Singapore is expected to remain one of the top investment prospects for real estate in the Asia Pacific in 2025, according to a joint report by PwC and the Urban Land Institute.

In its report "Emerging Trends in Real Estate Asia Pacific 2025," Singapore scored 5.83 or "generally good" for the list of City Investment Prospects, just behind Tokyo, Osaka, and Sydney.

It said Singapore's office pricing has shown remarkable stability despite the downturn due to tight supply and strong demand from inbound corporate occupiers.

However, the report noted local cap rates are seen as too tight to attract significant buying interest.

Whilst the market remains active, transaction volumes have been low, except for a few large deals in Q3 2024, which pushed annual transactions close to 2023 levels.

Weak office rental growth prospects were also noted, attributed to concerns over increased office space supply and low cap rates (around 3.4%), which are below borrowing costs (3.94% as of Q3 2024).

The report also emphasized that whilst Singapore's office market remains fundamentally strong, it poses challenges for investors seeking higher returns.

It noted that value-add strategies have gained some interest but face unique hurdles, as recent deals have focused on lower-priced assets and are further complicated by the emphasis on sustainability upgrades.