Impact of Information & Communication Technology (ICT) on Office Demand in Singapore CBD
Presentation to
Association for Project Management (APM)
Dr Sing Tien FooCentre for Real Estate StudiesDepartment of Real Estate, NUS9 April 2002
Outline of Presentation
Introduction Trend in ICT application Effects of ICT on Office Space Allocation & Work
Practices Survey Sample & Data Collection Mailed Questionnaire Results Logit Model and Other Statistical Tests Case studies by interview Conclusion
Introduction ICT has frequently been thought to be the driving
force behind today’s economy. It is generally felt that there is a direct relationship
between investment in ICT and productivity improvements, which include better customer service greater product variety shorter response time enhanced product quality; and better customization of products and services.
What is ICT?
Information & Communication Technology (ICT) is used to refer to infrastructure and product development that facilitate the collecting, storing and analysis of information that may be transmitted electronically
It includes equipment like telephones, communication lines used to enhance communication between employers and employees, businesses and customers, and business and business across physical boundaries
Growing ICT Adoption Rate in Singapore Government has been actively encouraging firms to
upgrade their connectivity and productivity via its agencies like IDA, EDB, PSB
Schemes offered include: Local Enterprise Computerisation Programme (LECP) by
IDA (assist SME to achieve higher competitiveness through effective use of IT)
Jumpstart Programme by PSB (assisting SME to adopt E-commerce)
IDA’s “Information & Communication Technology ICT usage survey 1999”indicates a high ICT adoption rates among businesses in Singapore
What are the Implications of ICT for Office Operation and Space Usage? Computer and information technologies are expected to
bring about “the third wave” of revolution to the production and social interactions in the new economy
How would these new ways of production and customer-manufacturer relationships impact on the demand for office space?
Would this IT revolution lead to a major structural change in the office space demand?
How would the location choice, spatial configuration and functional connectivity of the physical office space be changed to meet the demand of the IT-driven businesses?
ICT Trends & Investment in Singapore Office Buildings In Singapore, IT-ready office space commands a market
premium over obsolete and IT-unfriendly office buildings A trend of facelift to existing office buildings where developers or
owners spend million of dollars to provide broadband connection and raise floor facility to entice tenants in IT related business
Singapore Land Tower located in the prime Raffles Place business district is one the building that is currently undergoing million dollars upgrading to improve its facility and functionality
Hot-desking, home-office and tele-working is another emerging trend in the office market,
These will significantly transform the way work is carried out and lead to a reduction in demand for physical office space in the long run
Relationships of ICT-readiness on Offices Space Use? How would active integration of ICT into the work place
help companies to reduce the physical space requirement?
Aren’t the companies’ space decisions dependent on the prevailing market rents?
There are no easy answers at this stage to the questions.
However, the market driven and ICT induced office space demand shifts can be conceptually explained ceteris paribus using the familiar demand function as shown in Figure 1.
Office Space Demand
Quantity of space
MarketRent
Aggregate Demand Curves
D
D
D’
D’
OriginalMarket ClearingCondition
QQ’
R
R’
b
a
a = demand shift caused by rental increaseb = structural shift in demand curve brought about
by the ICT revolution Source: Dr Sing Tien Foo
Revolutionary levels
Evolutionary levels
Range of potential benefits
Deg
ree
of b
usin
ess
tran
sfor
mat
ion
High
HighLow
Low
Level 5: Business scope redefinitionLevel 5: Business scope redefinition
Level 3: Business process redesignLevel 3: Business process redesign
Level 4: Business network redesignLevel 4: Business network redesign
Level 2: Internal integrationLevel 2: Internal integration
Level 1: Localized exploitationLevel 1: Localized exploitation
5 Levels of ICT-Induced Firm Operation 5 Levels of ICT-Induced Firm Operation Evolution Evolution
Source: Venkatraman, 1991
Impact of ICT on Office Space Demand ICT impacts on office space demand would take place in
three broad areas: business function and configuration, staffing structure and location choice.
More information and transaction via the virtual space rather than the physical space (e.g. internet banking, electronic stock brokerage, NET transaction)
Flatter organization structure. Ratio of clerical staff to administrative and executive staff
is likely to reduce Productivity of the staff increases as a result of office
automation. Span of control of managerial staff ICT-induced decentralization of office space for
companies that operate largely over the virtual space.
Research Design – Survey Sampling & Data Analysis
Mailed Questionnaire Survey – pilot phase In 4th quarter 1999 URA statistics, 41.64% of the
total of 5.88 million square meters of office space were concentrated in downtown core.
Sample of tenants is restricted to CBD areas 500 tenants in offices within CBD areas ar
randomly selected Response rate was poor at 9% (46 responses) Distribution of respondents profile (Figure 1)
Respondents’ Profile
28%
26%
28%
11%7%
Real Estate, Finance & InsuranceBusiness, Retail, Trading & AdvertisingMedia, telecommunication & IT Trasport, Industrial Biz, & LegalOthers
Current Office Size (sf) Occupied
73%
9%
7%11%
Below 50005001- 1000010001 - 15000above 15000
Importance of ICT Products?
34.815.219.6
21.72.2
73.94.3
58.715.2
50
41.34.3
19.613
4.352.2
2.237
065.2
1330.4
067.4
0 20 40 60 80
1
2
3
4
5
6
7
8
9
10
11
12
Not Important
Very Important
Desktop
Laptop
Printer
Mobile Phone
Fax Machine
Voice Mail
Video Conferencing
Intranet/LAN
Internet/Server
Electronic Data Sharing
Customized/Task Oriented Software
Impact of ICT on Office Operation?
