growth was driven largely by multiple-user factories, which posted a quarterly increase of 1.7 per cent compared to the 0.4 per cent growth for single-user factories. ​


Overall industrial occupancy slipped marginally to 88.8 per cent in Q2 2025 from 89.0 per cent in Q1 2025 due to an increase in new completions.

Despite a marginal dip, net absorption remained positive at about 3.1 million sq ft of NLA. The decline in occupancies was due to new supply from JTC Space @ Ang Mo Kio and the final phase of Punggol Digital District.

Industrial Outlook:
The manufacturing sector is expected to face continual global trade uncertainties and headwinds as the end of the 90-day US tariff pause takes effect. Tariff headwinds may weigh on the industrial sector and impact overall growth.

Nonetheless, according to Singapore Economic Development Board (EDB), the manufacturing sector business outlook for the next six months recovered to a positive 5 per cent net weighted balance. Optimism in the electronics and precision engineering segments is expected to drive growth in the upcoming months.

Furthermore, interest rates are expected to continue their downward trend for the rest of the year. The lower cost of borrowing will create a more favourable buying environment for investments in the commercial sector.

The supply pipeline of industrial space completions may reach approximately 3.0 million sq ft GFA this year. The new supply may exert pressure on rents. We expect overall industrial rents to grow by 1 to 3 per cent in 2025.


Retail:

In Q2 2025, international visitor arrivals stood at 4.0 million, marking a 6.6 per cent decline from the 4.3 million recorded in the previous quarter. On a y-o-y basis, arrivals increased by 4.0 per cent. Demand from key source markets such as China and Indonesia remained stable during the quarter. The Singapore Tourism Board maintained its full-year forecast of 17.0 to 18.5 million international visitor arrivals, reflecting continued confidence in the tourism recovery.

In Q2 2025, Singapore’s island-wide retail occupancy rate eased to 92.9 per cent, down from 93.2 per cent in the previous quarter. The largest decline was observed in the Other City Areas, where the occupancy fell from 92.5 per cent to 91.5 per cent. Orchard/Scotts Road recorded a slight decrease from 93.2 per cent to 93.1 per cent. Similarly, the Fringe/Suburban Areas occupancy rates decreased slightly from 93.5 per cent to 93.4 per cent. Despite the small declines, demand in suburban areas remained steady.

The overall rental growth is attributed to higher operational and staffing costs, following the implementation of new regulatory requirements for foreign workers. Leasing activity remained stable with many retailers relocating within malls. Meanwhile, consumer behaviour continues to be a key challenge for the retail sector.


Two notable retail transactions were recorded last quarter. Frasers Property acquired Yishun 10 Cinema Complex for S$48 million in a sale and-leaseback deal with Golden Village, and Jun Jie Development secured Tanjong Katong Complex site for S$90 million through a government tender. These reflect continued investor confidence in retail assets and redevelopment opportunities. 

Retail Outlook:

There were no major retail project completions last quarter. The supply pipeline is expected to increase from 2028 onwards, with notable contributions from the Fringe/Suburban and Other City Areas. The upcoming supply reflects long-term confidence in retail demand and urban development, offering opportunities for retailers to expand into new and growing catchments. ​

Retail rents in Singapore are expected to see continued modest growth in the near term, supported by limited supply in Orchard/Scotts Road and steady tourism activity. However, rising business costs and tighter manpower regulations are likely to keep retailers cautious, with leasing activity largely focused on relocations or downsizing rather than new store openings. ​

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