They believe Singapore is a secure space that can mitigate rental escalation.
According to CBRE's Asia Pacific Occupier Survey 2018, 45% of real estate executives have major relocation plans for their companies in the next two years, about 25% of them prefer Singapore due to secure space to mitigate rental escalation. Meanwhile, 42% prefer Tokyo for Flight-to-quality amidst high supply, whilst 17% prefer Manila for cheaper locations outside the CBD.
"The rising trajectory on Singapore’s office rents will motivate more companies to actively explore activity-based working," CBRE said. This heavily involves three trends the firm has spotted: portfolio expansion, acceleration of workplace evolution, and higher investment in technology. Moreover, "rapid technological innovation, evolving workplace concepts, and shifting employee expectations are becoming the new normal for the regional commercial real estate, with these trends likely to spur ongoing office market growth for the next 24 months," it added.
David McKellar, executive director and head of CBRE’s advisory & transaction services office occupier team in Singapore commented, “The drive for employee engagement and productivity gains through activity-based working will continue to gain momentum in Singapore in 2018, as will an enhanced adoption of technology. Active sectors, such as tech, co-working and banking & finance, have accounted for much of the overall recent office absorption. This has resulted in an aggressive uplift in rents and landlord sentiment."
“To mitigate the rising occupancy cost base for tenants, efficiency gains in space utilisation will be an area of focus. Lease renewals will likely be evaluated alongside more efficient, agile workplace alternatives.” McKellar added. Singapore’s office rents have grown 8.4% since the bottoming out in mid- 2017, and are expected to continue to appreciate through to 2021.
Meanwhile, for portfolio expansion, China and India are the first and second countries to be considered, whilst Singapore, which "continues to serve as a hub for Southeast Asia," is third.
However, CBRE pointed out that the supply level in Singapore is low, as the proportion of its vacancy and two-year new supply reached less than 15%. Expansion intention fell between 25-27%, compared to over 30% in Bangalore and Shanghai and 23-25% in Tokyo.
"The marketwide supply shortage in Singapore could also pose a challenge for occupiers seeking space," CBRE said. Meanwhile, solid relocation activity is expected in the Singapore CBD along with a rental upcycle that is projected to last until 2020.
The annual survey is the third kind. It polled 50 corporate real estate executives from multinationals and large Asian corporates with companies headquartered in North America, Europe,and Asia Pacific. Major sectors included technology, media and telecommunications, banking and finance, and petroleum, oil and gas, and flexible space providers.
Do you know more about this story? Contact us anonymously through this link.