Singapore office property market to stay firm amid economic slump

No need to worry as the country’s solidified status as one of the leading financial hubs will keep on attracting investors worldwide.

According to Colliers International’s report, the Singapore office property market looks likely to stay caught in the renewed concerns of a global economic slump in the immediate months, causing companies to reconsider expansion plans.

However, Singapore has in place healthy demand fundamentals that could help prop up demand in a slowing economy.

Firstly, with healthy reserves, Singapore has proven that it has the ability to produce fiscal stimulus to cushion the impact from a global recession and could rebound quickly as seen in the aftermath of the 2008’s global financial crisis.

In addition, Singapore’s strategic location, business-friendly environment and strong infrastructure kept Singapore’s position as a 'key node' for economic activity in the region. Its status as one of the leading financial hubs in the region further attracts global financial players to locate here.

The Singapore government is also doing its best to spur economic activities by securing tie-ups with major institutions such as HSBC and the Singapore Business Federation to tap on their strong business support services or global networks to woo global mid-sized companies and Asian enterprises to Singapore. Such activities are expected to support a long-term sustainable demand for office space in Singapore.

Singapore’s average CBD Grade A office space is still more than 50 per cent cheaper than its equivalent in Hong Kong and about 20 per cent cheaper than that in Tokyo. In addition, the office supply crunch situation in Hong Kong compared to Singapore’s 11.3 million sq ft of new office supply in the pipeline till 2016 puts Singapore at an edge over developed regional cities in attracting corporations who are looking to set up or relocate their bases to Asia from the woe-plagued western cities.

Hence, though the fuzzy global economic outlook will inevitably take its toll on business sentiments, demand for office space may still be sustained at a relatively healthy level; thereby, providing the support for rents and capital values to hold firm in the near term with possibly marginal growth recorded for selected prime buildings.