Singapore 7th most expensive place in the world to rent office space

With a rate of US$13.38 per sq. ft. per year for industrial space, the country joins Hong Kong and Tokyo as the three Asian cities with highest leases for 1H10.

The latest issue of Global Industrial Highlights from Colliers International revealed that the top three countries with the most expensive prime warehouse rents are Tokyo at US$21.38 per sq ft per year, London (Heathrow) at US$19.59 per sq ft per year and Hong Kong at US$16.26 per sq ft per year.

The bi-annual Global Industrial Highlights tracked industrial property performance across 144 cities Prime Warehouse Rent (industrial space of 20,000 sq ft or more).

In the global ranking of prime warehouse rents, Singapore notably climbed up the rungs for the second consecutive period – from the 14th position in 1H 2009, to the 9th in 2H 2009, to the current 7th in 1H 2010.

The climb up the rank can be attributed to the dual factors of recovering warehouse rents amid improving business environment and the strengthening of the Singapore Dollar against the US Dollar.

During the period of the review, Singapore’s prime warehouse rents inched up 3.3 per cent (in local currency terms), to S$1.56 per sq ft per month in 1H 2010 from S$1.51 sq ft per month in 2H 2009.

Tay Huey Ying, Director of Research & Advisory, Colliers International, says, “Leasing demand for industrial space in Singapore continued to firm up in 3Q 2010 – on the back of positive sentiments and expansion plans by some business; thereby, lifting their average gross monthly rents by about 2-3 per cent quarter on quarter.

Consequently, as of 3Q 2010, prime factory space were commanding average gross monthly rents of S$1.95 per sq ft for ground floor space and S$1.67 per sq ft for upper floor space. The corresponding rental rates for warehouses were S$2.01 per sq ft and S$1.61 per sq ft, respectively.”

Similarly, prime warehouse rents across most markets in Asia Pacific have risen, with the region registering healthy economic growth and exporters boosting sales both within the region and globally. Many countries in the Asia Pacific region recorded double-digit growth in exports. Signs continued to emerge that as long as the global economy did not suffer a setback, both intra-regional and global trade should continue to increase, supporting most of the region’s warehouse markets.

Bulk Warehouse Rent (industrial space of 100,000 sq ft or more)

Mirroring the trend for prime warehouse rents, Singapore’s bulk warehouse rents has climbed up two positions from 12th in December 2009 to the 10th most costly bulk warehouse space globally in June 2010– displacing Oslo, Dublin, Helsinki and Tel Aviv.

This can be similarly attributed to the more robust economic condition and currency performance in the Asia Pacific region, as compared to the Europe and Middle East region. Notably, Singapore’s bulk warehouse rents rose a healthy 6.7 per cent from S$1.20 per sq ft per month in December 2009 to S$1.28 per sq ft per month in June 2010.

Prime Industrial Land

Despite soaring by some 15 per cent in local currency terms to S$93.80 per sq ft in June 2010 from S$81.57 per sq ft in December 2009, Singapore slipped from 5th to the 8th position in the global ranking of prime industrial land.

The fall in rankings could largely be attributed to the inclusion of cities such as Moscow, Saint Petersburg, Warsaw and Zagreb in the global land price ranking for this review period. These cities were not included in the rankings for the 2H 2009 report.

“Singapore’s economic outlook remains healthy, though fears of a possible slowdown in global demand may possibly weigh down on Singapore’s trade-dependent economy in 1H 2011. According to the Economic Development Board’s (EDB) latest Business Expectation of the Manufacturing Sector survey, business sentiments in the manufacturing sectors for October 2010 to March 2011 has weakened significantly, on fears of lower orders in key economies such as US and Europe. Hence, industrial rents are expected to stay relatively flat till the end of 2010," Tay said.