Firms reconfigure to smaller but better spaces

Knight Frank also expects rents to increase 3% to 5% this year.

Corporates are reconfiguring their offices and seeking less space that can be used for more collaboration by the employees as the hybrid work set-up evolves, according to a report by Knight Frank. But despite this, they are taking up “better” spaces in terms of quality, which drives the “flight-to-quality” movement.

With a recovering economy and the Singapore government’s drive to grow the Information and Communications, and Financial and Insurance sectors, Knight Frank is seeing a steady demand for office space for 2022 with rents expected to increase 3% to 5% for the year.

Calvin Yeo, Head of Corporate Real Estate for Knight Frank Singapore, spoke with Real Estate Asia Editor-inChief Tim Charlton to talk about the trends and outlook for Singapore’s office market.

Your survey said that 47% of companies are actually looking to improve the quality of their offices. Can you address these trends and concerns of corporate tenants and what they’re looking for?

We conducted a global survey, and 47% of respondents expected the quality of space to improve over the next few years. With hybrid working, business leaders are increasingly compelled to create a productive environment that is enjoyable, flexible, and healthy to work in for their employees, a workplace that also attracts and retains talents. On top of that, some 69% of respondents anticipated that they would resize their portfolio by more than 10%. And 90% of respondents still regard the office space as a strategic business device. What remains undeniable, the role of the office postpandemic is to nurture productivity.

Your report also had another interesting finding that mainstream companies are deciding to rent some coworking space for new teams or new projects that might be shorter in duration. Talk to us about that.

We find the co-working space inventory in the market serving very well for swing space requirements when corporates have not totally rationalised their requirements. But nevertheless, we are seeing the permanent office space remaining very relevant for corporates bringing their employees back to a collaborative work environment in the long term.

Your report showed that LinkedIn expanded its lease in MBFC Tower 2 to buy another 22,000 sq. ft. If you look at the dominant leases of space, would it be fair to say it’s big tech and fintech or are there any other trends that you’re seeing?

Last year’s net new demand was largely spoken for by tech companies like ByteDance. They took up significant space in the [Central Business District] CBD. Another tech company,

Calvin Yeo, Head of Corporate Real Estate, Knight Frank Singapore

With hybrid working, business leaders are increasingly compelled to create a productive environment that is enjoyable, flexible, and healthy to work in

SEA, which took up an entire tower Rochester Commons outside the CBD at Buona Vista. So clearly, space that is being given up by financial institutions in the CBD and new supply outside the CBD are being very quickly backfilled by technology companies.

Can you share with us interesting trends in Singapore?

I cite the example of Guoco Midtown. They are one of the few landlords who are providing flexible space, meaning they manage the space inventory and through advanced dialogue with their tenants, they’re then able to provide for expansion requirements, given the uncertain new world order. There’s also what we call “gym-like memberships”, at co-working spaces where you could buy passes for your staff. So there’s the flexibility of going into co-working spaces, nicely decked up with virtual call rooms and quiet booths, and a conducive work environment if unable to return to the office or work from home.

Is there a shift away from the outer areas and big campuses into CBDs or is it the other way in Singapore?

We’re seeing a good balance. In town, we have Facebook and Amazon. We see Google out of the CBD at Alexandra, a business park location, and SEA being out in offices at Buona Vista. So it’s a good balance of tech companies being located in the CBD and outside of the CBD.