What will drive Singapore’s office space demand post-pandemic?

Co-working operators expand their portfolios as demand for flex spaces grow.

According to Knight Frank, prime Grade office rents in Singapore’s Raffles Place / Marina Bay precinct grew for the first time since Q4 2019, with rents rising by 0.2% quarter-on-quarter (q-o-q) to S$9.98 per square foot per month (psf pm). 

“Office rents turned a corner and bottomed out in Q3 2021 as occupancy rates for prime offices in the precinct remained relatively stable, falling marginally by 0.7 percentage points (pp) q-o-q to 93.6%, a slight reversal from the 0.1 pp growth recorded in Q2 2021.”

Here’s more from Knight Frank:

In tandem with the firm signs of improvement in the office rental market, the volume of pre-termination space available fell 78.9% q-o-q in Q3 2021, declining empathically from the 360,000-sf estimate in Q2 2021 to some 76,000 sf in Q3 2021. The decrease in shadow space was expected as the flight-to-quality continued with corporates taking advantage of the rare opportunity to snap up premium spaces in prime buildings that were normally fully occupied, before rents start to increase significantly.

Demand drivers

As corporates continue to adapt to a post-pandemic work environment, co-working operators continued to expand their local offerings in anticipation of growing demand for more flexible work-spaces in the remote working era. In August, The Executive Centre (TEC) opened its 38,736-sf location at One Raffles Quay North Tower, while The Great Room will open its new 37,000- sf location in the new Afro-Asia I-mark building. 

Demand for the upcoming supply of space from new office developments also appears strong, with more than 90% of CapitaSpring precommitted or in advanced negotiations. It was recently reported that Red Hat, an IBM subsidiary, and Sumitomo Mitsui Banking Corporation (SMBC) leased 60,000 sf and 68,600 sf of space at CapitaSpring respectively. This reemphasised the appeal of Singapore as a neutral, accommodative and stable business node, drawing multi-national corporations to quality office space in the city. 

On the domestic front, local law firm Lee & Lee was reported to be relocating from Singapore Land Tower in Raffles Place to 25 NorthBridge at the corner of North Bridge Road and High Street. Different corporates have differing strategic needs and priorities, being drawn to specific buildings and locations for business reasons. Lee & Lee’s new 30,000 sf office will have contiguous floors with a staircase link in-between levels, signage rights and will place them at the core of Singapore’s legal hub, just across the Supreme Court.