Three years ago, it was touted as a development that would rejuvenate Singapore’s central business district, but an upcoming building in the city-state could have fallen victim to the COVID-19 pandemic, which has upended the office market as working from home remains a long-term arrangement for some companies.
CapitaSpring, a 51-floor integrated development with JPMorgan Chase & Co as an anchor tenant, has only managed to secure about 38 percent of 62,600m2 of net lettable area.
That is low considering it is 75 percent completed. Typically at that stage, buildings would have leased out more than half of their space.
In another sign that the health crisis has hit the commercial property sector, CapitaSpring’s completion has been pushed back to the second half of the year from the first half. It is the only premium Grade A office development in the city’s central business district that is scheduled to finish this year.
CapitaLand Ltd (凱德集團), which jointly owns the building with CapitaLand Integrated Commercial Trust and Mitsubishi Estate Co, said that after including leases that are in advanced negotiations, the development is on track to receive more than 60 percent commitments by completion.
To date, committed office tenants are mainly from the legal, and banking and financial services sectors, CapitaLand said in a statement yesterday.
About 10 percent of the office space in the building has been set aside for flexible workspace. JPMorgan became its first anchor office tenant in 2018, and the bank is to take up seven floors.
The setback reflects how the pandemic has battered Singapore’s commercial property sector. While tech behemoths are expanding, banks such as Citigroup Inc and Mizuho Financial Group Inc are cutting back office space in part due to the success of work-from-home arrangements.
Prime-grade office rents in the Raffles Place and Marina Bay precincts contracted about 10 percent last year, Knight Frank LLP said.
Early termination of spaces continued to rise in the fourth quarter of last year to an estimated 30,658m2 from 24,155m2 in the third quarter.
The prospects are not bright this year. Knight Frank expects office rents in Singapore to decline by about 5 percent this year before bottoming out and recovering next year, it said in a quarterly report published on Monday.
That is not taking into account whether new virus strains could result in subsequent lockdowns. The property consultancy firm foresees lower net new demand for office space given that some companies have adopted a rotational remote working approach.
“The rethinking of traditional office space usage in an age of flexible work arrangements, and the casualties of the COVID-19 pandemic as the government withdraws business support measures will likely add to contractionary pressures for office space,” Knight Frank said in its report.
DBS Group Holdings Ltd (星展銀行) and United Overseas Bank Ltd (大華銀行), two of Singapore’s largest banks, have allowed employees to work remotely on a permanent basis, part of the major work-culture changes triggered by the pandemic.
In contrast to the office sector, Singapore’s residential housing market is holding up. Home sales rose the most in six months last month, signaling that the market has weathered the recession. Authorities might be considering another round of measures to cool residential prices, analysts have said.
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