Now is an opportune time for occupiers to rethink, re-evaluate and renegotiate.
The Singapore government had recently approved a partial return to the office with safety management measures in place. When looking at the ideal office density, Colliers International’s experts found that approx. 150–172 sq ft (or 14–16 sqm) per person is an excellent standard for occupiers.
With a current average density of approx. 107–129 sq ft (10–12 sqm) in Singapore, occupiers will require continued effective use of rotation-based working, remote working or will need to rationalise their office space.
Grade A rents accelerated their decline to 2.3% quarter-on-quarter (QOQ) in Q3 to S$9.77 per square ft (psf), and we expect a further rental correction in Q4, as leasing demand continues to shrink with the global slowdown.
Related content: Tech Occupiers Remain Bright Spot | Q3 2020 Office report
“When looking at the ideal office density, Colliers International’s experts found that approx. 150–172 sq ft per person is an excellent standard for occupiers.”
Meanwhile, landlords continue to offer higher incentives, as leasing demand weakens further with the global economic downturn.
For example, rent-free periods for CBD Grade A offices have increased from 1.3 months to 1.5 months. This is the perfect opportunity for occupiers to either renegotiate their lease or secure new office space, especially with the vacancy forecasted to rise further in Q4. Landlords are willing to negotiate more than ever before, and we generally see the race for the best value.
Many larger occupiers are also taking the opportunity to revisit their existing real estate portfolio strategy. Adopting Flex and CoreTM or exploring a split-office strategy is very often the solution.
“This is the perfect opportunity for occupiers to either renegotiate their lease or secure new office space... Landlords are willing to negotiate more than ever before.”
This explains why the office leasing demand continues to be driven by the flexible workspace sector. The Great Room has announced they will occupy 37,000 sq ft of space at the new Afro-Asia-i-Mark building after its completion in Q4 2020, while The Executive Centre plans to move and expand into the two highest floors in One Raffles Quay North Tower in 2021.
Flexible workspace continues to grow in Singapore: The Executive Centre plans to move and expand into the two highest floors in One Raffles Quay North Tower in 2021
For those considering the split-office strategy, the average gross effective rents for Grade A in the city Fringe area is down to S$7.53 psf per month, down by 4.7% Year-On-Year (YOY) with a 6.9% vacancy rate.
Again, this represents a great opportunity as this could mean a 35% cost savings compared to a Grade A (Premium Tier) building.
It is time to be working with an enterprising team of experts and create the opportunity to maximise the potential of your property. Contact me for more details.
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