Given the ongoing challenges plaguing the office sector, landlords should incorporate greater flexibility in office space use to target Small and Medium Enterprises (SMEs), said CBRE in a report.
While the smaller space requirement of SMEs limits potential leasing demand, CBRE believes there is still a role for them alongside large corporations as a supplementary office demand driver.
“What they lack in scale, they make up for in numbers. This is predicated on the following three positives: (1) strong SME and start-up growth trends, (2) SMEs a distinct focus for the government, and (3) the rise of the sharing economy,” it said.
The number of SMEs in Singapore increased by 16.2 percent from 2010, signifying an additional 26,300 new companies over the past five years. This growth has been further boosted by the local thriving startup scene.
“Singapore is beginning to come into its own as one of the startup capitals of the world, rivalling cities such as Silicon Valley and Israel. Extensive government support, a strong intellectual property framework and easy access to key Southeast Asian markets have helped to attract and encourage many aspiring entrepreneurs to set up shop.”
As a result, start-ups shot up from 24,000 to 42,000 between 2005 and 2013. In Budget 2016, the government also unveiled a slew of measures aimed at helping SMEs through cyclical headwinds, and supporting them in growth and international activity.
The support comes at a favourable time, when major trade agreements are expected to help open up more markets for Singapore’s SMEs. These include the Asean Economic Community (AEC), which was established in late 2015, as well as the final proposal of the Trans-Pacific Partnership (TPP), which was signed in February 2016.
The combination of government support and such trade agreements will enable SMEs to invest in technology, improve their processes and grow their businesses by tapping into these external markets more effectively, said CBRE.
The rise of the sharing economy — in the form of co-working spaces — is also expected to play a major role in altering the dynamics of the office sector. CBRE noted that SMEs have taken to co-working relatively quickly, as it offers a flexible working environment and the opportunity to be located in prime locations, all at a fraction of the usual cost.
With this, CBRE advises landlords to find ways to cater to start-ups and SMEs and to incorporate them as another source of demand, alongside traditional large occupiers.
“MNCs and large enterprises might have large space requirements but they are few and far between. SMEs, on the other hand, have considerably smaller space needs but this is balanced (out) by their large numbers,” it said.
According to CBRE, this can be achieved by partnering with co-working operators or even establishing their own facilities or brand within their properties. This has already been seen in some high-profile co-working set-ups in Grade A office buildings, like The Great Room at One George Street, and Collective Works at Capital Tower.
Landlords can even combine the services of both co-working and serviced offices in one facility, said CBRE. They can also rejuvenate older or poorer quality buildings with small floor plates challenged by weak occupancy levels. In fact, they can consider fitting out under-utilised spaces into shared facilities, such as collaboration areas and meeting rooms.
“These gathering spaces will create opportunities for people and businesses of different backgrounds and areas to interact and network. Greater community spirit can be fostered among the occupiers and could even result in business collaborations,” it said.
“A plus point for landlords is that when the community grows, the allure of the development will grow organically and help attract and retain more SMEs.”
Cheryl Marie Tay, Senior Journalist at PropertyGuru, edited this story. To contact her about this or other stories, email email@example.com