Singapore’s office market to bottom-out in 2021

Singapore’s office market is expected to bottom-out in 2021 and turnaround by 2022

March 01, 2021

Singapore’s office market performed better than expected in 2020 despite the pandemic. It is expected to continue on a path to recovery after bottoming out in the current year.

Although Singapore’s GDP registered its deepest post-independence contraction of 5.4% in 2020, CBD Grade A office rents fell by only 9.3% − a mere fraction of the 49.1% plunge that was recorded in the first four quarters of contraction during the Global Financial Crisis.

Figure 1: Singapore CBD Grade A Office Rents and GDP Growth Rates

Source: Singstats, Ministry of Trade and Industry, JLL Research

Net absorption contracted in 2020, but we are optimistic that it will rebound in 2021 to support the bottoming out of rents by the year-end.

The key demand drivers for 2021 are:

  • With the progress in COVID-19 vaccine deployment and the gradual reopening of the global economy, the Ministry of Trade and Industry expects Singapore’s GDP to rebound and grow by 4% to 6% in 2021. Recovery will be led by players in the digital and green economy, such as technology, financial and professional services sectors, all of which are the main drivers of office demand.
  • Singapore Government’s continual efforts to help businesses and their workforce transform and reskill should also help existing enterprises emerge from the crisis stronger and support office space demand.
  • Singapore Government’s coordinated efforts to contain the COVID-19 outbreak led to Bloomberg placing the city-state as the world's second safest place to live during the pandemic, in its January 2021 COVID Resilience Ranking list. This has added to Singapore’s long list of accolades that include strong governance, high competitiveness and transparency. In turn, it has further raised corporate confidence to set up or increase their presence here, especially in the current uncertain times. Examples of companies setting up new offices or recently expanding in Singapore include Chinese tech giants, Tencent and ByteDance, US-based multinational hedge fund, Citadel, and the investment management firm, Hamilton Lane.
  • Singapore’s CBD is set for a major transformation as older offices make way for new developments that embrace flexible workspaces as well as the work-live-play offerings of the area. The redevelopment will also create greener buildings that cater to increasingly socially conscious occupiers.

Downside risks to demand for office space remain. For example, a year of COVID-19 has accelerated the remote-working trend as movement restrictions have forced people to work from home. An increasing number of Singapore companies are adopting flexi-work strategies and reducing their real estate footprint.

However, JLL’s recent Human Experience survey found that 76% of the employees surveyed still want the ability to go back to an office. A majority of them consider offices the best place for team building, connecting with management and solving work-related issues, and close to 40% expect a less dense office work environment.

Figure 2: Remote Work Expectations After COVID-19 (% of respondents willing to adopt each of the working patterns)

Source: JLL

Hence, the office will remain relevant in Singapore, although its role could transform from being just a place to work to becoming a place where employees gather to interact and collaborate. We expect more clarity on the COVID-19 impact on workplace strategy and office design to emerge as more occupiers take a position in 2021.