Capital Markets

KEY TAKEAWAYS

• A total of 22,290 rental contracts of island-wide private residential properties (excluding ECs) commenced during the quarter, up 5.1% from the 21,203 contracts recorded in the previous quarter.
  
• The URA rental index for non-landed private residential properties rose 0.4% QoQ.
  
• Based on Savills basket of high-end non-landed residential properties, the average monthly rent continued its upward trajectory, rising by 1.4% QoQ.
  
• Despite limited new completions, the overall vacancy rate of completed private residential properties (excluding ECs) rose to 6.4% in Q2/2026.
  
• While Singapore’s economic growth in 2026 is expected to outperform the official 2% to 4% forecast, the benefits to the residential leasing market may be limited. Mixed free cash flow trends among MNCs could restrain expatriate deployment overseas, while the removal of the 15-month wait-out period for private homeowners moving to HDB flats may reduce domestic leasing demand. Accordingly, we maintain our view that private residential rents will remain broadly flat in 2026.

The global data centre sector has emerged from a pivotal year in digital infrastructure, underpinned by continuous cloud migration and digitisation, combined with the proliferation of artificial intelligence, super-charging demand for data centre infrastructure. Across the globe, real estate transaction volumes, comprising single-asset-sales and development site acquisitions, totalled $16.5 billion in 2025 with development site acquisition volumes in particular surging 12.4% on 2024 volumes, the highest annual investment tally to date. Similarly, Knight Frank’s bespoke data centre appraisals valued the global stabilised data centre market at $1.95 trillion, a 39.3% increase on 2024. Looking ahead, 48GW is expected to be delivered between 2026 and 2029, representing a 77% increase in global supply volumes. Within this, AI supply volumes are set to expand from 8GW to 27GW, growing to 24.5% of total live IT.

Knight Frank’s ultimate guide to real estate market performance and opportunities in the world’s most promising economy.

H1 2026 opened against a broadly supportive macroeconomic backdrop, though conditions grew more complex as the period progressed. The Reserve Bank of India’s repo rate stood at 5.25% through H1 2026, reflecting a cumulative 125 basis points of easing since the start of the rate-cutting cycle. With the last reduction having taken effect in December 2025, the Monetary Policy Committee held at both its February and June 2026 meetings, citing West Asia conflict-related energy risks and a potentially deficient monsoon. FY 2026 GDP growth was estimated at 7.6%, affirming underlying domestic resilience. However, the RBI revised its FY 2027 GDP growth projection to 6.6% and raised its FY 2027 CPI inflation forecast to 5.1%, reflecting uncertainty around energy prices and food supply conditions. For the residential market, cumulative rate easing continues to support home loan affordability, but with further cuts on hold and global uncertainties mounting, the monetary tailwind that sustained demand through 2025 has largely run its course.

Accelerated growth, as outlined in the 2025 edition of this report, is no longer the most accurate descriptor of this dynamic and rapidly evolving global market. A more precise characterization is managed growth. Governments worldwide are rewriting the rules to ensure that new data center development does not overburden existing resources, particularly the power grid, and to address concerns associated with the industry’s expansion.

The global data centre market remains dominated by cloud and corporate usage, with AI contributing less than 15% of total workload as of 2025. With most AI demand now concentrated in the U.S., the ratio in Asia Pacific is even smaller.

Q1 2026 opened against one of the most severe global supply chain disruptions in recent memory. The US-Israel military campaign against Iran, launched in late February, triggered the effective closure of the Strait of Hormuz, through which roughly 20% of the world’s seaborne oil and LNG volumes transit, with major carriers including Maersk, CMA CGM and Hapag-Lloyd suspending operations through the strait entirely. Shipping companies were forced to reroute vessels, delay deliveries or suspend operations, causing a slower and materially more expensive global supply chain. Against this backdrop, the Indian rupee depreciated approximately 9% over FY 2026, reaching around INR 93.88 per USD. Sustained dollar demand from oil importers widened the current account deficit and raised landed costs for USD-denominated freight and equipment procurement, compressing margins across the logistics sector. Yet India’s macroeconomic foundations held firm. FY 2026 real GDP growth forecast came in at 7.6%, outperforming expectations, and the RBI has projected FY 2027 growth at 6.9%, supported by strong services sector activity, robust domestic consumption and ongoing GST rationalisation benefits, even as the RBI flagged downside risks from further geopolitical escalation.

Against this backdrop, industrial and warehousing activity remained buoyant, driven primarily by Manufacturing and Third-Party Logistics (3PL) occupiers, reinforcing India’s position as a resilient and strategically located hub for regional supply-chain diversification. Occupier activity continued to strengthen despite the volatile macroeconomic environment, with leasing volumes reaching 1.8 mn sq m (19.3 mn sq ft) in Q1 2026, reflecting a 15% YoY increase. Notably, this marks the second-highest quarterly transaction volume recorded since the beginning of 2023, underscoring sustained occupier confidence and strong underlying market momentum.