Things looking up for Singapore office market

/ EdgeProp
November 26, 2017 9:00 AM SGT
Singapore Grade A office rents rose 1.7% q-o-q in 3Q2017, the first uptick following 10 quarters of decline between 1Q2015 and 2Q2017, which saw rents falling 21% in total, according to CBRE in its 3Q2017 Asia Pacific Office Trends report. Market sentiment improved further amid signs the office market is turning the corner.
Over the next six months, CBRE expects rents to continue trending up as supply and vacancy come down. “With fears around new supply largely alleviated, landlords are increasingly confident and turning more aggressive in raising rents,” says the property consultancy.
As rents are set to increase over the next few years, firms should make decisions quickly, as availability in new projects is shrinking and vacancy is expected to stay low for some time, says CBRE.
According to CBRE, demand for office space is being led by firms in the technology, media and telecommunications sector, with IT and internet-based companies being the most active. Another source of demand comes from co-working operators, which are aggressively expanding.
The impact of co-working
Based on CBRE’s estimates as at 4Q2016, the amount of space taken up by co-working operators in Singapore increased 31% y-o-y to about 400,000 sq ft last year. This year, co-working space will grow another 80% to 718,000 sq ft, estimates CBRE. The proportion of co-working space to Singapore’s office stock will more than double from 0.3% in 2016 to 0.7% this year.
According to CBRE, co-working operators offer several benefits to landlords. Firstly, they tend to sign long leases, owing to the need to amortise fit-out expenditure, which allows landlords to lock in income for longer periods. Secondly, tenants that would not fit under a traditional lease can be accommodated in the co-working space through agreements with the operators. Companies that outgrow the co-working premises are also a potential source of tenants for landlords.
Through its venture fund C31 Ventures, CapitaLand recently invested in The Great Room, a hospitality-inspired co-working space provider that just expanded its operations at One George Street
Landlords have started to tap the growing co-working market and several have formed strategic...