Full Flexible Work Carries Some Risks

Opting For Full Flexible Work Carries Some Risks

SINGAPORE – Adopting an entirely flexible work arrangement carries some risks, according to an article jointly written by 2 experts that was published on The Business Times on Tuesday morning (1 December, SGT)

The property experts consist of Knight Frank Singapore’s Research Head Lee Nai Jia, who is also the Deputy Director at the Institute of Real Estate and Urban Studies (IREUS) at the National University of Singapore (NUS). The other is Eileen Kuan, a Senior Research Associate at IREUS.

For instance, a company’s customers may think that a business is struggling financially if it vacated all of its brick-and-mortar office space, said the duo.

Smaller companies without dedicated IT resources would also have to contend with higher levels of cybersecurity risk, including possible data leakage. Moreover, productivity could decline due to fatigue and miscommunication of tasks.

As for staff, they may likely prefer a hybrid work arrangement, in which they don’t have to work at home all the time, they noted. This is because working from home entirely blurs the separation of the staff’s office role and their personal life.

Still, a hybrid work set-up provides some advantages. “Hybrid workplaces with flexible working scheme will enable firms with expiring leases to avoid overcommitting too much space amid the uncertainty,” they pointed out.

“At the same time, if the economy recovers faster than predicted, the company is able to expand easily through the flexible working scheme without increasing its physical footprint. It will also prevent the company from occupying spaces during an economy upswing when rents are a lot higher.”

But if remote working will continue to a large extent after the virus outbreak has been surmounted, absorption of vacant and newly completed office space is expected to take longer. Landlords with office buildings, particularly ageing assets, would face greater pressure to retain lessees, while rents are projected to adjust.

“Data shows negative net absorptions in Singapore since COVID-19, which are the largest since 2013. Reflecting this, the rental index of office space is on a decline. The lack of new completions due to the slowdown in construction activity and the removal of Shaw Towers from the (available) office stock did not stem the decline in rents, and it seems likely that the decline in leasing activity and commercial rents may persist in Q4.”

Furthermore, due to more available rental options, businesses that are renewing leases would have a better bargaining position when negotiating rents. Older office premises with vacancies will not only witness weaker rents, but they could also attract companies which are downsizing. Consequently, there is a higher risk of tenants not paying rents due to sluggish business, while those that are doing well may relocate to better space once new completions enter the market.

“Hence, landlords of older buildings in the central business district (CBD) may be tempted to redevelop. In contrast, Grade A office buildings with customisable space are likely to be relatively more attractive, especially if they offer options for swing space such as coworking options,” they added.

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