Battling Rising Rental Rates: Exploring Options for Below-Market Rentals in Singapore’s Office Market

In the ever-evolving landscape of Singapore’s real estate market, finding below-market rental offices can be advantageous for businesses looking to optimize their operational costs. As 2023 unfolds, certain areas in Singapore are emerging as potential hotspots for securing office spaces at affordable rates. These areas not only offer attractive rental options but also provide a conducive environment for businesses to thrive. Whether you’re a startup seeking a cost-effective workspace or an established company looking to expand within budget, exploring the top areas to find below-market rental in 2023 can be a strategic move toward securing an ideal office space that aligns with your financial goals.

There is, however, a particular area within the Central Business District (CBD) of Singapore, known as the Central Area, where below-market rental opportunities can be found. These office spaces are located slightly further away from the train stations, forming a belt around this prime location. They often provide more affordable rental rates for tenants. For instance, if you are considering the Central Business District (CBD) area, the first place to explore would be towards the periphery of this region. Other areas worth mentioning are Middle Road, Rochor area, Beach Road, Lavender, Jalan Besar, Balestier, Bukit Merah, and Redhill, which have a reputation for offering below-market rent, making them attractive options for businesses seeking cost-effective office spaces.

Singapore’s Central Business District (CBD) office rental market is experiencing robust demand. As tenants actively seek lower or better rental opportunities, there has been a notable increase in occupancy rates, allowing landlords to secure higher rents. However, amidst this market trend, there are indications of below-market rental opportunities. One such indicator is how landlords become willing to rent out their spaces below market rates. Once the rental price reaches a certain threshold that landlords find acceptable, there is a rapid increase in tenant interest. For instance, on Robinson Road, known for its higher rental rates, neighboring streets offer office spaces that can be rented for less than $6.00 per square foot. These opportunities present significantly lower rental rates while conveniently located near train stations, making them attractive options for tenants. These below-market rental opportunities provide an excellent chance for businesses to secure affordable office spaces in prime locations. Tenants should stay updated on market trends, collaborate with real estate agents specializing in commercial rentals, and actively explore various areas and buildings to find the best options that align with their needs and budget.

Typically, new office buildings in Singapore do not offer discounted rental rates. Rental prices for brand-new buildings usually range from around $13 to $14 per square foot. However, there is a practice where early sign-ups, notably the top 30% of tenants, may be eligible to secure better rates. By committing to ample space or multiple floors in a building even before its construction, tenants may receive a discount of up to 20% off the current market rent. This strategy enables developers to boost occupancy rates, particularly for buildings still in the planning or construction phase.

For smaller office spaces or new developments, developers may only offer longer rent-free periods for immediate occupiers. Depending on the size of the space, the rent-free period can range from two weeks to a month or even one and a half to three months. This extended rent-free period effectively reduces the overall rental cost for tenants, providing them with a valuable discount. Staying informed about upcoming developments and new office spaces through real estate agents or industry news is crucial to identifying potential opportunities for discounted rental rates or attractive leasing terms.

The standard lease term for office spaces in Singapore typically ranges from two to three years. However, negotiating below-market rental rates can be influenced by the length of the lease term. Opting for a longer lease term may result in higher rental rates, as landlords may be less inclined to offer discounted rates for extended commitments. On the other hand, shorter lease terms, such as two years, may present a higher likelihood of securing a more favorable rental price. However, in some instances, tenants requiring a significant amount of space, such as anchor tenants, may possess more leverage to negotiate better rates for lease terms longer than three years. Landlords may be willing to provide discounted rates or favorable terms to attract prominent tenants and enhance the reputation of the building. Working with a specialized commercial real estate agent who can navigate lease negotiations and help find the best terms and conditions that align with specific requirements and budget is advisable.

