An uncertain macroeconomic outlook may lead to a divergence in interpretations, strategies, and decisions among real estate players in 2025. This, among other projections relating to several real estate sectors, was presented in CBRE’s 2025 Singapore Real Estate Market Outlook report.
Moray Armstrong, CBRE Managing Director, Advisory Services, Singapore, introduced the report, saying, “Overall the challenges weighing on the real estate market have eased with inflation rates stabilising and interest rates beginning to fall. That said, expectations of slackening economic growth in 2025 are hardly helpful to the demand side of the equation. Throw into the mix other external variables including geo-political tension, transition to a new administration in the US with a nationalistic economic agenda and, on the Singapore front, the keenly awaited URA Master Plan 2025 which will direct the country’s long term land use and development strategy, it is little wonder many of our clients and partners are referencing mixed signals and uncertainty going into 2025.”
(Moray Armstrong, CBRE Managing Director, Advisory Services, Singapore (Credit: CBRE)
“In business, a backdrop of change often brings rewarding opportunities to those that can see beyond the current, can sense emerging trends, and are agile enough to capitalise. Fortune may well favour the brave real estate play. CBRE is optimistic on the prospects for Singapore’s property sector as the Republic celebrates 60 years of independence and extraordinary success”, Mr Armstrong added.
Sectoral Highlights – Singapore Real Estate Market Outlook 2025:
Moderate growth in Core CBD (Grade A) rents driven by flight to quality and limited supply
- CBRE Research expects Core CBD (Grade A) rents to grow in line with GDP projections – at 2%. Limited supply and increasing demand for good-quality spaces in the CBD are key drivers of the continued increase. Global economic uncertainties, elevated fit-out costs, and interest rates will however temper expansionary demand and keep rent increases in check.
- Following a wave of completions in 2024, development pipeline over the next three years is estimated at 0.58 million square feet per annum – about 55% lower than the historical 10-year annual average. This limits options and supply for occupiers joining the flight to quality – a trend that continues as businesses continue to focus on offering high-quality workspaces in efforts to attract and retain talent. Banking and Finance, Legal, and Technology are the sectors accounting for the majority of such upgrades in 2024 and this trend will continue to be a key focus in 2025.
- With economic growth expected to slow in 2025, leasing momentum may follow. Considering the uncertainty, combined with high fit-out costs, some businesses may be inclined to renew leases instead of relocating or expanding, as well as seek more flexibility in leasing options.
Rental Consolidation in Prime Logistics could present window of opportunity for occupiers
- Rents for prime logistics and the high-tech segments are expected to remain in consolidation and stay relatively flat in 2025. This is mostly driven by a bumper supply injection in prime logistics in 2025, as well as the lingering effects of a similar phenomenon in the high-tech segment over the past couple of years.
- An estimated almost 5 million square feet of space is expected to be introduced in prime logistics in 2025, representing 3.9% of existing warehouse stock. However, more than 60% of these have been pre-committed, dampening downward pressure on occupancy and rents – especially in the West region. E-commerce and logistics also remained most active and resilient in 2024, driven by strong demand for modern ramp-up facilities.
- Growth across manufacturing clusters in 2025 is expected to be uneven. Advance manufacturers and semiconductor firms are likely to continue their outperformance, driven by booming AI adoption. Industrial players are also making plans to access more affordable land and labour in Johor via the JS-SEZ initiative but intend to retain core operations and R&D functions in Singapore – deriving a dual presence strategy to leverage the complementary strengths of the two jurisdictions.
Leasing Sentiment to Remain Strong in the Retail Sector, Fuelled by Tourism Recovery
- CBRE Research expects overall average retail prime rents to grow 2% to 3% in 2025 led by the Orchard Road and City Hall/Marina Centre areas, recovering to pre-pandemic levels. This follows 3.6% in 2024, and 4.2% in 2023. Meanwhile, the suburban market is projected to register more modest growth at 1% to 2% supported by stable and resilient demand from local catchment.
- Inbound tourism is expected to continue recovering buoyed by increasing flight connectivity and capacity, new/refreshed attraction offerings, and a robust pipeline of entertainment and MICE events. Uncertain economic conditions and a strong Singapore dollar could however impact visitors’ consumption.
- While leasing sentiment has weakened slightly from that observed in 2024, it remains strong in 2025. Expected supply of retail space in 2025 is also expected to drop by 40.4% compared with the previous year and persist at levels significantly below the 10-year historical averages for at least three years. These factors are expected to support retail rents.
Cautious optimism in the Residential Sector
- CBRE Research forecasts a moderate price increase of 3% to 6% in 2025, while rentals will likely recover and grow 1% to 3%. 7,000 to 8,000 new homes may also be sold in 2025, improving from 2024’s 6,469 units.
- Home sales sank to a record low in the first nine months of 2024, but an emphatic recovery in the final quarter could mark the beginning of a sustained recovery. In fact, the magnitude of recovery has even sparked market talk of possible cooling measures, although we do not think that is probable at this juncture unless prices accelerate sharply in the coming quarters.
- With improved buyer sentiment and lowered mortgage rates, developers may be likely to push ahead with launches, introducing an estimated 12,000 to 14,000 units through the year – double the 6,647 units launched in 2024. Buyers may be spoilt for choice and hence more selective but projects with unique propositions and superior locations should continue to outperform. Attractive pricing remains crucial for successful launches.
- Stable land supply should help to keep prices in check, and the ample number of options may encourage developers to participate more selectively at land tenders.
Singapore remains an attractive investment destination, with potential upsides
In the near-term, investors are expected to be selective, opting to allocate capital into sectors or strategies with more favourable outlooks. Barring macroeconomic shocks, CBRE Research expects investment volumes to grow 10% y-o-y in 2025.
CBRE’s 2025 Asia Pacific Investor Intentions Survey found that majority of investors transacting in Singapore real estate expect to purchase the same volume or more over 2025 compared to 2024.
Real estate investment volumes rose 28.0% to $28.623 billion in 2024, rebounding from the 30.3% y-o-y decline in 2023. Interest rate cuts in the latter months of 2024 likely boosted investor sentiment and appetite, with this expected to continue into 2025.
While the industrial and logistics sector retained its spot as the most preferred investment sector in 2025, income-generating residential assets have overtaken office properties in second place. Alternative sectors such as data centres are also increasingly popular, while appetite for retail and hotel assets remain resilient on projected continued tourism recovery.
As Singapore celebrates 60 years of independence, its real estate market stands at a crossroads, offering opportunities for those ready to adapt and innovate.
