Office Demand May Moderate, But Future Supply Is Low
SINGAPORE – Savills said demand for office space is being tempered by a “a confluence of factors,” namely the continuation of hybrid work, the mass lay-offs in the tech sector, and the current dismal state of the crypto market, reported The Edge on Friday afternoon (9 December, SGT).
Due to the above factors, rightsizing in the local office market persists, with some upgrading mixed in, according to Savills Singapore’s Chief Executive Marcus Loo.
For instance, Corporate Locations revealed that Toyota Group’s trading division transferred to a single office floor at OUE Downtown from Parkview Square. Sika Asia Pacific Management is moving to an entire floor in One Raffles Place from Robinson Point.
Burger King Asia Pacific is relocating its regional headquarters to Manulife Tower from the UIC Building. Alcoholic beverage firm Diageo is rightsizing to occupy half a floor at the Ocean Financial Centre from One George Street. The other half of the office floor is now leased by NBC Universal, which rightsized from International Plaza.
“Many companies rightsize come lease renewal,” explained Corporate Locations’ Director Douglas Dunkerley.
“Some consolidate two offices into one, others upgrade but take smaller and more efficient spaces, while still others work on a hybrid solution.”
Based on prior market cycles, surrendering office space is “not uncommon in a downturn, especially when those companies were growing at a rapid pace before,” noted Jones Lang LaSalle’s Country Head in Singapore Chris Archibold.
Still, the future office supply here is relatively low, “so the impact should be somewhat reduced.”
In 2022, the new supply in Singapore’s central business district (CBD) comes from just 2 office buildings – the redevelopment of the 27-storey Hub Synergy Point (118,000 sq ft) and a 30-storey office tower within Guoco Midtown that comes with 770,000 sq ft of high-end office space. The last one is 75 percent pre-leased to date.
Next year, there will only be three. The largest of which is the IOI Central Boulevard Towers, which will offer 1.26 million sq ft of Grade A office space. It’s roughly 30 percent pre-let. The other two are outside the CBD – One Holland Village’s office component (80,730 sq ft) and Surbana Jurong’s new HQ with around 741,801 sq ft of workspace within Jurong Innovation District.
Come 2024, the local office sector will see the completion of 333 North Bridge Road (40,000 sq ft), the redeveloped Certis Paya Lebar (220,000 sq ft), the redeveloped Keppel Towers (618,000 sq ft), and Labrador Tower (686,000 sq ft). Meanwhile, only Shaw Tower (435,000 sq ft) is the expected new supply by 2025.
“Including the completions in 2022 to 2025, the supply pipeline is equivalent to an annual average of 1.23 million sq ft,” which is 14.8 percent lower than Singapore’s historical 10-year annual gross completion of 1.45 million sq ft, added CBRE’s Song.
