Financial firms have been forced to limit workspace attributable to the pandemic, and “that is probably not an awesome thing,” said Alan Miyasaki, head of foreclosures in Asia at Blackstone. “But that position was filled quickly because a lot of tech companies were coming in.”
US and Chinese tech giants are benefiting from Singapore’s position as a gateway to Southeast Asia’s 650 million smartphone-savvy population.
Amazon is taking on three floors of which Citigroup is giving back, while ByteDance, parent of TikTok, is leasing three floors at One Raffles Quay. Alibaba, the parent company South China Morning Mailbought a 50% stake in an office tower in Singapore in a deal that valued the property at A$1.7 billion (US$1.3 billion).
Savills and Knight Frank analysts estimate that others may follow suit, including Indonesian start-ups Gojek and Traveloka and South Korea’s Coupang. The buzz around tech firms within the region is growing, with Singapore’s Grab set to go public on the US stock exchange in a deal that values the startup at $40 billion.
“We expect technology companies to remain a key driver of office demand in the near and medium term,” said Tay Huey Ying, director of research and advisory at JLL Singapore.
The tech invasion has to this point had a limited impact on the scene within the financial district, where smartly dressed office staff remain the norm. But at one-North, a business park home to firms akin to e-commerce giant Sea, there are signs of what’s going to occur if more tech firms arrange bases in town center. The area is bustling with activity, mostly with younger staff wearing T-shirts and baseball caps.
According to Savills, an analogous trend can already be observed within the UK. Technology and media firms accounted for 40% of office leasing within the City of London last month, probably the most of any sector. Over the past nine years, banks have reduced their footprint in London by about 6 million square feet, the equivalent of a dozen Gherkin skyscrapers, in accordance with broker CBRE.
Easy access to financing for technology firms, including start-ups, makes Singapore a beautiful destination. To attract the world’s top talent, last November the federal government launched a program providing a two-year visa to entrepreneurs and investors within the technology industry.
Its famously low taxes, ease of doing business, political stability and access to talent also attract foreign firms, said Mark Addy, a partner at KPMG in Singapore.
Rents in Singapore are showing signs of recovery after falling through the pandemic-induced recession. According to data from the Office for Urban Renewal, the office occupancy rate increased by 3.3 percent in the primary three months, the primary increase in seven quarters. The two-month lockdown contributed to an 8.5% decline in 2020.
Buoyed by demand from tech firms, rents are more likely to bottom this yr before rising in 2022, in accordance with Calvin Yeo, director of corporate real estate at Knight Frank.
Lower supply of office space may additionally end in a rise in rents. There will likely be a limited amount of gross latest inventory coming in between 2021 and 2023, and a few older buildings will likely be demolished or earmarked for redevelopment, said a spokesman for CapitaLand Integrated Commercial Trust, owner of six office buildings within the financial district. The supply of office space will decline even after most redevelopments are accomplished, so rents should increase over time, the spokesman added.
This bodes well for investors like Blackstone, which is looking to speculate in additional real estate in Singapore to capitalize on growing demand from the tech sector.
Developers aren’t panicking either. Banks have been adapting their operations because the 2008 financial crisis and so long as Singapore stays a profitable place to do business, there will likely be demand for offices, said a spokesman for CapitaLand Integrated Commercial Trust.
“Singapore, unlike the political unrest in Hong Kong, is an oasis of calm,” said Justin Tang, head of Asia research at United First Partners.
Banks will simply have to supply their playground. “The pandemic has accelerated the spread of technology in our daily lives,” Tang said. “The growth of technology companies is inexorable.”
