Office occupancy heats up as businesses return to the office

Employees may soon see themselves working from home only once a week.

Business occupancy in the Central Business District swelled by 93.9% in Q1 2021, as business leaders prepared to get back to the office according to Knight Frank.

According to the real estate consultancy, prime Grade office rents in the Raffles Place / Marina Bay precinct continued to decline in the first quarter of 2021, falling moderately by 1.0% QoQ to $10.06 per square foot per month (psf pm). Downward pressure on rents was nullified by committed occupancy at about 94.2% for prime offices in the precinct.

The increase in shadow space also showed signs of slowing in Q1 2021 with an estimated 344,000 square feet. This had initially risen from 170,000 square feet in Q2 2020 to 330,000 square feet by the end of 2020. Given the improving economy, pre-termination space is expected to taper off and start to fall in 2021.

Knight Frank said that despite the enforced period of remote working in the past year, business leaders were increasingly cognisant that productivity from working in the office could be higher, as critical face-to-face interactions facilitate better overall outcomes.

“Therefore, as telecommuting winds down with the government allowing more to return to the office from Q2 2021, the balance of time spent working from home (WFH) is expected to decrease and stabilise at around 15%-25% of an average employee’s workweek, depending on the nature of the industry and the worker’s profile. The need for office space remains central for functions where co-mingling is paramount for collaboration and workplace productivity, especially in sectors such as the technology industry,” KF said.

Technology companies from China continue to drive the demand for office spaces. Knight Frank said that with Singapore’s management of the pandemic, the wealth management industry is also expected to contribute to this demand.

“With the easing of WFH rules and as businesses rally employees back to the office to gear up to retake ground lost to the pandemic, the decline in office rents will be more benign in 2021, easing by about 5% before bottoming out late in the year and recovering in 2022,” Knight Frank said.