As reported on Channel News Asia, after a year since the wide adoption of the work-from-home (WFH) arrangement by companies large and small, employees have now become accustomed to remote work and are fully embracing it. Employee safety and well-being aside, this working setup provides plenty of benefits that are most welcome to the modern worker. The removal of commute from their daily schedules, flexible working hours, and an increase in personal time for friends and family are some of the pros of working from home.
Based on Showsuite Consultancy’s assessment, it also showed that the ever heightened technology and the fact that most companies are turning to paperless methods will mean that WFH has a higher chance of being implemented for an average of 30 percent of standard office operations.
With corporations deeming WFH to be a suitable working arrangement, it could potentially be adopted to ensure business continuity down the line. As such, all these may start to be an issue for the Central Business District's (CBD) commercial space market, hence, the need for it to undergo certain changes to remain relevant.
Post-COVID and its effect on CBD office rental fees
Due to a combination of many factors, such as the weakened economy, increased risk of business closures, and widespread adoption of remote work - market demand for commercial office spaces will naturally weaken in the short term. Additionally, after discovering the viability of WFH and flexible work arrangements, companies are also leaning towards downsizing their physical spaces or even pulling out of them entirely.
There is certainly a surge in the number of companies implementing hot desking practices, staggering their employees into separate teams, or shifting to serviced offices and co-working spaces.
On the other hand, office space planning at present would need more floor area per staff compared to previously, wherein the floor area to staff ratio is expected to rise by 20 per cent due to safe distancing measures.
Office rents are expected to ease for the time being due to the challenging business environment, and may see a slight drop in office occupancy. In fact, it is evident from the fact that vacancy rates in bustling areas have increased by a marginal degree.
For instance, in Singapore’s Downtown Core, vacancy rates have risen by 1.4% from the fourth quarter of 2019 to the first quarter of 2020, from 9.3% to 10.7%. As such, office rental prices have eased in response to the market demand, but they're still expected to remain stable nonetheless.
This is mainly due to several reasons like the increased space to worker ratio which means that businesses still require a large enough space to function from. Next, the limited supply of new CBD offices that are expected to be completed over the coming one to two years, prevents an oversupply from raising vacancy rates.
Thirdly, over a million sq ft of office space have been or is due to be withdrawn for redevelopment, reducing supply even further - consisting of space from Fuji Xerox Towers, AXA Tower, and Tower Fifteen. Finally, whereas office rental fees had strengthened in the foregoing two years prior to COVID-19, all these are not near lofty territory at all, which means that any drop in rental fees may not be as dramatic.
How the CBD will shape for the future
The decrease of footprint in CBD areas also brings some changes to the area's surrounding ecosystem. For instance, food and beverage establishments will see a drop in business moving forward, but public transport and related infrastructure will also become less congested during peak hours.
On top of that, a continued decline in occupier demand could also lead to property owners moving forward with redevelopment plans for their buildings. They could either convert their spaces for residential use due to the introduction of the CBD Incentive Scheme, or simply redevelop them to have larger floor plates for improved space planning and a bigger area allocation per employee.
With the current decline in the economy gives an opportune time for owners of neighbouring small, old establishments to join together and redevelop them into completely new offices that offer bigger floor plates for improved space planning and with smarter property specifications.
CBD and CBD offices will stay relevant
Despite the decline of market demand for space in the CBD, small business spaces and office warehouses for rent
alike will remain relevant due to companies requiring a solid and physical presence.
The necessity of offices dedicated to core operations will always be prevalent, and some of its irreplaceable roles, such as facilitating face-to-face communication with partners and clients, can't ever be substituted by digital means.
However, they'll need to be redesigned from the ground up to function in a way that's different from the traditional business space. Rather than just housing the standard office furniture and meeting spaces, they must evolve into destinations conducive
to brainstorming, communication, and collaboration.
The popularisation of remote work and decrease in demand for office space necessitates a change in the CBD in order to stay relevant. But no matter how it redevelops for the future, the fact remains that CBD’s small business spaces for rent
will remain relevant and necessary for businesses that intend to compete in their respective markets.
At LHN Group, we offer all sorts of spaces for rent - from commercial, industrial, residential to office use. We have residential spaces for rent near Outram Park MRT
to industrial spaces for rent near Bendemeer. With our available properties, find the ideal space for your business needs at LHN Group.