AS TECH companies and startups continue to make public their plans for remote work, market watchers remain optimistic that the technology sector will not downsize offices.
They predict that tech firms will continue to be a key driver of prime office space demand in the central business district (CBD) over the next few years.
“Singapore’s CBD is a traditional favourite among tech firms and in recent times this sector has been a key contributor to office demand,” said Andrew Tangye, head of office leasing at real estate firm JLL Singapore.
He believes that despite Covid-19, the sector will continue to drive demand for office space in the CBD since there is currently a limited supply of quality office space in decentralised areas.
“The other reasons for the CBD’s popularity as a choice location among tech companies include its accessibility and connectivity, the abundance of amenities, modern and good quality office space options, as well as the ease of attracting and retaining talent,” Mr Tangye said.
According to a 2019 Colliers International report, tech companies and co-working spaces have accounted for most of the net absorption in the CBD over the past few years.
As of June 2019, the technology, media and telecommunications (TMT) sector has taken up about 21 per cent of the Grade A micro-market in the Shenton Way-Tanjong Pagar district, as well as 12 per cent of the premium and Grade A office space in the CBD.
According to Colliers International, rent prices in the Shenton Way- Tanjong Pagar district are forecast to rise the fastest among its defined micro-markets, with a five-year compound annual growth rate of 3.7 per cent. Nevertheless, the amount of space tech companies will take up in these areas is set to increase. Strong earnings growth of technology companies should boost office demand, and mitigate declines from other sectors, the report said.
Market watchers say this could be due to the ample liquidity in the startup scene, driven by huge funding rounds and a robust entrepreneurial scene. As startups and investor communities grow and become more sophisticated, part of their strategy for positioning could include an office in the CBD as well.
For example, ride-hailing giant Grab currently has four offices in Singapore, which include a two-storey 80,000 sq ft research and development centre in the Marina One complex, right in the heart of Downtown Core. Its other offices are at Midview City, Cecil Street and Guoco Tower.
These offices, such as Airbnb’s three-storey office at Cecil Street and Facebook’s massive four-storey office at Marina One, are commonplace among huge tech firms, which tend to gravitate towards Grade A buildings in the CBD, market watchers say.
Tricia Song, head of research at Colliers International, told The Business Times that the office will likely still be a mainstay for most tech companies, even with flexible remote working policies.
“It’s still too early to tell if work-from-home policies will reduce the total office space area companies need as they would need to carefully weigh how their space needs might change.
“Theoretically, telecommuting arrangements will reduce total office space demand. However, we also anticipate spaces to be less dense, driven by social distancing policies as well as a stronger corporate focus on employee wellness,” said Ms Song.
Carol Wong, Cushman and Wakefield’s head of workplace delivery in Asia-Pacific, echoes a similar sentiment: “There is no definitive answer currently as companies need to further evaluate if the way of work is going to be performed differently, whether the role of an office will evolve, and the needs from the different demographic of the employees will also be a factor to consider when deciding where to locate office space.”
“The pandemic could lead to a structural shift in the tech sector… This might also lead to a lesser take-up of space by tech firms in the future.
“If the majority of tech workers are not present in the office, tech firms might not find it necessary to be in the CBD entirely and more could relocate to decentralised areas,” she said.
As such, another alternative tech firms might consider would be to have a smaller core office in the CBD, while taking up additional working hubs closer to the heartlands, Ms Wong told BT.
These smaller satellite hubs, she said, could give employees a conducive work environment without having to travel for long distances; while optimising prime real estate space in the CBD for larger-scale meetings, discussions and collaborative efforts.