Jan 20, 2021
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With many corporates permanently adopting rotational remote working, Knight Frank expects net new demand for office space to be lower, said BT.

Barring new COVID-19 virus strains and consequent lockdowns, office rents in Singapore are expected to decline by about 5% this year before bottoming out and recovering in 2022, reported The Business Times (BT) citing Knight Frank.

This comes amid a forecasted 5.3 million sq ft of islandwide new supply from the fourth quarter of 2020 to 2023, 94.1% occupancy within the Central Business District (CBD) and overall prime office rents averaging $10.16 per sq ft per month (psf pm).

With many corporates permanently adopting rotational remote working, Knight Frank expects net new demand for office space to be lower, said BT.

Mizuho and Sompo Insurance, for instance, recently slashed their Singapore office spaces by around 16,800 sq ft and 26,000 sq ft, respectively.

In December 2020, CIMB Bank reportedly leased more than 50,000 sq ft in 30 Raffles Place (former Chevron House), down from its 70,000 sq ft existing space at Singapore Land Tower.

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“The rethinking of traditional office space usage in an age of flexible work arrangements, and the casualties of the COVID-19 pandemic as the government withdraws business support measures, will likely add to contractionary pressures for office space,” said the consultancy in its Q4 2020 Singapore office market report.

While the banking and insurance sectors are expected to continue the trend of consolidating and paring their real estate footprint, Knight Frank sees the information and technology communications (ICT) companies remaining active in the office market, said BT.

Tech giants like Tencent and ByteDance unveiled expansion plans into Singapore this year as these firms emerged as inadvertent beneficiary of the COVID-19 pandemic.

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“With an estimated $3.5 billion invested for ICT procurement in 2020 and a further $25 billion into research, innovation and enterprise activities till 2025, global firms and family offices have been and will continue to be drawn to set up in Singapore,” said Knight Frank as quoted by BT.

Other factors cited by Knight Frank that will boost the city-state as an office destination includes the government’s effective handling of the pandemic and commitment to developing the economy’s key sectors.

Knight Frank revealed that prime grade office rents within the Raffles Place/Marina Bay precinct shrank 10.2% in 2020 as rental declines eased in Q4 2020, dropping 2% quarter-on-quarter versus Q3’s 2.3% fall.

Although pre-termination space in Q4 2020 rose to around 330,000 sq ft from the previous quarter’s 260,000 sq ft, Knight Frank noted that occupancy levels for prime grade offices continued to be supported by these committed leases resulting to a 0.2 percentage point decline quarter-on-quarter in Q4.

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