Tech layoffs: How badly will the office market be hit?

At Alexandra Technopark (ATP) on Alexandra Road, Google Asia Pacific signed on as a new tenant in June 2019. It is already midway through the five-year lease term that started in 1Q2020. The space was fitted-out, but Google staff has not moved in. When contacted, Google says it has no new updates to share on the status for now. Google took up the space at ATP 31⁄2 years ago for future expansion, as the firm’s Asia Pacific headquarters at the neighbouring Mapletree Business City II (MBC II) was full. The 344,000 sq ft that Google leased at ATP amounts to 33% of the total net lettable area (NLA) in the high-specification, a campus-style business park with over 1.038 million sq ft. Google Asia Pacific’s staff of 3,000 are at the headquarters in MBC II, where they have been since November 2016. The space occupied by Google spans two entire blocks, amounting to 680,000 sq ft or 57% of overall NLA at MBC II. Google is the anchor tenant there.

The number of tech firms announcing large-scale layoffs has sent a chill across the office sector. Fears are that they could derail the post-pandemic recovery. Meta, the parent company of Facebook, will shed 11,000 staff worldwide (13% of its headcount). Amazon is thinning its global headcount by 20,000. Twitter, has reduced the company’s headcount by 66%. Microsoft, Stripe, and Salesforce have axed 1,000 staff, respectively, while Cisco laid off 4,100 globally. Hewlett-Packard is offloading 4,000 to 6,000 employees by 2025. Alphabet, Google’s parent company, is looking to gradually retrench 10,000 “poor performers” via a new performance ranking system. That is 5.3% of its 186,779 staff worldwide.

According to Layoffs.fyi, a layoffs tracker, 144,554 employees globally have been let go from 916 tech companies this year, as of Dec 6, 2022. From July to mid-November, the number of Singapore resident workers laid off from the tech sector totalled 1,270, Manpower Minister Tan See Leng told Parliament on Nov 28. Eight in 10 were in non-tech-related roles, such as sales, marketing, and corporate functions.

Douglas Dunkerley, director of office leasing specialists Corporate Locations, sees “two narratives” being played out in the tech sector.

On the one hand, Amazon has committed to leasing 370,000 sq ft or 11 floors at IOI Central Boulevard Towers, which is scheduled to open in 3Q2023. Amazon already occupies 100,000 sq ft of prime office space in Asia Square, another 45,000 sq ft in One George Street and 80,000 sq ft in Capital Square, according to Dunkerley. The tech giant may consolidate its real estate footprint at IOI Central Boulevard Towers when it moves in.

Beijing-based ByteDance, the parent company of TikTok, is taking up a further 80,000 sq ft in Capital Tower, space vacated by JP Morgan. ByteDance already occupies substantial office space in One Raffles Quay and Guoco Tower.

On the flip side, Sea, the parent company of e-commerce firm Shopee, has reportedly given up 200,000 sq ft of Grade-A office space at Rochester Commons. The newly completed, mixed-use development by CapitaLand Development includes a 135-room hotel managed by The Ascott and a 54,000 sq ft shared executive learning centre. Sea is now looking for a replacement tenant for the office space. The firm laid off more than 7,000 employees, or around 10% of its workforce, over the past six months.

According to sources, American video-on-demand streaming service, Netflix, has given up one of its two floors at Marina One West Tower. The space offered for sublease is said to be about 30,000 sq ft.

There have been a spate of office moves, with a mix of upgrading and rightsizing. Toyota Tsusho, the trading arm of Toyota Group, relocated from Parkview Square to lease a floor at OUE Downtown 2. Facility and building management company Sika Asia Pacific Management is relocating from Robinson Point to a whole floor in One Raffles Place Tower 1. Burger King Asia Pacific is moving its regional headquarters from UIC Building to Manulife Tower. Alcoholic beverage company Diageo is rightsizing from One George Street to take up half a floor at Ocean Financial Centre. The other half-floor is now occupied by global media and tech company NBC Universal, which rightsized from International Plaza.

Summary of office space likely to be given up

This year, new supply in the CBD comes from two buildings. One is the completed redevelopment of Hub Synergy Point, a 27-storey tower with 118,000 sq ft located at the corner of Anson Road and Enggor Street. It opened in August. The other is the upcoming Guoco Midtown, a 30-storey office tower with 770,000 sq ft of premium office space which is scheduled to be completed by the end of 2022. Guoco Midtown has received strong interest from companies and has achieved 75% pre-commitment take-up of its office space to date, says GuocoLand. Tenants are said to be diverse, ranging from technology firms to consumer brands, banking and finance, reinsurance, energy, maritime and professional services.

In 2023, IOI Central Boulevard Towers is due for completion. It is a Grade-A office development in the CBD. The 1.26 million sq ft space is about 30% pre-leased.

The other two office developments to be completed are outside the CBD. One of them is the office component of One Holland Village mixed-use development with 80,730 sq ft floor space. The other is Surbana Jurong’s new headquarters with about 741,801 sq ft of office space at Jurong Innovation District. 2024 will see the completion of the redeveloped Keppel Towers (618,000 sq ft), 333 North Bridge Road (40,000 sq ft) and Labrador Tower (686,000 sq ft). Certis Paya Lebar is targeted for completion in 4Q2022 and will yield about 220,000 sq ft of Grade-A office space. Shaw Tower (435,000 sq ft) is flying solo in 2025.

According to Tricia Song, CBRE head of research, Southeast Asia, the supply pipeline is equivalent to an annual average of 1.23 million sq ft, which is 14.8% lower than the historical 10-year annual gross completion of 1.45 million sq ft. She expects rents in the prime office space in the CBD to be propped up by tight vacancy rates, below-historical average new supply over the next three years, and solid market fundamentals.