Flexible workspace, technology sectors drive office leasing demand
Flexible workspace operators continue to drive office leasing demand in Q3 2020.
Singapore witnessed the gross effective rents of Grade A office space in Central Business District (CBD) increase by 2.3% quarter-on-quarter to $9.77 per sq ft (psf) in the third quarter of 2020, while Grade B office rent fell 2.4% quarter-on-quarter, revealed Colliers International.
“With the year-to-date decline of 3.4% in CBD Grade A office rents, we expect to see further downside in Q4 2020,” said Tricia Song, Head of Research for Singapore at Colliers International.
“Meanwhile, landlords continue to offer 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.”
With incremental new take-ups in recently completed buildings being negligible, CBD Grade A vacancy rose 4.9% during the period under review, from 4.5% in Q2 2020. All micro-markets saw vacancies increase except for Raffles Place/New Downtown’s premium buildings, said Colliers.
The flexible workspace operators continue to drive office leasing demand in Q3 2020.
JustCo and WeWork, for instance, are set to open branches at Centrepoint (60,000 sq ft) and 30 Raffles Place (82,000 sq ft), respectively, in the fourth quarter of 2020.
The Great Room will also take-up 37,000 sq ft of space at the 70% pre-committed Afro Asia i-Mark building following its completion in Q4 2020. The Executive Centre, on the other hand, plans to expand and move into One Raffles Quay North Tower’s two highest floors in 2021.
“We see the flexible workspace sector being more and more sophisticated offering a more unique and bespoke service to a targeted audience,” said Rick Thomas, Head of Occupier Services in Singapore at Colliers International.
Colliers also noted that some tech giants were also seen establishing or expanding their footprint in Singapore.
ByteDance reportedly intends to invest billions of dollars as well as recruit hundreds in the city-state as part of its global expansion. Tenet also plans to open a new Singapore office, which will serve as its regional hub for Southeast Asia.
Other tech firms such as Rackspace and Twitter also intend to expand their headcount in the city-state.
“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,” said Thomas.
Meanwhile, Colliers said Singapore continues to remain attractive to investors even as total office or mixed office investment volumes declined 35.8% quarter-on-quarter to $846 million in Q3 2020, bringing the rolling 12-month volume to $4 billion, which is also down 34.5% quarter-on-quarter.
“In the third quarter we saw Robinson Point being sold by Tuan Sing Holdings at the highest price on psf basis since Straits Trading Building was sold in 2016. This transaction reflects investors’ appetite for quality rare freehold office buildings and also the long term attractiveness of Singapore to investors,” said Jerome Wright, Senior Director, Capital Markets and Investment Services in Singapore at Colliers International.
Source: CommercialGuru, 8 Oct 2020