32.6 32.6 34.8
54.3 32.6 13
78.3 19.6 2.2
10.9 6.5 82.6
67.4 19.6 13
71.7 19.6 8.7
65.2 26.1 8.7
67.4 13 19.6
0% 20% 40% 60% 80% 100%
1
2
3
4
5
6
7
8
No Change Reduce Increase
Quality of Space
Cost of Operation
Number of Meetings
Importance of Meeting Place
Workers Productivity
Need to Meet-up
Employee’s time in Office
Overall Space Req’d
How ICT Help to Improve Productivity?
Shorten Data process time (82.9%)
Reduce Number of Clerical Staff (58.5%)
Reduction in storage space for document (56.1%)
Increase Span of control of Middle Management (51.2%)
No11%
Yes89%
Does ICT Facilitate Working Away?
No43%
Yes57%
9
17
Does company encourage work away?
No
Yes
ICT on working practices
0%
10%
20%
30%
40%
50%
60%
Aministra
tive
Mark
eting
Managem
ent
Others
Reasons against working away practice Lesser control (34.3% Lack of trust (11.4%) Nature of job site
(80.0%) Resistance from
employees (2.8%)
Nature of works that will suit “working away” practice
Customer Services & ICT
0% 20% 40% 60% 80%
0% 20% 40% 60% 80% 100%
Telephone
By mail
In Person
Means of Establishing Contacts with Customers
Usual Meeting Place
Factors influencing office space requirement
70%39%
63%22%
20%30%
46%
0% 20% 40% 60% 80%
RentBuilding size
Employee sizeIT-readiness of building
Prestige of buildingNature of business
Location of building
Logit Model 1 Factors affecting perceived space change in future
Variable Coefficient Standard error Wald statistics Significance level
SECTOR -.259 .265 .956 .328
OFFSIZE -1.737 1.959 .786 .375ICT.EXP 1.478 1.159 1.625 .202
MAINTNCE 1.638 1.078 2.308 .129
WEBPAGE -1.841 1.736 1.124 .289
NO.EMPLY .910 1.301 .489 .484
C.EMPLOY -1.518 1.756 .747 .387AT.WKAWY 5.997 3.050 3.867 .049
RENT.DRP 3.843 2.449 2.462 .117
PDTY.OFF -1.532 2.094 .535 .465
Constant -2.871 4.297 .447 .504
Logit Model 2 Factors affecting actual office space changes
Variable Coefficient Standard error. Wald statistics Significance level
SECTOR .040 .131 .091 .763
OFFSIZE -.765 1.527 .251 .617
ICT.EXP -2.020 1.913 1.115 .291
MAINTNCE 1.584 1.102 2.065 .151
WEBPAGE -3.930 1.958 4.027 .045
NO.EMPLY -.495 1.093 .205 .650
C.EMPLOY 2.547 1.750 2.118 .146
AT.WKAWY 1.368 1.737 .621 .431
RENT.DRP 2.456 1.532 2.570 .109
PDTY.OFF -1.803 1.821 .981 .322
Constant -.011 3.440 .000 .997
Case Interviews – A Quick GlanceBusiness type Productivity Staff
StrengthLocation Choice
Insurance Yes Less clerical Hot-desking in future
Non-profit training institution
Marginal No impact No impact
Legal service Definitely Less clerical, More IT staff
Near courts, near clients
Dot.com Central theme Related staff Near client, no hot-desking
Property Consultants
Yes Less clerical No hot-desking, face to face important
Property Consultants
Definitely Less clerical, More IT staff
Cant hot-desk, face to face important
Management Consultants
Definitely Less clerical, more consultants
Near CBD, Office hoteling
Medical Suppliers Yes Less clerical, IT outsourced
Outside CBD, face to face important
Case Study 1 – Allianz Insurance Management Asia Pacific 70 staff in Singapore office ICT increases efficiency & productivity of employee and
reduces manual and clerical-type tasks Minimizing operation cost in long-run Moved from Shaw Building to Centennial Towers – space
increased from 10,000 sf to 20,000 sf Reasons: expansion of business and prestige of the
Mariana Bay office location Wireless applications will have impact on work practices,
as staff are frequently not working from their dests Tele-conferencing & hot-desking is important
Case Study 2 – Accenture Consultants – Business services The firm provides consulting services related mainly to business
management and technology 500 staff in Singapore office Located in the Gateway Building 25% increase in space over the last 3-year due to business
expansion Adoption of office space conserving concepts like “office hoteling”
and “hot-desking” 80% of staff are professional consultants, and they are apt to office
hoteling – worked mostly at the clients place ICT expenditure – 3% total operating expenses ICT increases productivity & revenue It reduces clerical staff, but increases IT personnel to maintain the
system
Conclusion Growing trends in ICT application in office Improved productivity via automation of selected operations Impact of ICT on demand is not significant Small proportion of respondent experienced a reduction in employee
size with an increase ICT investment Physical meeting place and office space are still important Most respondents do not encourage employees to “work away” away
from office The logit models suggest that probability of office space reduction is
related to the increase adoption of new work preactices Availability of webpage may also be a factor affecting the downsizing
of office space We will continue to see changes in the office space use and emerging
of new office practices eg. Service office, telecenter, hot-desking etc.
Thank you
Questions & Comments
The author wishes to thank Mr Don Toh for his research assistance.