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Singapore Office Market: The Paradigm Shift

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The events of 2020 have accelerated the shift towards sustainability, bringing forth an emerging trend of occupiers moving towards higher-quality assets that meet the rising demand for health and sustainability in 2021 and beyond.


In the recent Colliers' Global Investor Sentiment Report, over 75% of the investors said that Environment, Social and Governance (ESG) will impact their overall investment decision. However, we are yet to see a direct correlation to the selling price per square foot. Buildings with green features will potentially lease-up faster and lead to a lower vacancy rate. Due to the current supply and demand dynamics, it will also lead to higher rental rates.

 

"With Singapore taking a top spot as a potential world-leading technology hub and already hosting over $60b valuations of unicorns, the Office market's future is bright."

 

Refurbished buildings, or new Grade A Commercial Office Buildings are attracting large Institutional CORE funds. The events of 2020 has accelerated the shift for occupiers to move towards higher-quality assets that meet the rising demand for health and sustainability; we can expect this trend to continue in 2021 and beyond.

 

With Singapore taking a top spot as a potential world-leading technology hub and already hosting over $60b valuations of unicorns, the Office market's future is bright. Whilst there will be an immediate impact in demand for Central Business District (CBD)'s office space, it is also likely to impact the fringe CBD office / Business space, as occupiers seek more cost-effective options for mid to back of office operations.

 

 

 

"Commercial buildings within the CBD are expected to receive increased investor interest, on the back of the Government's long-term rejuvenation plans CBD Incentive Scheme."

 

When looking at submarkets, we see a strong growth is the Tanjong Pagar/Shenton Way area which is fast becoming a tech cluster and with the ongoing AXA and Fuji Xerox redevelopment projects, the URA incentive scheme will impact this area and investor strategy in the long term.

 

Overall, Commercial buildings within the CBD are expected to receive increased investor interest, on the back of the Government's long-term rejuvenation plans CBD Incentive Scheme. We can already see some of the smaller old buildings being redeveloped into mixed commercial and residential sites, not to mention the development of the Greater Southern Waterfront as well.

 

This removal of commercial stock could create a supply crunch and an interesting scenario where the developers need to decide what to do - ultimately, it is a question of timing. On one side, we expect an increase in rental rates due to the supply crunch with nearly 1.5 million sq ft taken out of the market and increasing demand from occupiers. On the other, we have some old buildings becoming irrelevant, not meeting occupiers' future requirements.

 

These are exciting times for Singapore!

  

 

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