The supply of new office spaces in the CBD is expected to be frontloaded with IOI Central Boulevard Towers coming into market in 1Q 2024. The rise of hybrid work is reshaping office space requirements, prompting developers and landlords to leverage the CBD Incentive (CBDI), as seen in mixed-use developments such as 8 Shenton Way (formerly AXA Tower) and Newport Plaza (formerly Fuji Xerox Towers), and Strategic Development Incentive (SDI) Scheme to redevelop and rejuvenate their older assets. This will further contribute to the tightening of office supply in the CBD. While the CBDmarket currently has the largest quantum of office stock, new supply is slated to be outside the CBD as the government focuses on decentralisation. A key area of interest is the Jurong Lake District, which is strategically planned to be the largest business district outside the CBD. The government has released a “white site” in Jurong Lake District under the 1H 2023 government land sales (GLS) Programme. With a potential to yield about 1.6 million sq ft GFA of office space, along with other complementary uses including retail and residential, this marks the largest GLS office space supply since 2016, and the largest in a decentralised location. The proposed integrated development will be progressively completed over the next 10 to 15 years. The scalability and new development design concepts could potentially be a unique selling point for occupiers, and the location could offer cost advantages with the right execution and target occupier groups. With the redevelopment of older office stock into mixed-use developments and more urban renewal projects expected in the next few years, coupled with limited new supply under the GLS scheme with the government’s focus on decentralisation, the mid and long-term CBD office stock is expected to remain limited. Demand and Vacancy Despite economic headwinds, office demand remained sustained in 2023, albeit with a slower growthmomentumas compared to the strong rebound experienced in 2021 and 2022. The office market observed some degree of demand on the back of limited supply and a steady absorption of shadow spaces. Over the course of 2023, the amount of shadow spaces continued to decline from the peak of 0.7 million sq ft in 1Q 2023 to 0.2 million sq ft in 4Q 2023. Aside from the absorption of such spaces, some shadow spaces were also taken off the market as tech occupiers decided to retain their office spaces. Meanwhile, shadow spaces in prime areas like Marina Bay and Raffles Place attracted occupiers seeking high-quality, fitted office spaces. For most of 2023, demand was mainly contributed by private wealth and asset management companies, law firms, professional services and government agencies. Despite pockets of rightsizing, some degree of renewal and expansion activity was observed across various sectors. In the coworking space, despite recent headlines of WeWork filing for bankruptcy in the US, the operator announced that its operations in Singapore will not be impacted. Other flexible workspace operators were also undeterred and continue to potentially expand their presence within the CBD. Flight-to-quality and flight-to-green are other trends that have held steady, as workplace-led changes have encouraged more relocations and adjustments to more efficient footprints. Such demand was prevalent in the privatewealth, asset management, and consumer goods sectors. The increasing back-to-office momentum has also contributed to the heightened demand for office space, with many companies mandating their employees to return to the office for more days in the work week in 2023. While some occupiers have MAJOR FUTURE OFFICE SUPPLY (2024 – 2026) 2024: (2.3 million sq ft) 2025: (1.0 million sq ft) 2026: (0.2 million sq ft) CBD Core • IOI Central Boulevard Towers: 1,258,000 sq ft • N.A. • Solitaire on Cecil (PIL Building Redevelopment): 196,500 sq ft CBD Fringe • Odeon 333: 39,800 sq ft • Shaw Tower Redevelopment: 435,000 sq ft • Keppel South Central: 613,500 sq ft • N.A. Decentralised Area • Labrador Tower: 696,800 sq ft • Paya Lebar Green (Certis Paya Lebar Redevelopment): 320,900 sq ft • N.A. • N.A. Source: CBRE, 4Q 2023 Note: As at 31 January 2024 Overview Leadership Performance Framework Other Information ANNUAL REPORT 2023 101
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