March 19, 2009
Singapore third costliest in office rental despite fall
By Joanna Seow
OFFICE rents here fell by 22 per cent last year, but Singapore is still the Asia-Pacific's third costliest city for business tenants, according to Colliers International's latest review. Hong Kong and Tokyo were No. 1 and No. 2 respectively.
The global office real estate review tracked office costs in 172 cities worldwide for the first and second halves of last year. It found that Singapore's office occupancy costs, defined as the annual average gross rents of central business district Grade A office space, fell from US$125.06 psf (S$191.17) in the first half of last year to US$97.07 psf in the second half.
Across the Asia-Pacific, 16 other cities also registered declining rents. Nine of the 20 cities surveyed saw rents plummet more than 20 per cent during the year. Beijing and Taipei were the only two cities in which rents rose.
Despite remaining the third costliest in the region, Singapore's office occupancy costs were 45 per cent cheaper than those of Hong Kong's at the end of last year, up from last June's 41 per cent, and 24 per cent less than Tokyo's as compared to just 3 per cent last June, said Ms Tay Huey Ying, director of research and advisory at Colliers International.
On a global scale, Singapore is the sixth most expensive city, behind Hong Kong, Moscow, Tokyo, London's West End and Dubai.
In the light of the global economic downturn, Mr Nicholas Mak, Knight Frank's director of research and consultancy, said that the outlook for office occupancy costs is 'more downside than upside for the next year or so'.
Banks, financial institutions and supporting businesses such as law and accounting firms were the biggest users driving demand for office space in the last three years or so. Facing contraction, they now need less space, which is dragging down rents.
'Most banks completed expansion plans many months ago and may now even be thinking of shrinking,' said Mr Mak.
This is seen not just in falling rents but also in higher vacancy rates. Ms Tay said: 'The growing vacancy rate seen for Singapore is due to the interplay of dwindling demand against surging supply.'
At the time of the review, at least 10 million sq ft of office construction was under way in Singapore.