More CBD offices, fewer CBD homes, less decentralised office stock
[SINGAPORE] While many premier office buildings are clustered in Singapore's bustling Central Business District (CBD), there are established decentralised office nodes islandwide in areas such as Alexandra Road, Buona Vista, Jurong, Novena, Paya Lebar and Tampines.
However, the growth of decentralised office locations suffered a blow when the Urban Redevelopment Authority (URA) did not award the master developer white site at Jurong Lake District (JLD).
Developing the 6.5 hectare JLD site was envisaged to yield at least 1.5 million square feet (sq ft) of office space, up to 1,700 homes, and close to 800,000 sq ft of space for other uses such as retail and food and beverage; and help propel the development of Singapore's largest business district outside the CBD.
A five-party consortium – comprising CapitaLand Development, City Developments Limited , Frasers Property , Mitsubishi Estate and Mitsui Fudosan (Asia) – submitted two concept proposals for the JLD site.
However, in September 2024, URA said while one proposal was shortlisted, the tendered price – which worked out to about S$640 per square foot (psf) per plot ratio – was deemed to be too low.
Certainly, other parties can try snagging the JLD white site with a suitable proposal and a higher bid price or the five-party consortium could submit a higher bid for the site.
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However, as uncertainties over US trade tariffs weigh on business outlook and economic growth, chances that a group will try to secure the mega site with a stronger bid appear slim.
Perhaps, the authorities should rethink whether the JLD site needs to have a large office component and if it should push hard on developing decentralised office locations.
Sure, transport connectivity at JLD will be good. Still, some residents living in the east may be reluctant to spend possibly more than an hour commuting by public transport to work at JLD.
Working in the CBD
Indeed, the CBD's pre-eminence as Singapore's choice office location may impede the development of decentralised office locations.
One, as the CBD is centrally located, residents living all over the island can easily access it. Thus, a business located in the CBD is well-positioned to draw talent from all across Singapore.
Two, the CBD is an established business location. Maintaining a CBD office can provide an entity credibility with potential employees as well as business partners at home and abroad.
Three, it offers businesses easy access to various businesses and professional services. Also, CBD-based knowledge workers find its location convenient for networking with industry peers.
Four, the CBD is hardly sterile. It has Michelin-starred restaurants, popular hawker centres, cafes, bars, gyms, recreational amenities, retail outlets, as well as a range of hotels and cultural spaces.
On weekends, when the office crowd disappears, the CBD can transform to host sporting and other events.
Certainly, decentralised office locations may tempt businesses with lower rents versus the CBD. However, rental might not be an overriding consideration for many businesses when choosing an office location. After all, businesses may prefer being in the CBD to better draw talent and for prestige.
Crucially, if companies and knowledge workers like working out of the CBD, the government should consider selling more CBD office sites. Could a CBD office site be on the confirmed list of the government land sales programme for the second half?
Singapore's CBD office market recovered well post pandemic and is still seeing positive momentum. Amid flight to quality with space users, CBD Grade A spaces have outperformed.
Following four consecutive quarters of flat rental growth, core CBD Grade A office rents here rose 0.8 per cent from the previous quarter in Q1, as gross effective rents in this most-coveted subsector reached an average of S$12.05 psf per month, consultancy CBRE indicated.
It noted that top corporations and companies in private wealth asset management showed a strong preference for office spaces in prime locations with premium specifications.
While CBRE's research team was cautious about global trade conflicts and tariffs, it projects core CBD Grade A office rental growth of 2 to 3 per cent this year mainly due to limited supply.
Raising the supply of high-quality CBD office spaces can help meet the need for such spaces and boost Singapore's competitiveness in attracting businesses to set up shop or expand operations amid a tough business climate.
Businesses looking to house high-value functions here might welcome greater choice of efficiently planned, modern and sustainable CBD work spaces, and more competitive rental rates for premier CBD office spaces due to greater supply of such spaces.
Moreover, if CBD office stock increases, businesses seeking to operate from multiple locations for risk management purposes can find it easier to be at multiple locations within the CBD.
Living outside the CBD
Concurrently, the government may wish to pause ambitions to grow housing inventory in the CBD.
Locals may be lukewarm to living in the CBD. And the popularity of long-stay serviced apartments in the CBD, with a three-month minimum stay requirement, is uncertain.
Given Singapore is small and has excellent public transport, many people working in the CBD seem fine living outside of it in more established residential enclaves.
Families with children might choose neighbourhoods that are close to sought-after schools. Childless households could prefer locales that offer a more residential rather than office vibe for lifestyle reasons.
Over recent months, numerous homes at One Shenton and The Sail @ Marina Bay in the CBD, with initial 99-year land leases, were transacted at under S$2,000 psf. In contrast, the capital values of premier office buildings nearby, with initial 99-year land leases, can be much higher.
Sure, the CBD is livelier on weekends if more people live in it. Nonetheless, Singapore can be great for 'live, work and play', with many people working in the CBD but living outside of it.
Singapore can aspire to have a vibrant office-centric CBD, alongside highly liveable housing-centric suburbs. Growing the CBD serves evolving workspace needs, while going slow on office decentralisation and building homes in the CBD ensures land use is optimised according to the preference of space users.
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