Source: URA, JLL Research 4Q2024

Separately, the rental gap between high-quality office assets in the CBD and Orchard Road (Cat 1) and all other grades islandwide (Cat 2) has widened from 89% in 2022 to 92% by 2024. As could be expected, these high-quality buildings have also recorded higher occupancy and more substantial rental growth. With a limited new supply over the next four years, the rental gap will likely widen further. Alongside the CBDI scheme, which is likely to result in a further reduction in office stock, the government should consider releasing infill sites to avoid a repeat of the office rental market in 2007/2008, when a limited supply led to the URA Central Region office rental index surging 15% q-o-q in 3Q 2007.

It is also an opportune time for landlords to upgrade their assets strategically. With interest rates to remain higher for longer, investors seek out assets with more substantial income potential since capital revaluation is unlikely in the short term. This is an opportunity for landlords and investors to extract value from underperforming assets in the CBD.

_{[1] Source: URA, Circular No: URA/PB/2025/02-CUDG}