Banks’ job cuts cast a pall over CBD rents

Can startups save the day?

Big banks used to lord over Singapore’s Central Business District (CBD), but a slew of painful job cuts at multinational finance firms means that office landlords will have to settle for lower rents as their key tenants grapple with escalating economic headwinds.

A report by DTZ showed that monthly office rents in the CBD declined for the third consecutive quarter in Q1, falling by 3.9% q-o-q to $9.90 per sq ft.

The unabated slowdown could be attributed to the continued weak performance of the services sector, particularly in financial services.

By the end of 2015, the number of workers made redundant in the financial services sector rose by 33% y-o-y to 1,710 from 1,290 in 2014.

Among the financial institutions that reported job cuts included Royal Bank of Scotland, Barclays, Standard Chartered, CIMB and Goldman Sachs.

Other companies such as Credit Suisse and Deutsche Bank have initiated job cuts globally and Singapore is unlikely to be immune to the structural headwinds.

DTZ said that as large banks continue to downsize, office demand will be supported by firms in insurance, technology, social media and serviced office providers for the rest of 2016.

“More start-up companies will be formed as they leverage on the mobile and internet platform, and take advantage of government schemes and initiatives,” said Cheng Siow Ying, DTZ Executive Director of Business Space.

“These start-up companies prefer to locate in the CBD or established business clusters to attract and retain talent as well as to be close to their clients. Such co-working space becomes a viable option as it provides them flexibility in structuring service agreements attuned to their business needs,” she added.