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Majority of tech firms leasing office space in CBD

SINGAPORE — Reflecting the strong performance of technology companies, a report by property research firm CBRE has found that a vast majority of these companies have snapped up space in the Central Business District (CBD) since the first quarter of last year.

SINGAPORE — Reflecting the strong performance of technology companies, a report by property research firm CBRE has found that a vast majority of these companies have snapped up space in the Central Business District (CBD) since the first quarter of last year.

Around 80 per cent of net office take-up by these companies was in the area, helped by the large volume of new supply and substantial rental discounts. The Asia Pacific Technology Sector Trends report, released on Thursday (Dec 7), revealed that companies operating in the transport, financial technology (fintech) and online payment sectors have been most active in securing and enquiring about office space in general.

It also noted that tech companies remain “one of the main drivers of new and expansionary demand in the Singapore office market”.

Tracking transacted office leases since the first quarter of 2016, CBRE said that the bulk of leasing activity in recent quarters has been concentrated in the CBD area.

Location continued to play a key role in attracting and retaining talent, and the research firm projected that “the war for talent” would continue to shape tech firms’ corporate real estate requirements next year.

Over the past 12 months, some of the notable leasing deals included transactions by LinkedIn and Grab.

GrabTaxi for example, took up 100,000 sqf of office space at Marina One, while tech company Wirecard relocated to a 25,000 sqf unit at Mapletree Business City II in Pasir Panjang.

To date, the largest leasing deal this year was made by an American social media firm, which took up about 300,000 sqf of space also at Marina One.

Mr Michael Tay, executive director of CBRE’s office services, said: “(The) expansion is being fuelled by the need to gain first-mover advantage as well as to consolidate market share in Singapore and South East Asia.”

However, he also said that in the short term, the pace of growth may slow “following the exponential growth seen in the last 24 months”.

The research firm foresees that leasing demand will be focused on properties offering comprehensive amenities and smart building technology, as opposed to those located in “the most prestigious locations”.

Business parks remain a viable option for tech firms, and newer and “higher quality developments” in one-north and Mapletree Business City are receiving the most interest because they fulfil both “locational and quality requirements”, the report noted.

Commenting on the findings, Ms Christine Li, director of research at Cushman and Wakefield, said that tech companies still prefer being in the CBD because of their “strong emphasis on talent acquisition and retention”.

“This is essential in a tight labour market such as Singapore, where unemployment rate continues to hover around 2 per cent. Some tech tenants may also be motivated to upgrade to better locations in a bid to attract talent, as millennial workers seem to prefer prestigious office addresses and funky office spaces.”

In the report, CBRE also mentioned that tech firms in the Asia-Pacific region tend to incorporate “cutting edge technology” in their office space. For example, “smart parking” supported by mobile applications help employees find the “best parking spot”, and “one-stop apps” enable employees to book meeting rooms. Wellness features are also popular, with some tech firms’ headquarters designed as “self-sufficient towns” that include fitness facilities such as gyms, running tracks and swimming pools.

As for signs that there may be an upswing in the office market, ERA Realty’s key executive officer Eugene Lim believes that it could be headed that way.

He noted that the rental index for office properties increased by 2.4 per cent in the third quarter of this year, compared with the 1.1 per cent decrease in the second quarter. “This has widely been read as the beginning of a recovery in the office market,” Mr Lim said.

He estimated that as the supply of new office space dwindles from next year onwards to 2020, rental prices may probably go up before tapering off when the next wave of new supply comes in 2021.


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