Shared or co-working spaces in Singapore present alternative options to traditional office spaces and can offer below-market rentals. These spaces provide a range of services, from reception areas to meeting rooms, and some operators even include additional amenities like beverages and snacks. However, certain operators focus on delivering more basic services, such as cleaning and essential amenities like water, tea, and coffee. These operators offer competitive rental rates, often around 20% lower than larger co-working or serviced office providers.
Moreover, some smaller co-working operators specifically cater to SMEs and offer concept-focused spaces. These operators typically provide smaller office spaces, accommodating around four to six workstations. Their target market is SMEs, so they strive to offer more affordable rental rates than their larger counterparts. Exploring shared or co-working spaces can be a cost-effective solution, especially for companies that have already established their presence in Singapore and are seeking dedicated workspace for their teams. These alternative options provide flexibility, networking opportunities, and the potential for cost savings compared to traditional office spaces.

Employing various strategies and tactics can help negotiate a below-market rental rate with landlords or property owners. Maintaining a good track record of prompt payment and responsible tenancy fosters trust and goodwill. Offering to handle specific maintenance tasks at your own expense demonstrates a willingness to contribute to the property’s upkeep. Presenting your company in a positive light by showcasing stability, success, and a robust business model can strengthen your negotiating position. Consider proposing a continuous rent arrangement that ensures the landlord does not experience income loss during lease renewals or tenant turnover. Staying informed about current market rental rates is essential to negotiate from an informed standpoint. Collaborating with a skilled commercial real estate agent or negotiator can provide valuable guidance throughout the negotiation process. Approaching negotiations cooperatively and respectfully is crucial to reach a favorable agreement.

Singapore’s office rental market is experiencing higher rates than during the COVID-19 pandemic, when rental rates were lower. While a few below-market rental opportunities may be available, some upcoming office vacancies or sublet opportunities offer favorable rates. For example, some tenants have transitioned to hybrid work models, so they may have excess space they no longer require. However, it is essential to note that landlords typically aim to collect market rent rather than offer significantly lower rates. Below-market rental rates are usually seen during market downturns when previous tenants are compelled to reduce rents or sublet their units.

There are specific periods or seasons in Singapore when landlords may be more open to offering below-market rentals. One such period is the year-end, particularly in November and December. During this time, some landlords may be motivated to improve their occupancy rates before the end of the year. Additionally, as the festive season approaches and people begin to clear their leaves, tenants could need to secure office spaces quickly. This creates an opportunity for negotiation and obtaining a more favorable rental rate during office space renewals or new leasing agreements. However, it is essential to note that market conditions and individual landlord circumstances can vary, so staying updated and actively exploring opportunities for below-market rentals is always advisable.

Typically, there are no specific additional costs or fees associated with below-market rental offices in Singapore that need to be considered. The rental terms and conditions negotiated between the tenant and landlord would generally cover the rental payment and any applicable service charges or utilities. Other standard costs, such as administrative or legal fees, are similar regardless of whether the rental rate is below market. It is important to note that each negotiation is unique, and terms can vary depending on the landlord and specific circumstances. However, it is advisable to work with a reliable and transparent landlord who communicates all the relevant costs and fees upfront to ensure clarity and avoid any surprises.

In conclusion, when searching for office space, companies typically have a predetermined budget they aim to meet. The specific nature of the business and the desired location play a significant role in determining the rental budget. Factors such as the need for a prestigious office address, proximity to competitors or target clientele, and the company’s and its employees’ preferences all contribute to the decision-making process. By considering these criteria and engaging in discussions within the company community, it becomes possible to find a suitable office space within the desired budget. While location availability may vary, options are available to accommodate different budgets. The key is aligning the office space with the company’s goals and positioning to create an optimal working environment.


About the author

Amy Aw, Senior Marketing Director (R002731Z)

Building long term relationship through office space.

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Having been in the commercial property market for more than 15 years, we specialize in office space for lease for commercial offices and conservation shophouses. We focus on delivering results, providing the best negotiating terms, and providing quality search for your next property rental.

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