Overview

When COVID hit the world, the accompanying lockdowns brought the term Work(ing) From Home (WFH) from the margin to the mainstream. This sounded alarm bells around the world, from savvy investors like Warren Buffet to analysts and other market watchers, thinking that the age of the CBD office market is over. 

Those who believe that WFH will significantly reduce demand for office space have valid reasons but their concerns about demand have not been articulated considering the following:

1.   The discrete nature of office leasing terms

2.   Time domain

3.   New demand

By not accounting for these factors, any analysis of the market is likely to fall short of the mark. Today, we will analyze the Singapore CBD Grade A Office market to look at how it may permutate over time after we adjoin these three extensions to the mainstream WFH belief that there will be a sharp climbdown in demand. From a list of permutations, we will input our prior probabilities as to which of these are likely to play out in future. This approach is in sharp contrast to providing a singular outcome after just one round of reasoning.  

Discrete Nature of Leasing Terms

This is closely related to the time domain factor. This is because thus far, market observers are mentally forming beliefs which assume that WFH can be instantly mapped to reality. Unfortunately, as a typical office lease contract spans between three and (increasingly) five years, demand may remain relatively constant in the short to medium term.