The tightening office market reflects a structural shift in tenant composition. Artificial intelligence companies and fintech firms have emerged as the most aggressive space-takers, often seeking large contiguous floors in premium towers to house engineering teams and regional headquarters. Several global AI firms expanded their Singapore footprints in recent quarters, attracted by the city-state’s regulatory clarity, talent pool, and proximity to Southeast Asian markets.

Asset and wealth management offices have also been a steady source of demand, particularly from Middle Eastern sovereign wealth funds and single-family offices establishing or expanding their Asia-Pacific presence. Singapore’s position as a neutral hub for capital deployment across the region continues to draw institutional players seeking Grade A space in the Raffles Place and Marina Bay corridors.

Flexible workspace operators are adding to the absorption story as well. Co-working and serviced office providers have been taking up floors in both new and refurbished buildings, betting on the hybrid work model’s staying power and the growing preference among mid-sized firms for plug-and-play solutions over traditional long-term leases.

The supply side offers little relief for tenants. Only about 400,000 sq ft of new Grade A office space is expected to complete in 2026, most of which has already been substantially pre-committed. This represents one of the leanest supply years in over a decade and stands in stark contrast to the 2.1 million sq ft pipeline expected in 2028 when several major redevelopment projects — including IOI Central Boulevard Towers — are scheduled for completion.

The two-year gap between now and the next significant supply injection gives landlords considerable pricing power. Buildings in the Marina Bay and Raffles Place precinct are reporting waiting lists for premium floors, and some landlords have begun offering shorter lease terms at higher rents to maximise flexibility and capture further rental upside.

Industry analysts expect Grade A rents to grow by a further 3% to 5% through 2026, with the pace moderating only once the 2028 supply wave begins to be absorbed. The current environment favours landlords, and tenants facing upcoming lease expiries are being advised to start renewal discussions earlier than usual to secure favourable terms.

The robust rental environment is a positive signal for Singapore-listed office REITs. Keppel Reit, OUE Commercial Reit, Suntec Reit, and CapitaLand Integrated Commercial Trust (CICT) all have significant CBD office exposure and stand to benefit from positive rental reversions as older leases roll over to current market rates.

Occupancy rates across REIT-owned CBD portfolios have generally improved, with several trusts reporting portfolio occupancy above 95%. The combination of rising rents and high occupancy should support distribution growth in the near term, although investors should watch for rising property tax assessments and increasing fit-out costs that could partially offset rental gains.

A potential silver lining comes from the continued inflow of Middle Eastern capital into Singapore real estate. Several Gulf-based investors have been actively acquiring stakes in prime office assets, providing REITs with opportunities for accretive divestments and capital recycling. This dynamic could support REIT unit prices even as global interest rate uncertainty lingers.