Singapore New Office Leases Drop by Half as Companies Cut Costs

Central business district of Singapore
A pedestrian walks through Esplanade Park as commercial buildings stand in the central business district of Singapore. Photographer: Nicky Loh/Bloomberg

Singapore’s new office leases declined by more than half as tenants such as Barclays Plc gave up space, while companies including Google Inc. moved out of prime office districts to cut costs.

The proportion of new leases dropped to 6 percent of all signed in the first six months from 15 percent a year earlier, according to the latest figures compiled by commercial-property broker Cushman & Wakefield Inc.

“Companies have become less optimistic about the outlook,” said Sigrid Zialcita, managing director of Asia-Pacific research at Cushman in Singapore. “There are a growing number of tenants gravitating to non-core, Grade-A buildings and business parks due to lower rents and ample space options.”

The city-state’s economy, heavily reliant on exports, is staring at a rough patch. Exports fell for the first time in three months in May and business costs have been rising since the government slowed the inflow of foreign workers in 2010. Employment shrank in the first quarter as manufacturing and construction jobs fell.

Chief financial officers in Singapore are the most pessimistic in the region about profits this year, according to a survey by Bank of America Merrill Lynch. In the poll of 630 CFOs, 53 percent of those in the city-state said they expect earnings to decline in 2015.

Cushman estimates a combined 869,000 square feet of prime-office space, which commands higher rents, will become available as financial services firms move out of the central business district over the next six months.

Moving Office

More than 300,000 square feet was vacated by new technology firms in the year ended March, the broker said. Companies said lower rents gave them flexibility to expand and freed up capital for other expenses or for hiring, it said.

Google is moving to Mapletree Business City II, a business park on the city’s fringe, from Asia Square Tower 1 in the CBD, cutting the rent by half, Cushman said.

Banks including Barclays, Standard Chartered Plc and Credit Suisse Group AG are consolidating operations in existing offices.

Standard Chartered gave up four of its 24 floors at Marina Bay Financial Centre as it sought to bring together workers from eight locations to two main offices at Marina Bay and Changi Business Park, according to Nick Hughes, head of corporate real estate services for Singapore and the ASEAN region.

Barclays, Credit Suisse

Barclays will vacate two of its three floors at One Raffles Quay South Tower when its lease expires next month and move employees to its offices at Marina Bay Financial Centre Tower 2, John Mcguinness, a spokesperson for the bank said.

Credit Suisse is bringing together operations from multiple sites to two main locations -- One Raffles Link in the CBD and ONE@Changi City on the outskirts -- that will accommodate the majority of its Singapore-based staff, a move the bank flagged in 2011 when it set up the Changi office.

Office rents peaked in the first quarter as Singapore’s economic growth showed signs of tapering.

Grade-A office rents in the CBD could slide 14 percent over the next two years to S$9.12 per square foot a month from S$10.60, Cushman estimates, as 4 million square feet of prime office space will be added next year.

“What’s contrasting is that more than half the relocations this year were a flight to value, where companies signed up contracts in cheaper buildings,” Zialcita said. “This is a big turnaround from 2014, where flight to quality was the main theme driving office leasing, with 71 percent of the space signed up in newer and more expensive buildings.”

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