Singapore Commercial REITs Show Resilience Amid Mixed Sectoral Performance in Q1 2025

The Singapore commercial REIT market entered 2025 with a cautiously optimistic tone, as occupancy rates and rental trends revealed a sector-by-sector balancing act. While office and industrial REITs demonstrated signs of stabilization, retail markets faced headwinds tied to shifting consumer behavior and supply dynamics. The result? A landscape where core assets and operational agility are key differentiators.

Office Sector: Rental Momentum Returns, but Vacancy Pressures Loom
After four quarters of stagnant growth, Singapore’s office rental market showed renewed vigor in Q1 2025. Core Central Business District (CBD) Grade A office rents rose 0.8% quarter-over-quarter (q-o-q) to $12.05 per square foot per month, driven by demand for prime space. The URA office rental index for the Central Region climbed 0.3% q-o-q, its first increase since late 2024.

However, vacancy rates remain a concern. Islandwide office vacancy surged to 11.7%—up from 10.6% in Q4 2024—as new projects like Keppel South Central and Paya Lebar Green added 1.2 million sq.m. of supply. Yet, the lack of Grade A supply until 2028 offers a floor for rents. “The limited pipeline of high-quality office space supports CBRE’s 2% annual growth forecast for 2025,” said one analyst.

Retail Sector: Prime Markets Outperform, Secondary Markets Struggle
Retail REITs faced a dual reality: prime locations saw rental gains, while secondary markets grappled with soft demand. Prime retail rents in the City Hall/Marina Centre submarket rose 0.6% q-o-q, while the URA retail price index for central properties rebounded 1.9% q-o-q. CLCT, focused on Chinese retail assets, reported a 0.5% rental reversion and 97.7% occupancy.

Yet, the broader picture was less rosy. Private retail vacancy climbed to 6.6%, as closures (e.g., Eggslut, Cathay Cineplexes) outpaced new leases. Secondary markets like Orchard Road and Tampines saw rising vacancies, while OCR (Outside Central Region) markets—long the sector’s bright spot—saw vacancy rise to 4.4%.

Industrial/Logistics Sector: Rental Softness Offset by Operational Strength
Industrial REITs navigated a challenging quarter as prime logistics rents fell 1.6% q-o-q. Trade policy uncertainties, particularly U.S. tariff delays, slowed leasing decisions. However, occupancies remained robust: Mapletree Logistics Trust (MLT) held at 96.2%, while Sabana Industrial REIT saw occupancy climb to 86.4%—driven by multi-tenanted assets like Sabana@1TA4.

The sector’s resilience stems from its diversified tenant base, with 85% of industrial space serving domestic demand. Sabana’s NPI surged 22% year-over-year (y-o-y), showcasing the rewards of operational efficiency.

Key REIT Performers
- Keppel DC REIT: Grew NPI and revenue 24.1% and 22.6% y-o-y, fueled by U.S. and Japanese data center demand.
- Suntec REIT: Improved distributable income by 4.3% y-o-y through cost discipline.

Investor Sentiment: A Rebound in REIT Prices, but Risks Remain
S-Reits rebounded 5.9% since mid-April, with retail buyers offsetting $36.6M in institutional outflows. Office cap rates—already among Asia’s lowest (3.00%-3.50%)—remained stable, reflecting Singapore’s “safe haven” status.

Yet risks linger. The office sector faces over 2 million sq.m. of new supply in 2025-2026, potentially pressuring vacancies further. Retail’s recovery hinges on tourism rebounding beyond MICE events and lifestyle trends like F&B integration.

Conclusion: Steady Growth Ahead, but Niche Plays Dominate
Singapore commercial REITs are navigating a bifurcated market: core assets in prime locations are rewarded for stability, while secondary markets face volatility. The 1-3% annual rental growth forecast for 2025 appears achievable if new office supply remains constrained and industrial demand holds.

Investors should prioritize REITs with:
1. Prime assets: OUE REIT’s 96.3% committed occupancy underscores the value of Grade A offices.
2. Operational agility: Sabana’s 99.7% tenant retention and Suntec’s cost cuts highlight the importance of management execution.
3. Diversified portfolios: Keppel DC’s global data center exposure exemplifies how REITs can hedge domestic risks.

As Singapore’s commercial property market balances growth and uncertainty, the mantra remains clear: quality over quantity.

This analysis synthesizes Q1 data to position Singapore’s commercial REITs as a cautiously bullish play, but with sector-specific caveats. The next six months will test whether the “steady state” can outpace emerging headwinds.