The issues confronting Hong Kong over the past five months have caused corporates to begin to consider alternatives. In the office market, questions are being asked as to whether companies in Hong Kong are planning any wholesale or partial relocations to Singapore. Whether this will or will not happen will clearly have a significant impact on the performance of our local office market in 2020. 

Over 2017 and 2018, the supply of CBD Grade A offices picked up quickly. Net supply averaged 2.18 million sq ft for the two years, much higher than the 5-year average (2012 - 2016) net take up of 0.71 million sq ft. However, the much-anticipated steep decline in office rents did not materialise. 

The saviour? Tech and business disruptors (new economy), particularly co-working space operators. These businesses took up much of the slack left behind in the secondary market when new buildings drew away incumbent tenants, many of whom are in the “old economy”, typically banks, law firms, shipping and insurance companies. 

For 2020, with global economic growth slowing to a crawl, “old economy” companies will be watching their expenses even more closely. The net take-up from these companies is likely to fall short of the 1.08 million sq ft of space that is expected to be completed next year in the CBD. (See Graph 1). Table 1 shows that demand from the old economy sector may come in between 602,000 and 853,000 sq ft next year, depending on which GDP growth rates we assume. As with the past three years, the Singapore office market would therefore need continued support from new economy companies.