For commercial real estate, the issue moving forward is demand and new structural trends like working from home (WFH) and ecommerce, notes Nupur Joshi, CEO of the REIT Association of Singapore (REITAS).
CapitaLand Commercial Trust (CCT) has indicated that only 24% of its office space is currently being used actively. While WFH is being recommended as the default mode of work by the Ministry of Manpower to curtail the spread of Covid-19, it is becoming increasingly evident that it cannot be a permanent feature.
“The operative word is flexibility. Office landlords have to cater for some flexibility. Companies need their employees to come in, because you cannot function for an extended period of time without the company working together,” Joshi observes. “Landlords will have to cater to the fact the interior of the office in 2021 may not be what it was in 2019. A common theme is core and flex,” she explains.
This solution aims to redefine and challenge the traditional lease model by enabling tenants to mix and match traditional office space (core) with flexible spaces (flex) into a lease, as well as customise the fixed and variable lease terms according to their needs.
There appears to be a few iterations of core and flex. CapitaLand introduced core and flex in 2018 when it invested in The Work Project, a co-working space operator that had leased space in Capital Tower and Asia Square Tower 2. The Work Project is part of CapitaLand’s core and flex solution, which is part of its new Office of the Future initiative.
In addition to the co-working spaces operated by The Work Project, other flex spaces include meeting and conference suites, collaboration spaces, serviced offices and more. These spaces will be progressively rolled out across all CapitaLand’s office buildings.
Separately, Colliers says the core and flex strategy helps occupiers manage uncertainty, dialing up or down their space needs in tandem with headcount movements and business objectives. Core and flex started by supporting BCP (Business Continuity Plan) and has come in useful in containing Covid-19.
“We believe that the experience from remote working and having alternative work arrangements during the Covid-19 outbreak will encourage occupiers to better appreciate the merits of the core and flex strategy and in turn, be more willing to try out flexible workspaces,” Colliers says.
In a recent global work from home experience survey conducted by Colliers International, 82% of respondents say they wish to WFH at least one day a week, but no one wanted to WFH for more than three days a week. While the data shows productivity has been maintained at reasonable levels, more respondents also stated that they missed being able to collaborate with colleagues in the office.
Colliers reckons that WFH will ultimately become a supplement to, rather than a substitute for, the office. “While remote work can provide flexibility for employees, it cannot replace human interaction forever — the office will still play a significant role in maintaining a culture of belonging, collaboration, and innovation,” Colliers says. “We expect the office of the future to be a combination of work choices and space options; a hybrid of remote and office work.”
In that respect, CCT has acted ahead of its time. Analysts were concerned that the REIT had too much flexible space in its portfolio — up to around 7% including WeWork’s lease at 21 Collyer Quay. Instead, CCT had correctly identified the office of the future, and juggled its portfolio accordingly.
