WHILE the adoption of a hybrid working model is expected to crimp some demand for office space, one can still count on flight to quality and tech companies to generate some buzz in the Singapore commercial leasing market.

CapitaLand Integrated Commercial Trust (CICT) is riding this wave of office demand at its Asia Square Tower 2 and potentially, Capital Tower.

CICT is said to have clinched KPMG earlier this year as a tenant for Asia Square Tower 2; the professional services firm will be relocating from Hong Leong Building in Raffles Quay, its home for more than 4 decades.

KPMG has leased 4 levels totalling about 125,000 sq ft in Asia Square Tower 2; this comprises space formerly occupied by Allianz (which has moved to 79 Robinson Road) and space currently occupied by Swiss Re, which will be relocating to Guoco Midtown in Beach Road, currently at an advanced stage of construction.

Chinese Internet tech company ByteDance is said to be in negotiations to lease possibly to the tune of 120,000-130,000 sq ft, at Capital Tower in Robinson Road. The space was formerly occupied by JP Morgan, which has relocated to CapitaSpring in Market Street (in which CICT also has a stake).

This is part of ByteDance's continued expansion in Singapore. The group has built up a sizeable office footprint here in the past few years. Today it is said to be leasing about 130,000 sq ft at One Raffles Quay's (ORQ) South Tower in addition to taking some space from flexible space operator The Executive Centre in ORQ's North Tower. ByteDance also occupies about 100,000 sq ft at Guoco Tower above Tanjong Pagar MRT station.

Market watchers suggest its future phases of expansion may include taking further space at ORQ.

Over at the 45-storey Hong Leong Building, KPMG currently occupies about 160,000 sq ft; the space is fragmented with staggered lease expiries towards the end of this year and at various points next year.

Observers expect KPMG to be operational at Asia Square Tower 2 in Marina View around early 2023. The substantially bigger floor plates throughout the building compared with Hong Leong Building has enabled KPMG to derive greater space efficiency across various business lines.

Having a clean slate at Asia Square will allow KPMG to implement new hybrid work initiatives in the post-pandemic environment. In contrast, the high occupancy at Hong Leong Building would have prevented KPMG from growing its footprint.

Word in the market is that Savills acted for KPMG but it declined to comment. Located opposite Lau Pa Sat, the IOI Central Boulevard Towers project under construction, and ORQ, Hong Leong Building was completed in the 1970s.

Its owner, Hong Leong Holdings, is understood to have launched an expression of interest exercise to gather interest from coworking operators to take up to 60,000 sq ft on 3 levels; this is part of the space that KPMG will be giving up.

Singapore Grade A office rents have been continuing the recovery that began last year, on the back of tight supply and relatively healthy demand volume.

Earlier this week, Colliers said that the average gross effective monthly office rental value for its Premium basket rose 2.3 per cent quarter on quarter to S$11.96 per square foot (psf) in the first quarter of 2022. Over the same period, its average rent for its CBD Grade A basket increased 1.2 per cent to S$9.53 psf.