Share: Share on Facebook Share on Twitter Share on LinkedIn I recommend visiting to read:%0A%0A {0} %0A%0A {1}

What’s New in Property: All Signs Point to an Inflection Point for Office Market 2020

According to advance estimates, the Singapore economy grew by 0.8% year-on-year in the fourth quarter of 2019, with full-year GDP growth coming in at 0.7%.

According to advance estimates, the Singapore economy grew by 0.8% year-on-year in the fourth quarter of 2019, with full-year GDP growth coming in at 0.7%. Despite subdued economic growth, employment in the office sector rose by 11,100 workers during the third quarter, a significant increase from the 6,000 workers added in the preceding quarter. The job market appears to be relatively resilient, although job creation tends to be stronger in the third quarter seasonally.

CEO Confidence declined to its lowest level in a decade. Tariffs and trade issues, coupled with expectations of moderating global growth, are causing a heightened degree of uncertainty. As a result, more CEOs than last year say they have curtailed investment. In a separate poll of CEOs and CFOs (conducted in September), we found that a large majority believe the recent trade disputes will have a lasting impact on their business. With fewer than one in five CFOs willing to take on risk, we’ll see slashed budgets for companies going into 2020. This will affect business expenditure, as companies may not want to be too bullish and save more for rainy days. When we apply it to the Singapore context, you can see the multinational corporations (MNCs) are taking a lot longer now for their budget approval if they were to move offices. Sometimes if they have the budget to pay rental but don’t have budget to fit out the new office, they are also stuck.

Office rental growth has been slowing in recent quarters, signalling that rents are nearing their peak. Despite lower market confidence due to weaker economic growth and the escalation of the US-China trade war, landlords have been able to hold their rents steady for the moment due to tight vacancies and limited upcoming supply. Based on Cushman & Wakefield Research’s basket of Grade A office properties, the Grade A Central Business District (CBD) rent increased by 2.8 per cent to S$10.66 per square foot per month (psf/mo) for the whole of 2019. This has significantly slowed down from the preceding year, which recorded a rental growth of 12.7 per cent. URA private office rents in Central Region have pretty much stagnated, growing by merely 0.1 per cent in the first nine months of 2019. This is in sharp contrast to 2018 when office rents rose 7.4 per cent.

In 2019, leasing demand stemmed mainly from the finance, tech, and co-working sectors. In particular, co-working operators expanded aggressively to dominate market share in the flexi-office space. Major co-working players took slightly over 1 million square feet (msf) of spaces, a substantial increase from 600,000 square feet (sq ft) taken up in 2018. However, the pace of expansion will slow as the large co-working players become more cognizant of the need to reduce cash burn and adopt a more conservative approach. Leasing demand from other sectors is also weakening due to the currently cautious business sentiment.

With supply easing from the preceding year, demand has retreated from the 1.33 msf recorded in 2018. Demand measured by net absorption of Grade A CBD office space amounted to 759,000 sq ft. representing a reduction of around 41 per cent from 2018. Nevertheless, it is still respectable given that in the previous economic slowdown between 2015 and 2016, the annual average absorption was only at 602,000 sq ft.

Although the situation in Hong Kong seems to have a long-lasting impact on its economy, we do not expect MNCs to uproot themselves and relocate to Singapore in the immediate future. Such decisions are usually not taken lightly given the complexity of relocating business functions. There could be some diversion in terms of expansion needs to other offices away from Hong Kong, and Singapore being one of the regional headquarters in Asia, could potentially capture some of the demand.

Going forward, Grade A CBD rents are expected to moderate slightly in 2020, as the global economy continues to face multiple headwinds from the most recent geopolitical tension in the Middle East, to the on-going trade war, and the resultant slower growth in the US, Eurozone and Singapore in 2020. Uncertainties are taking a toll on the ability of some companies to secure budget for relocation and expansion, limiting the net demand for office space. Additionally, in order to stay put in the CBD, corporate occupiers are exploring ways to optimise the use of office space, such as reconfiguring office layout, putting people on flexi-hours and reducing the size of work stations. Nevertheless, further tightening of the office supply due to potential redevelopments and the subsequent expiry of transition offices in the city fringe could help to cushion the softening in rents.

The above article originally appeared on The Strait Times on 12 January 2020.

Related Insights

main streets across the world 2023

Main Streets Across the World 2023

In this 33rd edition of Main Streets Across the World, we’ll explore the near-term outlook for the retail sector; headline rent and ranking changes for best-in-class urban locations across the world; key indicators and global main street rankings; and key trends to watch such as the cost-of-living crunch, e-commerce and more.
Dominic Brown • 21/11/2023
Reworking the office
Research • Workplace

REWORKING the Office Asia Pacific

Our ‘REWORKING’ series examines decision-making for occupiers under four key considerations: Cost, Carbon, Culture and Community – under which the changing demands, needs and impacts on office spaces and strategies can be examined.
Grant Carter • 03/11/2023
Insights • Economy

Cushman & Wakefield Comments on URA private residential price index Q3 2023

Overall sales volume declined by 3.5% qoq in Q3 2023, reversing the past two consecutive quarters of increase. The fall in overall sales volume was driven by the new sales market, which declined by 8.5% qoq to 1,946 units in Q3 2023.
Xian Yang Wong • 27/10/2023

Related Stories

Dexcom Philippines New Office Fit-out Project
Dexcom Philippines • Healthcare
Learn More
Cushman & Wakefield Stories Philippines Inc. • Travel
Learn More
Cushman & Wakefield Stories
OMD Philippines • Advertising
Learn More
With your permission we and our partners would like to use cookies in order to access and record information and process personal data, such as unique identifiers and standard information sent by a device to ensure our website performs as expected, to develop and improve our products, and for advertising and insight purposes.

Alternatively click on More Options and select your preferences before providing or refusing consent. Some processing of your personal data may not require your consent, but you have a right to object to such processing.

You can change your preferences at any time by returning to this site or clicking on Privacy & Cookies.
These cookies ensure that our website performs as expected,for example website traffic load is balanced across our servers to prevent our website from crashing during particularly high usage.
These cookies allow our website to remember choices you make (such as your user name, language or the region you are in) and provide enhanced features. These cookies do not gather any information about you that could be used for advertising or remember where you have been on the internet.
These cookies allow us to work with our marketing partners to understand which ads or links you have clicked on before arriving on our website or to help us make our advertising more relevant to you.
Agree All
Reject All