Occupiers Review Space Needs

Commercial Market Watch H2 2020

Office Market Awaits The Return Of Workforce

The office market went through a period of adjustment during the second half of 2020 as the economy and businesses responded to the impact of the Covid-19 pandemic. The most drastic change came during the 2-month circuit breaker (7 April-1 June) when the government enforced the closure of workplaces and employees to work from home (WFH) for business that are less critical to daily living. Even when the government implemented the Phase Two reopening of the economy from 19 June onwards, telecommuting remained the default and employees were still encouraged to WFH as safe distancing measures were still in place.

Anecdotal evidence showed that only 30% of the office workforce returned to the office to work even though the government permitted 50% of the headcount. For some companies, WFH and telecommuting have been a huge success and they are prepared to scale down their requirements for a physical office. Some companies still prefer to work in a conventional office environment while others prefer a hybrid model with employees alternating between WFH and working in the office.

In H2 2020, the leasing market had a leg up from companies that were and are being displaced by buildings that are going to be redeveloped. Two of such buildings are Fuji Xerox Towers (350,000 sq ft) and AXA Tower (680,000 sq ft). Fuji Xerox will move out of Fuji Xerox Towers to take up a 60,000 sq ft space at Mapletree Business City, Prudential Assurance will be taking up 60,000 sq ft in UE BizHub West while GAC Singapore has moved to Springleaf Tower in December 2020. Moving out from AXA Tower are AXA Insurance – giving up its 70,000 sq ft space – and Lazada of Alibaba Group, which is said to be taking up 100,000 sq ft in 5One Central (former Manulife Centre) when it leaves its 130,000 sq ft space in AXA Tower.

Other significant moves include:

  • Amazon taking over some 90,000 sq ft of the space vacated by Citibank in Asia Square Tower 1
  • Delivery Hero, in its expansion mode, is taking up 50,000 sq ft in Afro-Asia I-Mark
  • CIMB Bank is moving from Singapore Land Tower to occupy 50,000 sq ft of 30 Raffles Place (former Chevron House)
  • Boston Consulting departing Singapore Land Tower for a space of 46,700 sq ft in the top two floors of 79 Robinson Road

Some leasing demand also came from flexible workspace and technology sectors. In Q4 2020, The Great Room would occupy some 37,000 sq ft in Afro-Asia I-Mark, while Rackspace Technology would open a new 4,876 sq ft office space at One Raffles Quay. ByteDance, the Chinese owner of video app TikTok, reportedly signed an agreement to lease two floors measuring around 58,000 sq ft at Guoco Tower.

Based on rental data from the Urban Redevelopment Authority (URA), the median rent of quality office space in the Downtown Core and Orchard Planning Area in Q3 2020 declined by 3.5% from the previous quarter, a reflection of the impact of the pandemic as some businesses had to downsize or relocate to cheaper locations. The stronger leasing activity in the Fringe Area and Outside Central Region enabled the median rents to gain 11.5% over the same period. The stronger leasing demand in Q4 2020 would likely prevent further slide in rents.

Strata Office Sales

Despite the current Covid-19 situation, the office sector still proved to be resilient due to a tight office supply. This has helped to support the strata sales market as well as rental growth. Moreover, foreigners and companies are more open to invest in commercial units as additional buyer’s stamp duty or seller’s stamp duty will not be imposed on the sale. For good quality office space located in the Downtown Core, buyers can expect net yields of around 3.0 – 3.5%, an attractive return considering that borrowing costs hovered around 1.75% in H2 2020.

A portfolio of 27 strata office units on the 4th, 5th, 9th and 17th levels of Plus at 20 Cecil Street were put up for sale in October. The strata area of each unit ranges from 786 sq ft to 2,303 sq ft, with prices starting from around $2.40 mil. Based on caveats lodged in November and December, several units on the 5th, 9th and 17th levels have been sold. The biggest of these deals was the three consecutive units on level 17 sold for $11.53 mil in early December, which works out to $3,227 psf over its strata area of 3,574 sq ft.    

At Suntec City, a 3,078 sq ft unit on the 43rd storey sold for $10.60 mil ($3,443 psf) in August 2020. High floor units at Suntec City could fetch a premium because they offer unobstructed views of the city skyline and Marina Bay. In Tanjong Pagar area, two full floor units at Springleaf Tower were sold in November: on the 30th level, a 10,742 sq ft unit was sold for $26.00 mil ($2,420 psf) and a similar sized unit on the 22nd level was sold for $23.50 mil ($2,188 psf). Another significant strata office sale was the entire floor on the 7th storey of GB Building at 143 Cecil Street. The renovated unit was put up for sale in October at $9.80 mil for the 5,425 sq ft space. It was sold the following month at $9.50 mil ($1,751 psf).

The chart below shows the average price of strata office space in the key submarkets within the Downtown Core. It can be seen that the pandemic has cause greater swings in prices from H1 2020 to H2 2020. In view of the economic uncertainties, transactions in H2 2020 were dominated by older buildings, hence the decline in rents. For example, the Cecil Street/ Robinson Road/ Shenton Way submarket saw a decline of 18% from $2,511 psf in H1 2020  to $2,059 psf in H2 2020  because the basket of units included those from GB Building, Shenton House and Tong Eng Building. In Raffles Place, the $3,800 psf  in H1 2020 referred to the sole transaction of a whole floor of 13,100 sq ft in Samsung Hub which was also a record price for the building. There were no other sales in Raffles Place in H1 2020. In H2 2020, the average price of $3,091 psf was derived from the units sold at Plus.

Building Sales

The gradual reopening of the Singapore economy from June onwards included easing of restrictions at workplaces so that a higher proportion of the workforce can return to their offices. Investment activities began to pick up from Q3 2020 onwards as locally-based investors look for viable commercial assets.

One of the significant commercial transactions was the sale of a 50% interest in Northpoint City (South Wing) at the value of $550 million to TCC Group. Two other office buildings sales were Tuan Sing Holdings' Robinson Point that was sold to One South Bay Group for $500 mil ($3,736 psf on net lettable area) and Abi Plaza that was sold to Artemis Ventures (fund managed by CapitaLand) for $200 mil ($2,162 psf on net lettable area).


Preliminary estimates by the Ministry of Trade and Industry (MTI) showed that the Singapore economy shrank by 5.8% in 2020 after battling with Covid-19 pandemic for the whole year. This is the nation’s first annual contraction since 2001, and its worst recession since independence. The Government spent about $100 billion to support households and businesses, with construction, aviation and tourism among the most affected.

Even though the reopening of the economy is now in Phase 3, outlook for the first half of 2021 is still tentative. With the vaccination programme in progress so as to better control the pandemic, economic recovery could happen in the second half.

Given that technology has enabled remote working, some firms would downsize to rationalise cost and space efficiency. At the same time, landlords would be more willing to negotiate and to accommodate short-term lease renewals. All these point to a downward pressure on rents, particularly for prime space in the Downtown Core. Demand would be driven by technology, social media and fintech companies. Co-working space remains relevant but operators are likely to take a cautious stance towards expansion.

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