With a younger tenant mix, demand for more efficient spaces and flexible lease terms is now higher than before.
GuocoLand is no stranger to adapting modern designs and meeting tenant demands, but the COVID-19 pandemic is an unprecedented event that shook the entire real estate industry. For GuocoLand Group President & CEO Raymond Choong, it meant quickly pivoting to digital sales channels for its residential projects and pioneering the concept of core and flex space in its office leases.
In today’s "new normal", the trend among residential buyers is to move into integrated developments with spaces which can serve both as their home, office and a place to entertain guests. And for companies, they are looking for full amenities in and surrounding the development such as gymnasiums and quality restaurants.
In an exclusive interview with Real Estate Asia, Choong shared that GuocoLand had the opportunity to showcase itself as a responsible and trustworthy developer.
“I think this experience last year gave us the opportunity to demonstrate that we are a responsible and trustworthy developer. During the pandemic, we took a lot of steps to help our customers and tenants. We were also reminded of the importance of differentiating ourselves in this market. We showcased our thought leadership through our residential projects in terms of coming up with new innovations and ideas to promote our developments,” he said.
GuocoLand faced challenges such as delays in constructions and restriction of entry of foreign workers. These were quickly remedied with the help of contractors and the company’s decision to build separate dormitories for their workers.
“In the initial stage there was a major lockdown of foreign workers, but that has been resolved now. So we've got back a lot of foreign workers on site. We were quite fortunate that our contractors were able to get their workers back on site and we also built our own dormitory within some development sites,” Choong said.
With possible tenants and buyers from abroad not being able to physically visit the different sites available for lease or purchase, GuocoLand developed and offered its own virtual tools to enable continued purchases from foreign buyers.
Potential buyers were able to virtually visit their spaces, engage in webinars or online seminars, and communicate with the sales team. Choong said this new system has been integrated into the sales process moving forward.
“With the closure of borders and inability to reach out to buyers face-to-face, especially those outside the country, all our businesses in Singapore, Malaysia and China have developed their own virtual sales capabilities including virtual tools,” he added. “You can visit sales galleries or see the actual units virtually, and engage potential buyers via webinars. This has, in a way, become quite an important part of our sales process now."
When asked if GuocoLand might face challenges in the coming months, Choong said it would be the changing attitude of buyers and tenants as consumers are more careful now with what they invest in.
“We expect construction costs to continue to go up given the shortage of labor and disruption in the supply chain. We also think that consumer sentiments are impacted with this experience, and people are more careful with the way they invest,” he said.
“On the positive side, interest rates today are very low. Consumers are looking at ways to protect their wealth. With very low interest rates, real estate is one asset class that is on their radar and we see that happening in Singapore and in some parts of Malaysia and China,” he explained.
Maintaining the lead with open and modern spaces
Choong also said that GuocoLand will maintain its position as a top developer, and he mentioned Guoco Tower as reference.
Guoco Tower is a mixed-use development located in Tanjong Pagar in Singapore. It is one of the company’s most known developments, and shot to fame when British vacuum cleaner designer James Dyson reportedly paid $70m for the penthouse apartment.
Choong shared that this property’s popularity is mainly rooted in the building’s character. It does not appear to be boxed up, has open spaces, many green features, and is a mix of both commercial and residential in a heritage area.
“In Guoco Tower, the F&B outlets are not confined within four walls. You’ll find that it is popular because it's open,” he said.
He also revealed what really drives the demand for these prime properties is space. Choong shared that the main consideration of most of their buyers is the space and how it is efficiently utilised by the developer, rather than the cost of how much it will take to purchase one.
“Space is a premium in places like Singapore and China. Every square foot costs a lot of money. One of the things we have learned is to make sure that we plan our layout very efficiently,” he explained. “One of the hallmarks of our development in Singapore and many places is that we design from the inside out. When buyers step into our development, even though it is 1200 to 1600 square feet, it feels a lot bigger than that because the layout is optimised to be efficient.”
Adapting to a more vibrant and modern tenant mix
Likewise, business tenants are looking for space efficient layouts in the centre of town rather than larger spaces on the outskirts. This is particularly important for tech companies to attract the best talents who want to work in the best office spaces with the best connectivity and environments.
Choong said that rather than becoming more cost conscious following the pandemic, companies are more quality conscious, seeking spaces that can meet their health and safety needs and don’t mind sharing non-core areas such as meeting rooms and conference rooms, which in the case of the new Guoco Midtown development, are common to all tenants and can be booked as needs be.
Choong shared that he first observed the change in tenant mix in Guoco Tower. The workforce of these office tenants are younger, and demand for office leasing is now being driven by tech companies. It was observed that more tech and media companies are moving into the central business district, often to attract better hires and talents.
“We saw the obvious change in Guoco Tower, where we don't have many big bank tenants. We found that a lot of tech and media companies are coming into the central business district,” he shared. “The average age of the employees of a tech company or media company are 30 or younger, and their needs are very different from the traditional office worker.”
He said that putting this recent development in consideration, GuocoLand focused on adding more amenities to its projects. With a younger workforce, the demand for recreational facilities, open spaces, and accessibility to the MRT and F&B places became the top priority when planning a new building.
GuocoLand also started to see the demand in offering short-term office lease. Choong said that with new business models emerging where experimental phases are crucial, the demand for flexible leasing arrangements is now another opportunity they have embarked on.
“The tenants may have a project for six months instead of three years or five years, or they may be testing a new concept,” he explained.
“If it works, then the space will become permanent. But if it doesn't work, they will shut it down. So that's where flexible spaces are helpful for tenants. As such, we have reserved a percentage of our office space to be leased on a flex basis,” he added.
When asked how the company sees the real estate market in Singapore post-lockdown, Choong said GuocoLand believes that demand for office spaces will remain high. Location, however, will play an important role in how potential tenants will choose these spaces.
He stated that despite the ongoing pandemic, Guoco Tower is operating at close to full occupancy in the last few months.
“We do see demand for office space — but more selective demand, post-COVID with a flight to quality,” he added. “That also means that the office space must be able to provide the infrastructure for businesses to adapt to the new normal. I think office space will continue to have a role. But location and a more holistic development would also be very important.”
Photo courtesy of GuocoLand Limited.
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