Business Parks To See Higher Demand As Tenants Relocate From CBD Offices To Reduce Costs

SINGAPORE – Business parks in the city fringe with Premium Grade offices are expected to become more sought-after, and their rents are forecasted to increase over the next 12 months, reported The Business Times on Wednesday morning (21 October).

According to Cushman & Wakefield (C&W), gross effective rents of city fringe business parks increased in Q3 2020 to S$5.91 psf per month. This represents an uptick of 0.2 percent on a quarterly basis and a gain of 2.4 percent year-on-year.

Rents of such premises, particularly those housing Grade A offices, are projected to improve over the short-term as companies relocate from Singapore’s central business district (CBD) in favour of city fringe business parks in a bid to slash their commercial property costs.

Another factor spurring companies to shift to city fringe business parks is that working from home has become the norm although the government has permitted employees to return to their workplace. And this trend has reduced the demand for CBD office space, noted C&W’s Research Head for Singapore & the ASEAN (Association of Southeast Asian Nations) region Christine Li.

“The movement towards business parks with Grade A (office) specifications and the continued moderation of Grade A CBD rents will further narrow the rental gap between CBD office and city-fringe business park space over the next few quarters,” she added.

C&W thinks that the trend would only reverse after rents of Premium Grade offices in the central business district become more palatable to tenants – that is after it has suffered the projected 20 percent fall in 2021.

Meanwhile, gross effective rents of business parks in Singapore’s outlying areas reached S$3.64 psf per month. However, C&W expects it to fall over the next 12 months as the properties are older.