Office building owners should start paying attention to Singapore's burgeoning start-up scene and the growing popularity of co-working, according to analysts.
As flagging economic growth weighs on mid- and large-sized companies, smaller tenants are increasingly becoming a force to be reckoned with in the rental market.
However, it can be tough for them to find a suitable space.
"With a little effort, landlords will be able to capitalise on this relatively untapped pool of demand," said CBRE Research's head of Singapore and South-east Asia, Mr Desmond Sim, and senior analyst Dylan Chua in a report.
The impact small- and medium-sized enterprises (SMEs) have had on office space demand has been limited, mainly because of the mismatch between their needs and the type of space available, noted Mr Sim and Mr Chua.
With a little effort, landlords will be able to capitalise on this relatively untapped pool of demand.
CBRE RESEARCH'S HEAD OF SINGAPORE AND SOUTH-EAST ASIA, MR DESMOND SIM, AND SENIOR ANALYST DYLAN CHUA, on how smaller tenants can become a force to be reckoned with in the rental market.
SMEs typically require between 200 and 450 sq ft, but at least 90 per cent of office buildings require tenants to take up a minimum floor space of 2,500 sq ft.
In addition, Mr Sim and Mr Chua said landlords and leasing agents traditionally do not look at SMEs as a key demand driver, and usually find it more worthwhile to pursue larger deals. Landlords might also find it administratively easier to deal with a few tenants instead of many.
Still, what SMEs lack in scale, they make up for in numbers, especially amid strong trends in start-up growth, greater government support, and the rise of the sharing economy, which has popularised co-working, the report noted.
Co-working involves multiple companies or individuals sharing a working environment. The movement, traditionally driven by those in the start-up ecosystem, has been gaining popularity across sectors.
Many SMEs have taken to co-working because of the lower costs, networking opportunities, flexibility and the chance to be located in prime areas.
SMEs are not a replacement for larger firms, which continue to drive the office market, said Mr Sim and Mr Chua.
The size in square feet that SMEs typically require.
The minimum floor space that at least 90 per cent of office buildings require tenants to rent.
But landlords "should find ways to cater to start-ups and SMEs and incorporate them as another source of demand alongside traditional large occupiers".
Landlords stand to benefit from this as they can establish working relationships with early-stage firms and grow with them as their office space needs increase, they added.
Some landlords have already started incorporating co-working as part of their overall strategy. Examples of such set-ups in Grade A office buildings include Collective Works at Capital Tower and The Great Room at One George Street.
The co-working trend is also an opportunity for landlords to rejuvenate older or poorer-quality buildings, said Mr Sim and Mr Chua.
They could take cues from start-up cluster JTC Launchpad @ one-north in Ayer Rajah, which uses old flatted factories built in the 1970s.
Ms Grace Sai, the chief executive and co-founder of community and co-working space The Hub Singapore, said tenants who would usually rent offices are increasingly opting to join co-working spaces.
These include later-stage start-ups setting up in Singapore, as well as companies that are choosing to base innovation teams close to entrepreneurial communities, "which are often a rich source of learning for corporates who want to inspire innovation from within their own teams by exposing them to a disruptive start-up culture", she added.
The Hub Singapore, one of the largest co-working spaces here, opened its second facility earlier this month at Cuppage Terrace in Orchard Road.