Corporate real estate is gaining more importance and significance around the boardrooms of many companies globally, as they recognise the role that this function plays in providing great places for people to work, advancing the company’s sustainability agenda, supporting new business opportunities, and managing risks around the world. Corporate real estate (CRE) is always at the forefront of change.
The theme of this year’s CoreNet Global APAC summit is “Changing the Conversation from Cost to Value,” and that is precisely the function of corporate real estate executives throughout the world – to ensure that their companies are making the right investments into real estate that will create the greatest value for their business in the long term.
Corporate Real Estate and Singapore
So where does Singapore fare in the global corporate real estate market benchmark? It is clearly a thriving business destination where lots of multinationals look to locate offices.
But does it offer global corporate real estate strategists a viable investment when they are looking to make a value-add location move?
A snapshot survey on corporate real estate trends in Asia conducted by CoreNet Global in February revealed that demand for office space in the Asia region and Singapore is on the increase.
More than half (52%) of global respondents would locate facilities to Southeast Asia over the next two years, with over 60% to developing economies including Jakarta, Kuala Lumpur, and China.
39% of respondents said Singapore was most receptive to economic development and facilitating new office locations, followed by 25% who preferred Hong Kong. 91% of total respondents said Singapore remains an attractive destination to locate a new office.
Overall, the outlook for Singapore corporate real estate seems very positive, but what are the key trends that will impact the Singapore market in the coming years?
Decentralisation – There is an increased proliferation of Grade A type offices in decentralised locations throughout Singapore which means that we are seeing the CBD spread much further than Raffles Place, which is no bad thing.
However, decentralisation is a trend occurring in other cities in more extreme ways and it is predicted that these locations, such as Iskandar and Shanghai Economic Zone, will grow at a faster rate by 2020 than traditional CBDs, which may be a draw for companies intending to set-up support operations that do not require a CBD location.
Given Singapore’s size, decentralised hubs that offer the convenience, stable prices, and modernity of good quality buildings could succeed in attracting companies to locate or relocate.
Competitiveness of other Asian cities – Along the same theme, Singapore has to stay relevant in terms of cost and supply of Grade A office space in order to remain competitive compared to its greatest rival Hong Kong, but there are a lot of competitive advantages still attracting companies to setup in Singapore, including government incentives and infrastructure.
Search for talent – CRE location decisions, perhaps surprisingly, often depend on a ‘human factor’ rather than necessarily a cost consideration. Singapore trumps many other regions in Asia with an enriched and talented pool of knowledge workers, but needs to continue to nurture its local talent in order to maintain its position compared to other developing cities in the region.
Stability of real estate market - If we do look at cost for a moment, it is fair to say that one advantage Singapore can rely on is its fairly stable and predictable real estate pricing (the 10-year average has stayed constant around $8-9psf/mth).
While it may not be the lowest price in the region, it is based on strong demand/supply fundamentals that make it easier to predict which, for CRE strategists making long-term investments and building multi-asset portfolios, is a definite advantage.
Focus on sustainability – Singapore is fortuitous in that there is a common effort between government, businesses, and locals to prioritise sustainable living.
As such, multinationals choosing to locate in Singapore can be confident that their company’s sustainability efforts will be honoured thanks to the country’s strong emphasis on energy efficiency and sustainability, where many buildings are built to the highest local or even international Greenmark standards.
The CRE opportunity
The mystique of real estate markets is really quite simple. Despite all its seeming complexity, it really boils down to demand and supply.
Corporate real estate occupiers, because they are forward thinking and strategic, actually have a major impact on the delicate equilibrium of the demand and supply of commercial real estate.
As corporate real estate executives at corporations globally take on more responsibility and leadership roles within their businesses, CoreNet Global is encouraging its members to seek an ever-greater understanding of the business, align with its current and future needs, and continue to “change the conversation from cost to value.”
Erwin is among the speakers who will be sharing their expertise at the CoreNet Global Asia Pacific Summit.
CoreNet Global Asia Pacific Summit
Shangri La Hotel, Singapore
22 Orange Grove Road 258350
25-27 March 2014
Click here to register.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.
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