DBS Research says banks' office downsizing 'less than projected'
FINANCIAL firms are expected to return less office space than DBS Group Research had earlier projected.
"(It's) darkest before dawn. Most of the negative news on major occupiers space rationalisation is out, in our view," the brokerage said in a report on Friday.
DBS Research estimates that the total return of space by major financial institutions is about 0.5 million square feet (sq ft), which is "manageable" for the office market. This is less than the average annual demand over the past five years, it added.
The brokerage said that 30-40 per cent of that returned space has already been backfilled by landlords.
"We believe that some may be converted to co-working space given trends towards more flexible workspaces."
The brokerage referred to a recent Bloomberg report saying that Standard Chartered Bank is weighing options to downsize its Singapore office space by four floors - about 80,000 sq ft - out of a total of 21 floors.
"This news will present one of the last few major banks to release its downsizing plans, and as such, we believe that most of these 'negatives' are now known," it said.
DBS Research estimated the potential impact on office landlords Keppel Reit and Suntec Reit is up to about 4 per cent of leases that are expiring in fiscal 2022. This "clears away the uncertainty that is capping share prices".
Separately, DBS as a bank said it too expects to cut its overall physical footprint by about 20 per cent as the bank moves towards a hybrid work model. The bank's chief executive Piyush Gupta on Friday confirmed that it has given up space in the financial centres of Singapore and Hong Kong.
DBS Research said it keeps its "positive stance" on the Singapore office sector, as a proxy to recovery and reopening of the economy.
"We believe corporates and institutions will start to review expansion plans as the economy recovers and hiring begins again."
Other analysts have said that the shuffling of physical networks has been going on since the Global Financial Crisis in 2009.
Banks have rejigged operations amid changes in strategy, and to save costs. Consultants noted that large banks have already moved back- and middle-office positions from the more expensive CBD to Changi Business Park and Mapletree Business City.
Still, Singapore is tapping on burgeoning growth in Asia. Business expansion plans mean taking more space.
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