Grade AAA Vacancy Falls to 3.1%, Lowest in 13 Years
Savills Raises 2026 CBD Grade A Rental Growth Forecast to 5%, Projects Further 5%-7% Growth in 2027
Savills Singapore shares that demand-led rental inflation is increasingly overriding global economic concerns as tightening vacancy and limited supply continue to support rental growth in the CBD office market. The vacancy rate for CBD Grade A offices fell by 1.0 percentage point quarter-on-quarter (QoQ) to 5.6% in Q2 2026, the lowest level since Q3 2022, while average rents increased 2.8% QoQ to a record high of S$10.42 per sq ft, marking the strongest quarterly rental growth since Q4 2018.
The market's resilience has been underpinned by strong demand for premium office space and a limited supply of new office developments. As vacancy rates continue to tighten, landlords have maintained a firm stance on both asking and renewal rents, allowing rental growth to accelerate.
The tightening of the overall market has been driven largely by premium office assets. Vacancy within Grade AAA office buildings declined to 3.1% in Q2 2026, the lowest level recorded since Q4 2013.
The continued strength of the premium segment has also reinforced the emergence of a two-tier leasing market. While premium office buildings continue to record strong occupancy levels and command higher rents, lower-quality office buildings are facing greater difficulty in backfilling vacant space.
As Grade AAA space becomes increasingly constrained, occupiers are turning to Grade AA buildings as a practical alternative. Vacancy in Grade AA offices declined by 0.7 percentage points QoQ to 8.5%, reversing increases recorded over the previous three quarters. Many occupiers are reluctant to incur the higher occupancy costs associated with relocating to Grade AAA buildings, particularly as rents, fit-out costs, reinstatement costs and relocation expenses remain elevated.
This divergence is increasingly reflected in rental performance. Grade AAA rents rose 1.4% QoQ to S$13.61 per sq ft, while Grade AA and Grade A rents increased 2.8% and 3.4% respectively. According to Savills Research, rental growth in Grade AA and Grade A buildings may not necessarily reflect tightening vacancy conditions, but rather the spillover effect from rising rents in Grade AAA developments.
Leasing activity during the quarter was supported by pockets of expansion demand from the technology, financial services and hedge fund sectors. The market also saw new entrants in the serviced office sector and expansion among smaller corporate services providers. At the same time, the pace at which occupiers have been surrendering office space appears to have slowed as more companies adopt five-day return-to-office policies.
Savills has revised its 2026 CBD Grade A rental growth forecast upward from 3%-5% to 5%, while projecting a further 5%-7% year-on-year increase in 2027.
Ashley Swan, Executive Director, Commercial & Industrial, Savills Singapore, said: “As has been the case over the last few quarters, the lack of supply, especially in the core CBD, has been the main driver in the rental growth. Activity levels have remained stable in the last quarter and our expectation is that this will continue over the next few months with Grade AAA buildings leading the way which in turn will carry the rest of the market upwards.”
Alan Cheong, Executive Director, Research & Consultancy, Savills Singapore, said: " Barring a significant deterioration in the political-economic sphere, even a marginal increase in office demand could result in disproportionately strong rental growth given the current supply constraints. Accordingly, we are revising our 2026 rental growth forecast upward from 3%-5% to 5%, while projecting a further 5%-7% year-on-year increase in 2027."