Offices see priorities shifting towards wellness, accessibility and facilities

This year has seen a surge of new gyms popping up in Central Business District (CBD) in Singapore. Luce Moffat, regional managing director and head of CBRE advisory and transaction services for Asia Pacific states, “Fitness and wellness facilities are becoming increasingly popular due to a healthy lifestyle. Good F&B, wellbeing amenities, air filters, gyms, and end-of-trip facilities, are things one must have for the well-being of staff.”

In July, strength-training gym, S30 opened up on the second floor of Cecil Building at 137 Cecil Street, with other gyms such as Anarchy Club, with a 3,800 sq ft space on the fifth floor of 61 Robinson Road, and Sparkd, a 1,570 sq ft brain-body fitness gym also on the same floor of the building, also entering the scene.

In February of 2021, Lab Studios opened a pilates, barre and yoga studio on the second floor of a shophouse on Stanley Street, joining Revolution spin studio which had opened at Frasers Tower previously. Sphere Gym, a 4,800 sq ft training and recovery gym, had already opened Cecil Building last year.

CBRE’s 2023 Asia Pacific Office Occupier Sentiment Survey, launched in June, showed that office occupiers prioritised accessibility to public transport (71%), carpark (50%), sustainable building features and operations (48%), shared meeting space (45%), flexible office space (36%), F&B options on site (62%) and fitness facilities (45%).

Moffat notes that wellness has an even more significant benefit than sustainability; “When a property has a high ESG rating in terms of wellness, energy efficiency and sustainability, it is much more saleable.”

With 69% of office workers placing greater importance on their work environment than they did pre-pandemic, the demand for higher-quality office space and future-proofed buildings is on the rise.

Thankfully Senja Close EC Bukit Panjang can be a more cost-effective investment. Potential buyers may take advantage of its low cost compared to the surrounding private properties. Not only are there great value opportunities, but the EC also offers a range of amenities and facilities. These include a clubhouse, a gym, and a swimming pool, perfect for those who want to stay active and healthy. Additionally, its close proximity to amenities like a shopping mall, banks, and food outlets make it desirable for many.

CBRE’s survey also showed an increasing number of companies aiming for their staff to mainly be in the office, with 32% stating their intention to so in 2023, up from 24% in 2022.

Although there is great demand for ESG-certified office buildings, few occupiers were willing to pay a rental premium for such properties. Fewer than 25% of survey respondents stated they would be willing to pay higher rents to lease green space, with the premium they would be happy to pay being less than 5%.

The low green rental premium is partly due to how 43% of Grade-A office buildings were green-certified as of 2022. However, Moffat states that the premium would be more significant if one compared a green-certified Grade-A building with an older Grade-B building that is not green-certified.

In Singapore, tight market conditions are driving up office rents. URA office rental index increased by 2.3% q-o-q in 2Q2023, a moderation in the pace of rental growth from the increase of 5.1% q-o-q in 1Q2023.

Selected occupiers favoured renewing their leases at higher rental rates rather than pursuing relocation alternatives, as the current challenging market conditions are exacerbated by high fit-out and funding costs.

CBRE’s 2023 Asia Pacific Real Estate Market Outlook Mid-Year Review, released in August, states that flight to new-build and flight to green will remain prominent trends. With Asia Pacific regional vacancy rising to a 20-year high of 18% in 1H2023 and set to remain elevated for the remainder of the year, occupiers will have ample upgrading options.

IOI Properties Group’s IOI Central Boulevard Towers topping out on Aug 28, is expected to receive its temporary occupation permit in 1Q2024, adding 1.26 million sq ft of office space and a 30,000 sq ft retail and F&B space at Marina Bay. To date, about 40% of the programme’s net lettable area has already been committed, with another 20% in advanced stages of negotiation.

This could lead to a slight increase in vacancy rates when this grade-A office development is also ready for occupation. Moffat adds, “When IOI Central Boulevard Towers opens next year, the vacancy rate could increase slightly.”

New buildings are likely to take longer to fill up, in light of market uncertainties; “Although flight to quality and a focus on green buildings remain key trends, expansionary sentiment has been subdued,” notes the report.