The office leasing market in the central business district has seen a greater diversification in tenants over the past 12 months.
Property consultants say that as financial institutions continue to rationalise their real estate costs, others such as dotcom companies are expanding in prime city locations to attract “Gen Y” talent.
Unlike those in other cities, tech companies in Singapore are located in prime business locations, which analysts say is quite uniquely Singapore.
“The growth is pretty aggressive,” said Marcus Loo, executive director of office services at Colliers International.
“For example, Google have taken 200 odd thousand square feet in Asia Square and they are poised to take probably 20-30 per cent more space in the building. LinkedIn has just done a deal at MBFC (Marina Bay Financial Centre) of two floors, that’s about 45,000 square feet.
Analysts say that other than dotcom companies, firms in the insurance sector are also leasing prime office space in the CBD.
According to consultancy CBRE, office demand from the financial institutions has not been as strong. Last year, such demand accounted for under one-third of the leasing transactions over 30,000 square feet, compared to more than half in 2010.
Colliers International estimates that financial institutions take up about 11 million square feet of office space islandwide, about 16 per cent of the total existing stock.
“Based on CBRE estimates, we had close to 2.1 million square feet of take-up space last year and that’s very encouraging,” said Desmond Sim, head of research at CBRE.
“We saw the tenant profile in Marina Bay and Raffles Place becoming more diversified. For example, we had Lego, the toy manufacturer, taking up close to 30,000 square feet in MBFC. We have Mead Johnson, the baby milk and nutritional pharmaceutical company, taking up space and more recently, we have bookings.com.”
Analysts say the average monthly rental rate for Grade A office buildings in the CBD is around S$12.50 per square foot — about three times more than those in the suburban areas. However, tech firms are willing to pay more in order to attract talent.
“CBD offers the company the opportunity to hire the best and brightest,” said Mr Loo.
“We are talking about tech firms who need to hire staff that belong to Gen Y, and in the Gen Y profile, they would rather work in a convenient location for a good brand in a nice building versus going out to a suburban location.”
Looking ahead, analysts say banks will continue to be a dominant occupier of office space in Singapore.
But demand from the tech sector is expected to grow further as companies are drawn to the talent pool in the region.
Source : Channel NewsAsia – 29 May 2014