Overall leasing demand remains subdued

• Leasing volume in Q1 2026 stayed below 2025 levels, with typical seasonal softness amplified by sustained demand weakness. Most transactions in the quarter were carryover deals initiated by the end of 2025, with limited new leasing demand emerging.
• Tenants continued to prioritise cost efficiency as a core consideration, either moving to projects offering more competitive rents or downsizing their leased space.

Pre-leasing of upcoming projects intensifies competition

• The overall vacancy rate of the Grade A office market stood at 14.9% in Q1 2026, down slightly by 0.3 ppt q-o-q, driven by selective absorption in projects that offered aggressive rent cuts.
• Approximately 700,000 sqm of new supply is expected in 2026, the highest volume in recent years. Market pressure mounted as upcoming projects advanced pre-leasing to attract tenants ahead of delivery.

Decline moderates amid low transaction volume

• Average Grade A rents declined -2.4% q-o-q, with the pace of decline slowing compared to the previous quarter. Limited deal flow early in the year reduced downward momentum on pricing.
• Amid structural pressures on supply and demand, landlords have broadly adopted flexible leasing strategies to stabilize their existing tenant base, with rent adjustments increasingly handled on a case-by-case basis.

Outlook: Structural rent divergence to continue

• With demand recovery expected to be limited and new supply continuing to enter the market, near-term relief from leasing pressure appears unlikely. Average rents are forecast to decline -6.8% y-o-y in 2026.
• Projects with deep 2025 rent cuts are seeing steadier leasing, with some beginning to explore modest rent increases, while high vacancy assets will rely on aggressive pricing. Rental performance will remain structurally divergent.