SINGAPORE (EDGEPROP) - An issue that CEOs everywhere are grappling with is how to get their staff to return to the workplace. “Many organisations would prefer to have most of their staff back at the office,” says Simon Raper, director and head of workplace Apac, Savills. “Some managers are struggling with remote working and how to manage people if they are not physically there.”
According to Raper, about 70% of organisations have accepted that things have changed. The other 30% have swung back to their previous in-person work model with the flexibility of working from home (WFH) one or two days a week.
As a global real estate advisory firm, Savills has a front-row view of the ongoing tug-of-war between management and employees about returning to the office. “There is no one-size-fits-all work arrangement,” says Sally Tan, managing director of commercial, industrial and logistics at Savills Singapore. “But we note that interestingly, most North Asian companies — Chinese, Japanese, South Korean and Taiwanese — want everyone to return to the office.”
On the other hand, companies like London-listed Savills have adopted “hybrid work 100%”, says Raper. The management has left the decision entirely to the line managers and their respective teams to work out their optimal work arrangements.
The reception area doubles as a communal space for staff events as well as for client events (Photo: Owen Raggett)
During the latter part of the pandemic in 2020-2021, Raper and his workplace team set out to create “a destination workplace that would attract people back to the office”. The new office was a response to the changing needs of employees in the wake of the pandemic. Savills as an organisation was changing and evolving too. “We wanted to create an environment where innovative and passionate people could perform at their best,” he says. “And we wanted to do it sustainably as well as in a socially responsible and employee-centric way.”
After Savills moved to Prudential Tower in 2010, it only made one minor refurbishment to the reception area. However, the workplace team looked beyond the physical environment, focusing on developing a workplace strategy for their firm.
The entire office was designed with acoustics, WiFi access, touchscreens and Barco ClickShare to facilitate sharing screens of laptops or other mobile devices through a room’s audio-visual system. A central panel controls lighting, air-conditioning and blinds for different ambiences in each room.
Most people miss the social interaction and “water-cooler moments” of the workplace. The reception now houses a coffee bar during the day and a bar serving alcoholic and non-alcoholic beverages in the evenings. It is also a communal space for staff and client events, such as overseas property launches.
The reception of Savills’ office with a coffee bar-turned-bar in the evenings (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Savills also pushed the corporate boundaries regarding ESG (environmental, social and global corporate governance) and sustainability. The chairs in the office are from Smart Ocean, a company that makes ergonomic, human-scale chairs out of recycled plastics to reduce ocean plastic pollution. “Sometimes we do have meetings that go on for eight to 10 hours, so it’s important that we have comfortable chairs,” says Raper.
The office flooring is from carbon-neutral certified flooring company Interface. Instead of being thrown out and replaced by new ones, the original L-shaped work desks in the office were carted away to a local joinery company, cut into new shapes and sizes, and given a new laminated surface. The original furniture joineries were refinished and reused.
Some of the new workstations have gas-lift desks with adjustable heights from Gainscale, which are more silent than the motorised ones, says Raper. Since Savills went paperless, all the old filing cabinets were also sent to the local joinery company and refashioned into new lockers. With the false ceiling removed, the office roof had a fresh coat of grey: “White was too bright and black was too dark,” says Raper.
“A scientific study showed that if the ceiling is at least 3m in height, sick leave is reduced by 25%,” says Raper. “I’ve been monitoring the situation, and for the past 18 months, sick leave has been down 24%.”
New worktops refashioned from the traditional L-shaped worktops that Savills used to have (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Savills’ fit-out took nine months and cost an estimated $175 psf. Based on its 12,000 sq ft space, that translates to $2.1 million. A good 35% of that went into new technology. “Our fit-out has one of the lowest wastages in Singapore,” says Raper.
Having redesigned a workplace that achieved its corporate objectives and at a reasonable budget, the workplace solutions business took shape. Instead of entering at the tail end of a leasing deal, Raper and his workplace team are increasingly at the forefront. The project management team is also included in such client meetings from the start.
“We used to have a set process when leasing office space,” relates Ashley Swan, executive director of commercial, Savills. “But increasingly, people are asking about hybrid working and how they can bring employees back to the office. The actual leasing part has taken a back seat. Instead, occupiers want to know upfront how they can optimise their workspace and how much it will cost, especially with inflation.”
