Tech Sector Office Demand Slowed In H1 2023
SINGAPORE – Data from Cushman & Wakefield (C&W) showed that demand for office space here by the tech sector declined during the first half of the year, reported The Edge on Saturday afternoon (29 July, SGT).
C&W’s Research Head for Singapore and Southeast Asia Wong Xian Yang revealed that the tech sector accounted for just 20 percent of the new office leases in the city-state’s central business district (CBD) during the first six months of the year compared to 46 percent for the whole of 2022.
On the other hand, the finance sector generated 49 percent of the new office leases in Singapore’s CBD during H1 2023 from merely 21 percent for the entirety of 2022. As such, the finance sector was the top driver of office space demand during the period under review, while the tech sector fell to the 2nd spot.
“Financial and professional services firms have partially offset a slowdown in tech office demand,” noted C&W’s Wong. He added that as the country’s wealth management industry expands, professional services like legal, certification, and training are occupying pockets of office space in Singapore’s CBD.
However, Jones Lang LaSalle’s (JLL) Research Head Tay Huey Ying disclosed that leasing enquiries, particularly from large office occupants, have been “noticeably scarce” since the beginning of 2023. During the 1st half of the year, leasing activity was mainly driven by office tenants with “smallish requirements”.
Nevertheless, Tay expects some ongoing negotiations for mid-to-large pre-leasing transactions for upcoming office developments will conclude over the coming months.
For H2 2023, JLL doesn’t rule out the possibility that the monthly rents of Grade A office space in Singapore’s office could enter a “correction mode”. This is due to an uptick in office supply to the tune of 1.26 million sq ft because of the impending completion of IOI Central Boulevard Towers, coupled with the elevated level of shadow office space within prime office properties in the Downtown Core.
JLL’s Tay thinks that landlords of office buildings with high vacancy levels will be under pressure over the short-term to reduce their asking rents in order to attract or retain tenants. “As such, upward pressure on office rents should continue to ease and give way to downward pressure,” she added.