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With companies delaying relocation and expansion plans amid the Covid-19 crisis, Singapore’s office market saw prime grade rents drop 1.1% quarter-on-quarter in the first quarter of 2020, revealed a Knight Frank report.
The drop in rent was moderated by high occupancy rates of more than 90%. The Raffles Place/Marina Bay area, for instance, posted an occupancy rate of about 96% in Q1, which is down 0.6% percentage points from the previous quarter.
While most companies are expected to put expansion and relocation plans on hold in the immediate term, demand in the mid-term could come from companies that are less affected by the crisis, said the property consultancy. These companies would take the opportunity to relocate to quality spaces in case rents fall to opportunistic levels.
Medium-term demand for older well-maintained office space, on the other hand, could come from companies needing to downsize to lower rental cost.
“However, overall space take-up in the longer-term post-Covid-19 could be more muted, as companies are now attuned to teleworking from home and becoming future-ready, reducing their core space requirements by not having all teams work in the office within a week,” said the report.
Given the uncertain economic outlook and the Covid-19 crisis, Knight Frank expects occupancy rate to fall by about 5% this year, while prime office rents are expected to drop by around 5% to 10%.
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Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email victorkang@propertyguru.com.sg