Office rental contract values down but leasing volume up in Singapore 

Tenants are renegotiating rents and reducing office spaces instead of vacating them.

The continuity of economic recovery in the domestic sector was broken by the imposition of tighter restrictions in May. According to Savills, even though Singapore’s economy saw a robust growth of 14.3% YoY in Q2/2021, it was due to the low base last year when there was a non-essential business lockdown. Compared with the preceding quarter, the economy contracted 2.0% in Q2/2021, a reversal from the 3.1% expansion in Q1/2021. 

In the face of additional pre-emptive measures since May, Savills says workplace capacity was reduced to 50% and eventually work-from-home (WFH) became the default. Despite the gradual reopening to Phase 3 (Heightened Alert) from June 14, WFH remains the default arrangement to keep transmission risks down. 

“Notwithstanding that, many are still contemplating implementing flexible work arrangement in the long run. With that, office leasing activity picked up from a year ago alongside more rental renewals in Q2/2021. Notably, many firms renewed their office leases because they either do not have any fit-out budget or given a very austere one.”

Here’s more from Savills:

Rather than giving up their office space, most existing tenants are re-evaluating their leases to right-size their office footprint. As firms renegotiate their rents and reduce their office space, the total value of rental contracts shrunk in Q2/2021 from the same period last year, albeit leasing volumes were higher.

In the Central Area, the number of leasing transactions in the <100 sq m size category made up 41% of all leases in Q2/2021. In Q1/2021, the percentage was 35%. For larger unit sizes, >1,000 sq m made up 5% of total leasing volume, down from the 7% recorded in Q1/2021. Apart from the existing lease renewals, the leasing market is also supported by some new demand driven by Chinese and tech companies, who are still coming and taking up space here.