Singapore office market two years post-pandemic

The COVID-19 pandemic prompted companies to significantly re-evaluate their workplace strategies. Initially, as the pandemic started to subside and employees began returning to the office, there was a strong expectation that hybrid working models and a shift towards a decentralised work environment would define the future of work. However, two years on, the landscape has evolved once again.

With the rise of hybrid work, many firms have observed a decline in organisational culture, team cohesion, and innovation capabilities. This has led them to revert to the full-time office-based work model.

JLL's latest The Future of Work Survey 2024 reveals a near-even split between organisations favouring hybrid work models and those expecting full-time office attendance. It shows that 44% of organisations are office advocates, while 56% are hybrid adopters. This represents a shift from 2022 when only 34% of companies favoured full-time office work.

Amazon and Grab are among the office advocates that have recently announced mandates for employees to return to the office five days a week. They join Goldman Sachs, Salesforce and Tesla, which have earlier implemented stricter return-to-office policies.

Contrary to earlier expectations, the trend of working closer to home did not gain much traction post-pandemic in Singapore. Employees continue to be drawn to centralised, vibrant office locations, appreciating the social interactions. As a result, companies still prioritise the connectivity and accessibility of Central Business District (CBD) locations, recognising them as strategic advantages for attracting and retaining talent.

Moreover, with restructuring and right-sizing, some companies now require a smaller footprint. This allows them to move to buildings within or closer to the CBD while staying within the budget.

The current availability of space, coupled with the insufficient rental gap that would otherwise encourage companies to stay in the decentralised area, has also driven the return to the CBD. This trend has been further reinforced by the recent decision not to award the Jurong Lake District (JLD) master developer site, which has somewhat stalled Singapore's decentralisation plans.

Demand for office space is anticipated to increase in 2025, driven by sustained economic growth, a more favourable interest rate environment, and a growing return-to-office trend. The current availability of office space offers occupiers opportunities for expansion and upgrades before supply tightens between 2025 and 2027.

This tightening supply is further compounded by the expected withdrawal of several office buildings over the next few years. This is due to impending redevelopment and refurbishment works, driven by various incentive schemes. Also, the expiration of transitional office sites previously sold on 15-year leases between 2007 and 2011 is contributing to the tightening supply. Furthermore, in pursuit of yield accretion, more investors are adopting value-added strategies, converting existing office spaces into alternative uses such as co-living facilities, commercial schools, and medical suites. This is further reducing the available office space in the market.

While an uptick in new supply in 2028 may offer some relief, the decision not to award the JLD master developer site has intensified concerns about another potential supply crunch beyond 2028. This situation highlights the need for occupiers to act strategically in securing suitable office space in the near term.

Figure 1: Island-wide office potential supply

Source: JLL Research