Prime office space in Singapore's central business district is getting scarcer, with artificial intelligence companies now competing with banks and asset managers for the best floors, according to property consultancy CBRE.

Vacancy in Core CBD Grade A buildings fell to 2.6% in the third quarter from 3.3% three months earlier, CBRE said in an Oct. 23 commentary on third-quarter real estate statistics from the Urban Redevelopment Authority. Average rents in that segment rose 2% from the previous quarter to S$12.75 per square foot a month, faster than the 0.8% gain in the second quarter.

CBRE described conditions as “firmly landlord favourable.” That supports rental income for Singapore's office landlords, including the REITs that own many of the city's prime towers.

AI tenants move in

CBRE named several AI companies among recent tenants. Anthropic took space at The Executive Centre in Ocean Financial Centre and Manus AI at Industrious in Keppel South Central, while OpenAI was reportedly negotiating for about 120,000 square feet at Shaw Tower, a deal not yet confirmed, the consultancy said. Financial services firms were still the largest source of demand so far this year.

In its second-quarter commentary in July, CBRE said AI companies of various sizes were moving out of flexible workspace and into dedicated offices in prime buildings. It named IOI Central Boulevard Towers, Marina One and Marina Bay Financial Centre as focal points of active leasing.

The wider market improved as well. Island-wide office vacancy fell one percentage point to 10.0% in the third quarter, and occupied space grew by 17,000 square meters, the second straight quarter of positive net absorption, according to CBRE's reading of the URA figures. The URA's Central Region office rental index rose 0.8%, matching its second-quarter gain.

Shrinking stock, thin pipeline

Part of the tightening came from buildings leaving the market rather than tenants arriving. Office stock fell by a net 72,000 square meters in the quarter, with no notable completions, CBRE said. Most of the decline was in planning districts D02 and D04, which the firm said were likely linked to the redevelopment of 79 Anson and HarbourFront Centre.

New supply is limited for the next two years. Shaw Tower was finished in the second quarter, and the next notable CBD project is Newport Tower in 2027, according to CBRE. In July, the firm said 2027 supply would be below average.

Occupiers planning moves are increasingly looking at projects due from 2028 onward, including One Comcentre, The Clifford and The Skywaters, CBRE said. The URA pipeline from the second half of 2026 through beyond 2030 stood at about 848,000 square meters of gross floor area at the end of June, down from 867,000 square meters three months earlier, the firm said in July.

Strongest year since 2022

Core CBD Grade A rents are up 3.7% so far in 2026. CBRE expects a full-year rise of more than 5%, which would be the biggest annual increase since 2022, when rents climbed 8.3%. The forecast assumes the economy and hiring hold steady, the firm said.

Gains have not been spread evenly across tenant sizes. URA median rents for the smallest Category 1 office units, of 100 square meters or less, were 15.5% lower in the second quarter than a year earlier, CBRE said in July, while rents for units of 500 to 1,000 square meters rose 12.4% to S$12.70 per square foot a month. Larger occupiers looking for whole floors in top buildings are the ones paying up.

The next tests for landlords are whether OpenAI completes its reported Shaw Tower deal, whether hiring holds up, and how quickly occupiers commit to the 2028 projects. CBRE expects limited new supply through 2027, together with resilient demand, to keep upward pressure on rents.