Apac office occupiers still willing to pay higher rents for quality locations: Colliers

Core CBD premium and Grade-A rents in Singapore rose 0.7% q-o-q to $11.57 psf per month after two consecutive quarters of decline. (Photo: Samuel Isaac Chua / EdgeProp Singapore)

Office occupiers across the Asia Pacific (Apac) region are still willing to pay higher rents for quality and amenity-rich locations, according to an April research report by Colliers.

This comes despite occupiers being more cost-conscious. Colliers highlights that top of mind for Apac business leaders is how to optimise resources and maximise savings and drive growth, while contending with challenges like inflation, competition for talent, the need to digitalise, and the rising pressure of climate change.

“Amid this scenario, offices today, albeit with much higher workforce flexibility, remain the epicentre of the work culture, with relocation decisions being underpinned by talent strategy and ESG goals,” observes Mike Davis, managing director of occupier services for Apac at Colliers.

In its report, Colliers maps its priorities for office occupiers looking to achieve cost savings. These include aligning office strategy to business goals, consolidating space, monetising non-core assets, disposing or sub-leasing excess space, and investing in technology and smart solutions for better space utilisation.

It also highlights that prioritising sustainability initiatives and driving employee engagement and satisfaction will further contribute to occupiers achieving cost savings.

In Singapore, Colliers notes that a flight to quality and limited pockets of space prompted a rebound in rents in 1Q2024. Core CBD premium and Grade-A rents rose 0.7% q-o-q to $11.57 psf per month after two consecutive quarters of decline.

Nevertheless, the market remains mixed, says Bastiaan van Beijsterveldt, Colliers’ managing director for Singapore. While rents in quality buildings in good locations are holding up, rental expectations have softened for buildings with persistent vacancies and high upcoming secondary spaces.

He anticipates landlords to face increasing competition in the near term as more supply comes in, while new flexible work guidelines may prompt more firms to right-size according to their requirements.

Amid this environment, Colliers believes occupiers could take advantage of the uncertainty in the market in 1H2024 to negotiate their requirements, avoiding positive rent reversions in the future.