The Singapore office property market, which had a good run in 2018, looks set to continue to shine this year amid tight office supply and healthy occupier demand for prime office space in the Central Business District (CBD).
Colliers Research forecasts that average Premium and Grade A office rent in the CBD could rise by 8% year-on-year (YOY) in 2019, following a 15% YOY rental growth last year. Vacancies are also expected to be tight, trending below 6% until 2022.
Despite the growth momentum in the office property market, landlords remain watchful of supply and demand dynamics. In a poll of landlords whose properties represent more than half of the Premium and Grade A stock in Singapore’s CBD, Colliers found that 75% of the respondents cite tenant retention as a challenge owing to more competitive pricing, changing economic factors, and new commercial developments.
To this end, Colliers has recommended in its inaugural Landlord Sentiment Survey in Singapore that office landlords be more proactive in engaging occupiers and be more progressive with varied lease structures to retain and attract tenants.
Office space in prime CBD buildings remain well sought after by both existing tenants and new prospects, as 75% of the respondents report a vacancy rate of 10% or less vacancy within their buildings.
The survey, which was conducted in Q2 and Q3 2018, also found that 90% of the respondents have a flexible workspace provider within their building and believe they add value to their buildings’ tenants. Of these, 25% of the respondents have both serviced office and coworking space in their property, while 40% have serviced office only, and 25% have just coworking space.
The flexible workspace sector, comprising both coworking space and serviced office operators, has seen tremendous growth in recent years. Including recent leases that have been signed, Colliers estimates that flexible workspace operators will take up a combined 2.7 million sq ft of space within the Singapore CBD – representing about 5% of the total office stock (all Grades) in the city centre.
Colliers projects that the flexible workspace footprint in Singapore could potentially rise by a further 20% (or about 580,000 square feet) YOY in 2019, after growing by an estimated 30-35% YOY or 670,000 sq ft in 2018.
However, due to the healthy demand for and tight supply of space, landlords can be more selective when choosing a flexible workspace operator to complement their development’s offering.
Colliers’ poll further found that eight in 10 respondents are not in favour of offering exclusivity to a flexible workspace player, possibly reflecting landlords’ preference to keep options open – be it to bring in other operators or perhaps setting up their own flexible workspace offering.
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