Singapore office costs 3rd highest in Asia

Published 12 May 2011
The Business Times
By Kalpana Rashiwala

But competitiveness with HK improves as gap in Grade A office rentals widens

Singapore remained the third most expensive office location in the Asia-Pacific for the seventh consecutive quarter since the office market bottomed in the third quarter of 2009 after the Global Financial Crisis, based on the latest Q1 2011 analysis by Colliers International.

Singapore office costs 3rd highest in Asia

Singapore office costs 3rd highest in Asia

In fact, the gap in average Grade A CBD office rentals between Hong Kong (the most expensive location in Q1 2011) and Singapore has widened from 29.8 per cent in Q4 last year to 32.1 per cent in Q1 this year. ‘This extends and reinforces Singapore’s competitiveness against Hong Kong,’ argues Colliers.

The widening gap follows an 11.9 per cent quarter-on-quarter increase (in both US dollar and local currency terms) in Hong Kong’s average Grade A CBD rental value in Q1 2011, surpassing Singapore’s q-on-q rental growth of 8.2 per cent in US dollar terms (or 6.1 per cent in local currency terms) over the same period.

Hong Kong, with its 11.9 per cent q-on-q rise Grade A CBD rental surge in the first three months of this year, has overtaken Tokyo as the most expensive office location in the region. The rental growth rate for Hong Kong was also the highest among 26 cities surveyed.

Colliers said the average Grade A CBD office rental value in Singapore rose from US$53.55 psf a year (or S$6.31 psf a month in local currency terms) in Q3 2009 to US$79.76 psf a year (or S$8.39 psf a month) in Q1 this year.

The average gross monthly rental for Grade A office space in Raffles Place/New Downtown stood at S$9.72 psf in Q1 2011, up 8 per cent from the preceding quarter and 41.9 per cent from the Q4 2009 trough. The Q1 rental figure is 45.7 per cent below the pre-Global Crisis peak of S$17.89 psf in Q3 2008.

For Hong Kong, the average monthly rental for Grade A offices in Central/Admiralty stood at HK$117.33 psf in Q1 this year, up 11.2 per cent from the preceding quarter and up 58.5 per cent from the Q3 2009 post-Crisis trough of HK$74.04 psf. However, the latest Q1 2011 figure is just 3.2 per cent shy of the Q3 2008 pre-Crisis peak of HK$121.24 psf.

CB Richard Ellis executive director (office services) Moray Armstrong said: ‘The Singapore office market seems to be reasonably healthy; there is adequate supply of new quality buildings, the relative occupation costs are competitively placed vis-a-vis other regional centres, and occupier demand is robust.’

Colliers expects Singapore’s office property market to remain on a growth trajectory in the short to medium term. This will be supported by the recovering global economy, as well as the strengthening of the Republic’s position as a regional financial hub amidst the government’s efforts to strengthen the island’s physical, economic and social infrastructure.

‘In addition, continued political instability in the Middle East and North Africa regions could prompt some companies to relocate their bases to other parts of the Asia-Pacific region, including Singapore. This could have a positive boost in demand for office space in Singapore and in turn, provide further support to absorb the 2.8 million sq ft of new CBD Grade A office space slated to complete in 2011, which has already achieved a healthy overall pre-commitment rate of close to 60 per cent as of Q1 2011,’ Colliers said.

As a result, Colliers predicts that rents for CBD Grade A office space in Singapore will rise 15-20 per cent for the whole of 2011.


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