The future for Singapore office
The future for Singapore office
By David McKellar, Co-head of Office Services, Singapore and
Yuki Suzuki, Assistant Manager, Research, Southeast Asia, CBRE
In spite of the headwinds that the office sector is facing, there has been some positive signs of late
– demand from the technology and asset management sectors, leasing activity driven by displacement from the Central Business District (CBD) buildings that are scheduled to be redeveloped, and also a wider acknowledgement that going forward, the physical workplace will remain central to a firm’s identity, talent attraction and productivity.
The Office - essential for collaboration and a
firm's identity
Despite the talk around remote working, most companies still expect the majority of employees to return to the office in the near term. Based on CBRE Asia Pacific’s ‘The Future of the Office Survey’ published in January 2021, the survey findings revealed that around 66% of respondents intend to allow remote working for no more than one or two days per week.
Flexible working arrangements
Firms have begun to turn focus towards accommodating some flexible working alternatives in the longer term. Based on the same CBRE survey, more firms have indicated a shift in attitude towards acceptance of remote working as an option for the workforce as compared to pre-COVID-19. In response to the rising need for portfolio agility, more landlords and agile space operators are establishing partnerships with occupiers to facilitate the ‘flexible’ component of ‘core and flex’ modes.
Evolving office landscape
Over the next three years, three upcoming Grade A developments are expected to bring more innovation into the CBD. These buildings are CapitaSpring, Guoco Midtown and Central Boulevard Towers. Equipped with intelligent building systems, biophilic features and large floorplates, these new developments appeal to occupiers who value premium office space. Two of these new developments will also incorporate the ‘core and flex’ concept. Guoco Midtown has developed the concept even further by incorporating a purpose-built ‘Network Hub’ of lounges, agile offices and collaborative workspaces with seminar and training facilities.
Urban renewal and decentralisation
Prior to the pandemic, the Urban Redevelopment Authority had rolled out two schemes – the CBD Incentive Scheme and Strategic Development Incentive Scheme to encourage developers to redevelop ageing office developments into mixed-use buildings and inject more vibrancy into the business district. Several redevelopment projects that plan to leverage on these schemes include AXA Tower, Central Mall, Fuji Xerox Towers, and Faber House. While this may lead to a reduction in office stock within the business district, it may also motivate some cost-conscious occupiers to consider options in decentralised areas.
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Diversified occupier profile
The city has been somewhat insulated by the more diversified occupier profiles now seen in many commercial buildings. Whilst the traditional banking sector and in particular consumer banks, continue to look at footprint reduction, office demand is being driven by fast growing sectors such as technology and non-bank financial services, with Chinese technology firms at the forefront.
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Chart 1:
Flight to quality in light of lean supply
The relative resilience of the Grade A (Core CBD) market in 2020, which registered positive net absorption of 0.51 million square feet, is noteworthy. In contrast, the Grade B (Islandwide) market witnessed a reduction in occupied office stock of 0.79 million square feet in the same year. Over the next three years (2021 – 2023), an average new supply of 1.13 million square feet per annum is estimated to come onstream, some 32% lower than the historical 10-year annual average of 1.67 million square feet. Taken alongside the likely removal of existing stock via redevelopment activity, the demand and supply dynamics should re-calibrate such that occupancy rates will stabilise over the midterm.
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Note: Others: Legal & accounting, business services, energy & commodities, manufacturing, pharmaceutical, construction, and real estate.
Source: CBRE Research
Four-quarter rolling total net absorption and vacancy
Leasing breakdown
by sectors in 2020
Chart 2:
For more information, please contact:
David McKellar
Co-Head of Office Services
& Head of Occupier,
CBRE Advisory & Transaction Services, Singapore
Lay See Lim
Co-Head of Office Services, CBRE Advisory & Transaction Services, Singapore
conclusion
That said, it will not be a uniform recovery in rents across all office grades and locations. The vacancy in older office stock may edge up as occupiers relocate to quality buildings. On the other hand, prime office buildings will be the main beneficiaries through the market recovery phase. Singapore is well placed as a business hub and the office sector will undoubtedly remain relevant and essential to sustaining the city’s economic growth and attractiveness to major corporates.
Henry Chin
Global Head of Investor Thought Leadership &
Head of Research
Asia Pacific
Source: CBRE Research