Vincent Lau, senior director at Savills Singapore, notes that determining the appropriate space and requirements for companies with hybrid work arrangements is crucial and can be a challenge too. “Hence, we have our workplace strategy team to help our clients to determine the staff-to-space ratio and other requirements,” he says.
Fit-out costs can vary based on project requirements, adds Lau. But he estimates that they are generally 10 to 15% higher post-pandemic due to higher inflation.
Office fit-out costs are not pegged to rents, adds Swan. For instance, he notes that financial institutions that moved their back-office staff to Changi Business Park spent more on fitting out the space and providing amenities for their staff. They put in bigger pantries and offered free shuttle service or free meals, relates Swan.
Lockers recycled from former filing cabinets, with shoe storage space below (Photo: Samuel Isaac Chua/EdgeProp SIngapore)
More shadow space is entering the market, especially with tech firms reducing their space needs. “A lot of these tech firms were bullish and had taken up a lot more space in 2019–2020 in anticipation of expansion over the next three to five years,” says Swan. “But the anticipated expansion is not going to occur, so we see some of that space returning to the market as shadow space.”
However, Swan assures, “it’s not all doom and gloom”. The mood is certainly more cautious, he adds. But while there is contraction, expansion is also happening in other sectors. “We are going to see some bright spots,” says Swan.
In Singapore, tenants cannot terminate a lease pre-term, says Tan. “Tenants are obliged under the lease to continue paying the rent and find a replacement tenant for the landlord.”
Companies that must give up some of their space may have fitted their interiors to high specifications, with good-quality fixtures and fittings, says Tan. “If they have to look for a replacement tenant, the new tenant can take over the existing fit-out, plug-and-play and be operational more quickly.” She adds that there is less wastage from an ESG perspective, as well as savings in capital expenditure.
“It’s a win-win situation for both parties,” notes Tan. “We see that as an opportunity to secure space for new tenants or occupiers looking to relocate.”
A communal space that also doubles as a pantry (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Some financial institutions that are increasing their headcount will absorb the increase within their existing space, with the majority going to their “backroom office” in the suburbs, says Swan. “Importantly, we expect them to adopt some form of hybrid working.”
If an occupier had intended to increase the headcount by 50 but has now pared the figure down to 20 in light of the more cautious sentiment, they can expand within the existing space. “They can increase their flexible working ratio from 80:20 to 70:30, for example,” says Swan. “We see most companies continuing to do that.”
In “right-sizing”, most companies still prefer to move into new premises to implement flexible work arrangements. “It’s much harder to do so in an existing space,” adds Swan. “We could do it for our own office because we took advantage of the government’s WFH policy during the pandemic.”
For instance, a company may occupy an area of 80,000 sq ft at its existing office. However, by adopting a hybrid working model with an element of WFH or WFA (work from anywhere) and moving to a new development, for example, Guoco Midtown, its space requirement may be just 40,000 to 50,000 sq ft. This is because it no longer needs to incorporate large event spaces for training or town hall meetings, says Raper. The company can rent those facilities at Guoco Midtown if needed, he points out. “So instead of 80,000 sq ft, they now need just 40,000 to 50,000 sq ft,” he adds. “We are seeing that kind of right-sizing for many organisations, leveraging the new core-and-flex landlord models.”
One of the meeting rooms where furniture can be stacked at one corner to make room for furniture for clients’ selection (Photo: Samuel Isaac Chua/EdgeProp Singapore)
The 30-storey, Grade-A office tower at Guoco Midtown on Beach Road, with 770,000 sq ft net lettable area, obtained its temporary occupation permit in January and is already 80% pre-leased. “If the market is declining, new buildings would struggle to secure tenants,” says Swan. “But Guoco Midtown is already over 80% leased.”
IOI Central Boulevard Towers is another new office development targeted for completion sometime in 3Q2023. It is the only other new office tower in the CBD this year, says Swan. Amazon will occupy nearly 30% of the 1.26 million sq ft of Grade-A space.
Swan expects office occupancy rates to remain high, with CBD rents hovering around $10 psf per month and premium office stock at $12 to $14 psf per month. He still expects “flattish growth” in office rents of 0% to 2% this year instead of the original projected 5% to 8%. “A lack of supply still drives the market,” he adds.
Check out the latest listings near Guoco Midtown, IOI Central Boulevard Towers