More flexible component expected in offices next year
By Charlene Chin
/ EdgeProp Singapore |
Savills forecasts a 0% to 2% increase in effective rents for CBD Grade A offices next year (Credit: Samuel Isaac Chua/ The Edge Singapore)
SINGAPORE (EDGEPROP) - Outlook for the office sector has been largely impacted by on-again, off-again workplace mandates that change according to government regulations. With mutations of the Covid-19 strain potentially giving way to more uncertainty, consultants believe most corporations will be adopting a wait-and-see, flexible model when it comes to their office footprint allocation in 2022.
For most of next year, “we believe that it will be very much like what transpired in the second half of 2021 where companies remained cautious about mandating workers to return to the office”, says Alan Cheong, executive director of research and consultancy at Savills Singapore.
To adapt to the uncertainty, “most tenants will react to this by right-sizing for a period of at least a lease cycle — three to five years. The companies that may likely expand are those in the tech and social media related space plus family offices”, Cheong says, adding that “many of the tech and related unicorns already have a toe hold in Singapore and are presently in co-working premises”. He notes: “For 2022, more will be looking to take up privately leased space to accommodate their increased headcount.”
In 3Q2021, CBRE Research observed that most of the leasing transactions comprised renewals and “flight to quality” moves. “As the pandemic evolves into an endemic, this paves the way for firms to adopt the hybrid working model while reassessing their space requirements. This may eventually result in space returning to the market, particularly pronounced amongst consumer banks,” says Tricia Song, CBRE’s head of research for Southeast Asia.
However, like Cheong, she believes that in 2022, bright spots for the office market will exist within the tech and non-banking financial sectors, with demand from these industries continuing to spur leasing activity.
More flexibility
Given the uncertainty surrounding when workers can finally return to the office, it seems logical to assume that flexibility will be a priority for companies. “The fluidity of the Covid-19 situation and the associated uncertainties around public health restrictions have become an accepted norm for corporates,” notes Tay Huey Ying, head of research and consultancy at JLL Singapore.
This is expected to change landlords’ offerings. Already, “pre-Covid-19, some landlords have already been partnering flexible workspace operators to offer such space in their buildings”, says Song.
Examples include CapitaLand group’s investment and partnership with The Work Project, Frasers’ investment and partnership with Justco, and CDL’s investment and partnership with Distrii. Developers have also established their own flexible workspace platforms such as CapitaLand and Ascendas’ Bridge+ as well as Keppel Land’s Kloud.
In the upcoming Guoco Midtown development, located along Tan Quee Lan Street in Bugis, developer GuocoLand has committed 15% of its office net lettable area — in line with its “core and flex” leasing scheme — to meet the needs of companies with dynamic business needs and shorter business cycles, she adds.
Moving forward, Song expects to see “more landlords providing flex solutions within their portfolios either through third party operators, joint ventures or self-managed facilities.”
(Source: Emerging Trends in Real Estate Asia Pacific Surveys; ULI)
Office market expectations for 2022
From Jan 1, work-from-home will no longer be the default working arrangement for companies. From next year onwards, up to 50% of workers will be allowed back into the workplace. The authorities recognised that teleworking was “not ideal and not sustainable in the long run, as face-to-face interaction is important for team dynamics, as well as other operational considerations”, said Covid-19 multi-ministry task force co-chair and Trade and Industry Minister Gan Kim Yong.
Once workers are back in the office, their expectations surrounding the workplace are likely to change. “The Covid-19 pandemic has amplified the demand for greener, more sustainable spaces and healthy working environments,” says JLL’s Tay.
A survey by JLL in March revealed that some 71% of employees based in Singapore want to be working in an environment that puts health and well-being at the forefront. Meanwhile, one in two employees based in Singapore also wants to be in workplaces that are resilient and are able to innovate and adapt to future crises.
In the survey, employees also expect that the future office has to cater to new working practices, such as the option to work remotely and adhere to safe-distancing measures. Two in five employees expect to continue to leverage on digital interactions whenever possible. Similarly, two in five expect less density and more physical separation in their future workplaces.
Song believes workers “will expect a high standard of hygiene, perhaps touchless technology to reduce surface contact, fresh air circulation and filtering systems, and more frequent cleaning routines”.
The in-office experience will also have to change. This could include leisure-oriented common lounge spaces, biophilic design, end-of-trip facilities and landlord loyalty programmes. It could also include recreational amenities such as games rooms or even rock climbing walls, for instance, suggests ULI in its emerging trends in real estate 2022 report.
Song adds: “In terms of office designs, workers may expect more collaborative space for unscheduled catch-ups, smaller meeting rooms for up to five persons and more soundproof space for individuals to take video calls.”
Supporting the wellness of workers
Wellness programmes are also crucial. “Some 74% of European occupiers have a health and wellness programme in place. A recent CoreNet survey found that 80% of employees agree that a company’s wellness offering will be crucial in recruiting and retaining them within the next 10 years,” says David McKellar, co-head of advisory and transaction services, office services at CBRE Singapore.
CBRE has applied wellness-led features and services in its offices in Los Angeles, Amsterdam, Warsaw and Madrid, which follow the principles of the WELL Building Standard for air, water, nourishment, light, fitness, comfort and mind, he adds.
“Apart from supporting the wellness of employees, they bring benefits for business. Facility management professionals that introduce health and wellness services are helping to attract and keep talent and reduce the cost of absenteeism,” says McKellar.
Next year, CBRE expects “an overall expansion of office space, particularly in the CBD Grade A market as technology occupiers, non-banking financial services firms such as wealth management and asset managers and agile (or flexible workspace) operators continue to grow,” says CBRE’s Song.
CBRE expects three projects will enter the office market in 2022. The two upcoming developments in the fringe CBD include the redevelopment of Hub Synergy Point (0.13 mil sq ft) and Guoco Midtown (0.67 mil sq ft). The sole development in the decentralised submarket that is expected to complete is Rochester Commons (0.20 mil sq ft), which is reportedly committed by Sea Ltd, highlights Song.
Meanwhile, Savills forecasts a 0% to 2% increase in effective rents for CBD Grade A offices next year. “The supply in 2022 will have little bearing on rents because it is expected to be relatively low,” says Savills’ Cheong.
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