Reinventing Cbd What Singapore Can Learn Paris New York And Tokyo
freehold (kenut.02.12.2020)(The comprehensive CBD Incentive (CBDI) Scheme, first implemented in 2019 and recently extended through 2030 as CBDI 2.0, not only benefits landlords, but also serves as a catalyst for occupiers to redefine their future in the city centre.The scheme’s ultimate goal is to revitalize the CBD and transform it into a round-the-clock mixed-use area where commercial activities coexist with residential and lifestyle amenities. This, in turn, encourages landlords to replace their aging office buildings with integrated developments that cultivate live-work communities and enhance overall connectivity.As reported by JLL Research, the CBDI Scheme affects about 16% of the total office inventory in the CBD, with over 25 buildings comprising approximately 6.4 million square feet qualifying under the criteria.In addition, the scheme has a ripple effect that extends beyond just landlords and their tenants. For business leaders, the key to navigating this change is not to get bogged down in the policy details, but to understand the wider implications it creates. Drawing from experiences of other world-class cities, which have undergone similar urban renewal programs, can help turn this potential disruption into a strategic advantage.The ripple effect: How a landlord’s incentive becomes an occupier’s realityOne of the main drivers behind the CBD’s transformation is the underperformance of targeted buildings. According to JLL Research, most of these older buildings are around 42 years old and have smaller floorplates of less than 10,000 square feet. As a result, they command lower rents at $7.29 psf, which is 26% below the CBD’s average of $9.85 psf.This, coupled with the fact that the CBDI Scheme offers a bonus plot ratio, has made full redevelopment a lucrative option for landlords. Not every owner will opt for redevelopment, though. Some may choose to undergo significant additions and alterations (A&A) to modernize their assets.In any case, the scheme’s emphasis on redevelopment provides an additional financial incentive that makes it more compelling for landlords to consider full redevelopment as an alternative to A&A.Tightening supplyThe flip side of the redevelopment coin, however, is a tightened supply of office space for the market. This is due to the temporary removal of about 1.7 million square feet of stock, based on known projects utilizing the CBDI for redevelopment to date. Following this temporary shortage, there is also a permanent reduction in pure office space when redeveloped assets deliver roughly 20% less office area to accommodate their new mixed-use focus.This predictable tightening of supply has accelerated the “flight to quality” into a structurally smaller pool of high-grade space. For occupiers in older buildings, this creates a trilemma: accept higher rents, move to another aging asset and postpone the inevitable, or relocate out of the CBD. While a forced move may be disruptive, it presents a rare opportunity for occupiers to “right-size” and escape the constraints of an outdated layout.Occupiers in the CBD are facing a challenging situation where they need to navigate rising costs while also making strategic trade-offs. This dynamic changes the decision-making process for every occupier. The focus is no longer on the cost per square foot, but on a more complex equation that must take into account redevelopment risk, business continuity, and brand positioning. To successfully navigate this new reality, occupiers need a fresh perspective that can be gained by looking at experiences from other global cities.Global lessons in navigating transformationWhile each city’s regulatory context is different, patterns of market transformation following major urban renewal are consistent. By examining how similar programs have reshaped other global hubs, occupiers in Singapore can anticipate what lies ahead.The systematic renewal of Paris’s La Défense district serves as a case in point. Before its renewal, La Défense was facing obsolescence as a first-generation business district. The Master Plan focused on sustainability, with the ultimate goal of becoming the first post-carbon business district in the world. As a result, new developments became showcases for environmental, social, and governance (ESG) excellence. This compelled existing tenants across the district to evaluate their own environmental credentials to remain competitive.The lesson here is that a revitalized CBD recalibrates the baseline, especially on non-negotiable aspects such as sustainability. It forces occupiers to question whether their current workspace is an asset that attracts talent and aligns with corporate values, or if it suggests that their company is lagging behind in terms of progress.Similarly, the rezoning of New York’s East Midtown allowed developers to purchase unused “air rights” from landmarks to build taller towers, such as One Vanderbilt. In exchange for this added density and improved commercial viability, developers were required to fund major public infrastructure improvements, such as enhancing the subway system.This directly linked a premium corporate address with tangible benefits to employees and the general public, creating a powerful branding narrative. These new towers offered not just space, but also advanced technology and a visible commitment to civic betterment. This created two distinct tiers of office accommodation, forcing companies to implicitly choose which tier was better aligned with their identity.The lesson here is that the gap between old and new is not just wide, but it acts as a chasm that separates the market into distinct classes of prestige and functionality.Finally, Tokyo’s approach in districts such as Marunouchi highlights that urban renewal is not a one-time project, but a continuous process. Its legislative framework creates “Special Urgent Urban Renaissance Areas”. This is rooted in a philosophy of continuous improvement, which allows for perpetual evolution. This creates an environment where tenants are not just leasing space alone, but are also participating in an ecosystem that is constantly upgrading. The expectation of excellence is continuous.The lesson here is that a static real estate strategy is inherently vulnerable in an environment that is designed for change. This challenges businesses to assess whether their strategy is agile enough to adapt to a perpetually evolving urban landscape, or if it is designed to function in a CBD that is no longer the same.Taking on a strategic lensThese global patterns confirm that an occupier’s response cannot be a simple real estate decision. It demands a series of fundamental conversations at the board level.Firstly, timing is crucial. An occupier whose lease is expiring in 18-24 months must start planning now to secure the best alternatives. Those with longer leases must scrutinize their redevelopment clauses and notification periods. As time passes, the advantage will inevitably shift further in favor of landlords, and the market will become tighter.Secondly, there is a conversation about vision and brand. Does the physical environment reflect a forward-looking vision or anchor it to the past? An office is a powerful, tangible statement of a company’s ambition. In a revitalized CBD, occupying an aging asset can send a conflicting message to clients, partners, and potential investors, even before a single word is spoken. It poses the question: What kind of message does our office entrance convey?The winners in this new landscape will be those who view real estate not as a fixed cost, but as a dynamic asset that must evolve with their business. Understanding what has happened in global cities can provide the foresight to do just that. It is clear that in a city designed for perpetual evolution, the greatest risk is not choosing the wrong building, but standing still.Tahlil Khan is the executive director of leasing advisory at JLL SingaporeJames Short is the senior director of leasing advisory at JLL Singapore)(This article was updated on Dec 3, 2020, 11:20AM)(This article was updated on Dec 3, 2020, 11:20AM)