More Tenants Eyeing Decentralised Office Space In Singapore
SINGAPORE – More occupants are targeting office space located farther away from the city-state’s central business district (CBD) in a bid to attract skilled manpower and lower costs, according to an article written by Cushman & Wakefield (C&W) that was published on The Business Times on Thursday morning (16 September, SGT).
“Office tenants such as tech companies which are expanding their footprint rapidly or planning to de-densify their offices would look towards decentralised locations, where rents are relatively cheaper,” according to an article jointly written by Carol Wong and Wong Xian Yang. The former is C&W’s Overall Workplace Lead for Asia Pacific, while the latter is its Research Head in Singapore.
As of Q2 2021, average monthly rents of decentralised Grade A office space were more affordable at S$7.07 psf compared to that in Singapore’s CBD, where Grade A office space average about S$9.60 psf.
“Furthermore, an expected rise in CBD Grade A rents could push some CBD occupiers to decentralise to contain costs. CBD Grade A rents are anticipated to grow 3 to 4 percent per annum over the next few years, driven by strong economic prospects and limited new supply,” said the duo.
They also pointed out that more ageing office properties here will likely be redeveloped due to strong demand for private housing as well as new and prime office towers. As a result, some of the existing tenants displaced by the redevelopments could relocate to Grade A office space that are more budget-friendly.
“However, the supply of new decentralised offices is expected to stay tight. Most of the office space at Rochester Commons in one-north, slated for completion in 2022, has been pre-committed by Sea Ltd. After that, the next major decentralised supply will come only in 2024, at SP @ Labrador Villa, located within the Harbourfront/Alexandra submarket,” they explained.
“While we see sustained demand for decentralised offices, not all such properties will perform equally. Growth prospects will be stronger for mature submarkets such as one-north and Alexandra/Harbourfront, which already enjoy a strong branding and are underpinned by a critical mass of industries such as tech, biomedical and finance.”
Another precinct to look out for is Paya Lebar Central, as the government’s Business Improvement District (BID) programme is expected to make it more bustling. But other decentralised office submarkets in Singapore could lag behind as they have not yet lured a critical mass of industries.
To increase rental demand, owners of decentralised office properties can put up shared amenities like multi-purpose collaborative spaces. This amenity is expected to be appealing to tenants as this would allow them to lower property costs.
“For example, Rochester Commons has a purpose-built executive learning centre, Catapult, featuring technologies such as virtual and augmented reality,” they noted.
Looking ahead, office rents in Singapore are generally forecasted to return to growth by next year, although the performance of the city-state’s decentralised office submarkets is expected to be unequal.
“On average, decentralised office rents are expected to rise about 2-3 percent per annum, driven by limited new supply and increasing demand as more occupiers explore the benefits of decentralisation,” they added.