THE Covid-19 pandemic has upended the way we work as well as altered the workforce's priorities and expectations of its workplaces. The formula for landlords to attract and retain office tenants has to be rewritten.
Drawing on JLL's experience in post-pandemic workplace strategy and leasing advisory, and backed by research surveys we conducted in 2022, there are several strategies landlords can adopt in their quest to attract and retain office tenants.
Quality over quantity
In our Future of Work Survey 2022, 88 per cent of the corporate real estate professionals in Singapore whom we interviewed agreed that investing in quality office space is a greater priority than expanding total footprint. This is significantly higher than the global and Asia-Pacific averages of 80 per cent and 82 per cent, respectively.
This comes as the war for talent is shifting the power from the employer to employees, forcing organisations to reimagine workplace and portfolio strategies.
With the successful adoption of work-from-home during the pandemic and with the hybrid working arrangement becoming increasingly mainstream post-pandemic, corporates are also hard-pressed to ensure the space their organisation occupies, now and in the future, is optimised to encourage employees to spend time in the office.
All these issues have led occupiers to gravitate towards better quality and newer office developments in their hunt for office premises post-pandemic. Accordingly, the average vacancy rate for the Marina Bay sub-market, home to mostly newer, good quality and green office developments, had tightened to 3.6 per cent by end Q2 2022 on the back of the ongoing flight-to-quality.
Occupiers that will be moving to the Marina Bay area include KPMG, which took-up about 125,000 square feet (sq ft) of space in Asia Square Tower 2 - it will be relocating from its home of more than four decades in Hong Leong Building. Chinese online fashion retailer Shein has also reportedly taken up 21,000 sq ft at Marina Bay Financial Centre Tower 3.
Additionally, CapitaSpring was able to overcome the challenges of marketing during the pandemic to achieve a 93 per cent leasing commitment rate by the time it received its Temporary Occupation Permit at end-2021. Meanwhile, the pre-commitment rates of Guoco Midtown and IOI Central Boulevard Towers, scheduled for completion in 2022 and 2023 respectively, are climbing steadily.
It is, therefore, pertinent that landlords ensure that the quality of their office assets are aligned with corporates' expectations, and these include large column-free spaces that are integrated with green features and served by state-of-the-art building services and management systems.
Flexibility is king in the hybrid working world
Our research suggests that hybrid work is not just a passing phase. Of our Future of Work 2022 respondents in Singapore, 62 per cent are likely to make remote working available to all employees by 2025.
With hybrid working, workplace occupancy will fluctuate on a day-to-day basis, and so will the utilisation rate for communal facilities such as meeting rooms, focus rooms and collaboration spaces. While corporates can stay agile by leveraging modular designs and versatile furniture, landlords who can support this by offering flexibility will gain an edge in attracting and retaining tenants.
This explains why more than one in three corporates interviewed as part of our Future of Work 2022 survey are looking to accelerate their investment in flexible space over the next three years, raising the proportion of flexible space in their real estate portfolio from an average of 30 per cent today to 46 per cent by 2025.
On the ground, there is already a growing realisation among landlords that providing a tenant-tailored flex and amenity space in their building is important for their holistic asset strategy. Providing tenants the flexibility to use bookable suites and meeting spaces on another floor helps give them the confidence to renew or commit to long-term leases.
Depending on the scale of the building asset, some landlords are even being thoughtful in the design of their flex space, hosting products like an amphitheatre, event spaces, wellness and collaborative zones. This means that tenants do not need to carve out those types of spaces in their premises, thus allowing them to navigate their workplace strategy more freely.
These flex and amenity spaces can be operated by the landlord or even a third-party flexible operator, or a mix of both.
Other flexible offerings for landlords to consider could include fixed and variable lease terms as well as the ease of relocation and expansion within a building or portfolio for expansion or consolidation purposes by providing ready-fitted units to help some tenants reduce the barriers to entry. Landlords could also waive the requirement for tenants to reinstate their properties at the end of their lease term.
In short, the broader the availability of flexible options, the greater the ability to attract and retain tenants in the hybrid world of working.
Health and wellness offerings
In JLL's Workforce Preferences Barometer 2022, seven in 10 employees in Singapore ranked workplaces that promote healthy lifestyle, safety and wellbeing as their most important expectations for their workplaces.
However, not all organisations have the expertise and/or economies of scale to provide amenities or organise health and wellness activities to cater to the wide-ranging preferences of their employees. This explains why one in two organisations in Singapore anticipate they will require more outsourcing support in this area over the next three years, according to a JLL poll.
Therein lies an opportunity for landlords to make a difference through the provisions of health and wellness amenities within their developments for easy access by tenants. This could include incorporating walking or jogging tracks, gardens and greenery, as well as fitness stations.
Landlords can take this a step further by organising a range of health and wellness activities in which tenants' employees can participate. This could include talks, workshops, fitness classes, or simply group walks or runs.
Some tenants would also appreciate it if group purchases of healthy snacks, meals or the like can be arranged so they can enjoy the economies of scale and bulk discounts.
Andrew Tangye is head of office leasing and advisory, and Tay Huey Ying is head of research and consultancy at JLL Singapore.