According to The Business Times, with the prolonged presence of the recent global pandemic, Singapore's office leasing market has been subjected to change in order to meet the demands of its evolving audience.
The primary force behind this transitioning of the market from being landlord-favoured to neutrally tenant-friendly is the evident softening of leasing activities across the island.
Several factors can be attributed to this weakening need for space, which are expounded in detail in the following sections.
WFH to persist and its inevitable adoption
Remote work has been largely embraced by many companies now, with it being the established working arrangement for many up until the foreseeable future. Since employee safety is a leading priority, this essentially means that corporate occupiers will stick to the WFH setup for the majority of their employees unless conditions improve enough for office operations to be viable again.
During this time, corporate clients are also focusing on containing their costs and preserving their capital. This means taking the opportunity to review their present needs by evaluating how much square footage is necessary and assessing how to best utilise space in order to cater to the norm of flexible working arrangements.
In addition, for existing leases that are coming up for renewal, the probability of them returning to vacancy is undoubtedly high due to the fact that the pressure faced by the market provides occupiers to explore other, more cost-effective options.
It’s evident that the finance and banking industry have forecasted that a substantial portion of its workforce will be able to operate remotely, resulting in numerous firms re-evaluating their space requirements in the future.
Evolving working requirements and conditions
Although shifting a significant portion of business operations to WFH is the expected and ideal move, it's not feasible for every company and industry. That means the office real estate market will need to evolve to cater to the new working conditions required by these companies and other WFH-oriented businesses.
The concept of having a central office that serves as a "home base" will still predominantly be a necessity. However, many other functions will be decentralised and situated in areas that fit their purpose. Some may still be required to be in the heart of central CBD, while others can be dispersed according to staff catchments and logistics.
With more remote work in place, employees are looking for a better working experience
- one that is more impactive than just functional. Organisations will begin to focus on a new set of drivers: comprising intelligent building management, welfare, safety management, and finally, amenities.
This means that the office strategy will emerge as a key pillar to reel in and retain talent, especially with a workforce that is currently more mobile than ever.
Moderation in rental price from a rise in competition
During the advent of Covid-19, Singapore's office market had just reached its cyclical high, with Grade A offices reaching 2.8% to S$10.66 psf in 2019, according to Cushman & Wakefield Research. Now, rents have begun to decline, with Grade A CBD rent averaging at about 2.7% to S$10.37 psf a month during the first half of 2020.
However, despite the relatively insignificant change in rental prices, landlords will still have to be more competitive in the face of falling demand and the emergence of new supply.
How landlords will respond to the change
Apart from pricing competitively, landlords are responding to the changing market landscape by prioritising their focus on the client's needs.
This means proactively engaging with them to uncover and understand their requirements, identifying those who are recession-proof and who are not, and trying to find a medium where both parties can be satisfied. An example of the latter is by turning small offices to rent
into co-working spaces.
It's an undeniable fact that the commercial leasing market is shifting in accordance with the new market. However, the inevitable recovery of the economy and the indispensable need for commercial or business spaces will have it back on its feet in due course.
At LHN Group, we have a variety of spaces available for rent - ranging from industrial, commercial, office to residential use. We have warehouses for rent near Tai Seng MRT
and Paya Lebar, as well as many other types of spaces islandwide. Discover the ideal space to meet your business needs at LHN Group.