The past couple of years have seen a renewed focus by occupiers on CBD offices judging by where the majority of leasing activity has taken place. Rather than any real challenges facing decentralisation, this phenomenon can be largely explained by three key reasons: the narrowing rental premium between CBD and decentralised rents, supply-side factors and the competition for talent.
Decentralisation continues to be a value proposition to both landlords and occupiers. The decentralised market tenant profile is markedly more diversified which can mitigate economic fluctuations that can adversely affect office take-up of key sectors. At the same time, the rental premium between CBD and decentralised rents is expected to expand over the next two to three years, providing greater incentive for cost conscious occupiers to decentralise.
At the end of the day, a strong Singapore growth story will be good news for the entire office market - both within and outside the CBD. After all, it is not uncommon for a metropolis to have more than one core business district.