Real estate consultancy firm Savills Singapore expects office rents of Grade-A buildings in the Central Business District to remain flat in 2025, with super-premier buildings to outperform.

A Savills Singapore report released on Wednesday (Apr 23) said: “As vacancy levels among most of the premium AAA-grade buildings are very low, they may still be able to eke out a 2 per cent year-on-year increase.”

The report noted that the forecast comes amid early stages of the start of trade talks between the US and several countries.

Savills also suggested that the US tariffs are unlikely to affect CBD Grade-A rents in the next two quarters.

Rents have remained firm, with average monthly rents of overall CBD Grade-A offices tracked by Savills rising 0.4 per cent on quarter to S$9.83 per square foot (psf) in the first quarter of 2025.

Year on year, these rents grew 1.5 per cent in Q1, marking the largest increase since Q3 2023, when rents rose 1.7 per cent.

While growth momentum slowed for Grade A and AA buildings in Q1, rents of Grade AAA buildings rose 1.1 per cent on quarter to S$13.05 per square feet (psf), compared to the 0.7 per cent rise in the previous quarter, said Savills.

It noted that rents of Grade-AAA buildings have been on the rise for four consecutive quarters, on the back of high occupancy rates that have motivated landlords to maintain or increase their asking rents.

For Grade-AA buildings, rents rose 0.3 per cent on quarter to S$10.75 psf in Q1, moderating from the 1 per cent in the previous quarter. Rents of Grade-A buildings increased 0.2 per cent to S$8.70 psf.

By location, office rents in Beach Road/Middle Road, Orchard Road and Shenton Way remained unchanged in the recorded quarter; Marina Bay recorded the highest growth of 1.4 per cent to S$13 psf.

Savills said the tight occupancies in Marina Bay contributed to the strong rental growth in the micro-market.

Rental growth was recorded as the vacancy rate of overall CBD Grade-A offices fell to 7.7 per cent in Q1 2025, after having risen for three consecutive quarters.

The largest decline was seen in the Grade-AA office market, where the vacancy rate fell by 0.4 percentage point (ppt) to 6.5 per cent in Q1. This is followed by the Grade-AAA office segment, which contracted 0.3 ppt to 9 per cent, and the Grade A office market, which inched down 0.1 ppt to 7.2 per cent.

Savills said: “With the improvement in vacancy rates, net demand remained in the positive territory for the second consecutive quarter, albeit at a smaller 83,000 square feet (sq ft), compared to the 175,000 sq ft in the previous quarter.”

By location, the vacancy rates of buildings in Tanjong Pagar fell to 9.7 per cent in Q1 from 10.3 per cent in the previous quarter; those in Raffles Play, Marina Bay, Shenton Way and Beach Road/Middle Road recorded declines of between 0.3 and 0.5 ppts.

The vacancy rates for offices in City Hall rose 3.9 per cent, and stayed at 1.5 per cent for Orchard Road.

While the Singapore office market has been able to overcome macroeconomic challenges, Savills thinks that the tariffs could result in tenants adopting a conservative approach regarding expansion, relocation or renewing their leases.

Ashley Swan, executive director of commercial and industrial, said: “After seeing an increase in leasing activity levels to begin the year, some uncertainty has crept into the market, further fuelled by the tariff announcement.”

The office investment sales market was lukewarm in Q1, with only one block transaction and a few strata deals, noted Savills. The block transaction came from the sale of a one-third stake in the share capital of Woodlands Square by Sekisui House for S$125 million.

The largest strata deal was for three floors at 20 Collyer Quay for S$91.8 million, sold to GuocoLand.

Savills said the slower investment values may be due to aggressive asking prices by sellers and economic uncertainties caused by trade tariffs, among other factors.

Swan said: “Companies here continue to evaluate their operations and space requirements as their business plans evolve in light of the changing economic landscape, which will inevitably affect demand in some way.”