Due to COVID-19, many businesses have experienced uncertainties and even froze hiring or had to retrench. Onboarding digital technologies to enable remote working has also been a priority in the past few months. Certain sectors have also seen their growth accelerated by years in the space of a few months.
All this has made reconsidering your office requirements a topic.
For Businesses Onboarding Digital Technologies To Reduce Physical Office Requirements
Some businesses are leveraging on digital technologies to enable work from home. Just like many hip businesses, like Twitter and Microsoft in the US that have implemented work from home forever policies, many Singapore businesses are embracing such work arrangements.
Some companies may downsize their office, not requiring all employees to be in all the time. Some companies may leverage on co-working spaces to give them the flexibility to enlarge or compress their on-site employees fluidly.
DollarsAndSense is working entirely remotely, requiring a once-a-week physical huddle to discuss our editorial ideas and review our performance. The rest of our communication is done through a daily morning huddle and via texts or individual meet-ups when required. We don’t actually need an office space anymore, but still require some space to bring the team together when we need.
Businesses letting employees work remotely can also mean allowing them to work from alternative office spaces of their choice – which may include hot desks, hotel facilities, work-friendly cafes and lounges. Implementing such an arrangement can mean these businesses no longer require an office space at all. At DollarsAndSense, most of us have an acceptable space in our home except for one colleague. She gets to rent a desk at a co-working space to help her.
For Businesses Expanding Their Office Requirements
Some entrepreneurs we’ve spoken to are expanding, riding on the digitalisation wave as they grow their service offerings and workforce. The need for even more space may be urgent to accommodate a growing employee base as well as due to safe distancing measures requiring demarcated space for individual employees.
Some offices may no longer be suitable either as open-plan offices lose their lustre too.
There Are Many Businesses In Hiring Freeze Or Scaling Down
Of course, for companies that are having to shed employees, they no longer require such a large office space. Furthermore, scaling down their office rents may be crucial to such companies staying lean and overcoming the downturn.
Earlier in the year, the government intervened to compel landlords to provide rental rebates to their tenants, especially those who have suffered the most in the hardest-hit industries. This was through the COVID-19 (Temporary Measures) Act. Going forward, discussions have begun in parliament about another round of amendments to the act to help small businesses. This will likely include the ability for businesses to renegotiate terms for their leases and potentially allowing them to break contract without penalty if they cannot afford rents.
Prices Are Down From Last Year
Whether you are renegotiating rent prices or whether to continue at all, it may be worth noting that office space price has come down since 2Q2019. According to URA’s 3rd quarter 2020 real estate statistics, the office rental index has dropped nearly 10%.
At the same time, office supply expected in 2021 is also quite healthy. Coupled with rising vacancy at about 12.0%, this will provide more competition for office prices in 2021.
For businesses with retail space requirements, rentals are at a 5-year low. Meanwhile, supply is expected to continue to be healthy while vacancy rates are on the rise – up to 5-year highs as well – which may further depress prices in 2021.
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