Singapore office leasing demand driven by flexible workspace, tech giants: Colliers

FLEXIBLE workspace operators and tech giants are driving office leasing demand in Singapore, according to a report by real estate services and investment management company Colliers International.

In the next three months, some 142,000 square feet (sq ft) of co-working spaces are set to open, Colliers said in a press statement on Wednesday. WeWork is slated to open an 82,000 sq ft branch at 30 Raffles Place, while JustCo will open a 60,000 sq ft branch at The Centrepoint.

In addition, The Great Room will occupy some 37,000 sq ft of space at the new 70 per cent pre-committed Afro-Asia i-Mark building after its completion in Q4 2020. Meanwhile, The Executive Centre is setting its sights on expansion and plans to move into the two highest floors in One Raffles Quay North Tower next year, Colliers said.

Rick Thomas, Colliers' head of occupier services in Singapore, said: "We see the flexible workspace sector being more and more sophisticated, offering a more unique and bespoke service to a targeted audience."

Separately, Colliers also noted that tech giants are consolidating their regional hub in Singapore, which bodes well for sentiment and should help support office demand.

As part of its global expansion, ByteDance is reportedly planning to invest billions of dollars and recruit hundreds in Singapore, Colliers said, adding that Tencent intends to open a new office in the city-state as well. Other tech companies such as Twitter and Rackspace also plan to expand their Singapore headcount, Colliers added.

A NEWSLETTER FOR YOU

Tuesday, 12 pm

Property Insights

Get an exclusive analysis of real estate and property news in Singapore and beyond.

Sign Up

"While some of the tech giants have a small presence in Singapore now, we can expect them to bloom in the years to come and improve the tech sector representation of the overall occupiers in Singapore," Mr Thomas said.

That said, central business district (CBD) Grade A vacancy rose to 4.9 per cent in Q3 from 4.6 per cent in Q2, as more leased space was returned across the market, Colliers noted.

According to the firm's data, CBD Grade A rents fell 2.3 per cent quarter-on-quarter (q-o-q) to S$9.77 per square foot per month (psf pm) in Q3, bringing the year-to-date rent decline to 3.4 per cent. Meanwhile, CBD Grade B rents shed 2.4 per cent to S$8.09 psf pm in Q3 as compared to the previous quarter.

On Tuesday, Cushman & Wakefield similarly noted that Grade A CBD rents continued to decline 5.1 per cent q-o-q to S$9.84 psf pm in Q3. This is in line with weak market sentiment amid the worst recession on record, it said.

Looking ahead, Colliers expects to see further downside in the fourth quarter. It forecasts that rents would decline 5 per cent this year, but rebound 5 per cent in 2021 in tandem with the economy.

Nonetheless, Tricia Song, Colliers' head of research for Singapore, noted that landlords are offering higher incentives, as leasing demand weakens further with the global economic slowdown.

"For example, rent-free periods for CBD Grade A offices have increased from 1.3 months to 1.5 months," she said.