THE NEXT BIG THING – THE FLIGHT TO GREEN BUILDINGS

The Singapore office market is at the early stages of a global transformation where multinational tenants increasingly seek to be compliant with Economic Social and Governance standards set in their respective home countries. In the coming years, this pressure is going to weigh on the local real estate market, especially the office sector. This, and the re-ordering of centres of production caused by global political tensions is expected to remould the market from that which emerged after the global financial crisis in 2008 to what was shaped from Q1/2022 by the SARs-CoV-2 virus outbreak.

The previous decade has seen the emergence of what we term AAA-Grade offices which have surpassed the previous highwater AA-Grade building specifications. The latter were the crème-de-la-crème of offices from the 1980s to the mid-2000s. Rents were bumped up to a new baseline.

(In 2007, rents spiked not because of the completion of Grade AAA buildings but a severe crunch in office space.) It was during this time that rents started to differentiate themselves by location. As more Grade A office buildings were developed in the Central Area, rents pulled ahead of those in the Fringe Area. (Please refer to Graph 1.)