Singapore is the third most expensive office location in Asia Pac

A title it holds for eight quarters in a row now as office rents rose by 6.2% to $8.90 per sq ft per month in 2Q11.

According to Colliers International's report, Hong Kong remains the most expensive office location in the region for 2Q 2011 after displacing Tokyo for the first time in the previous quarter.

In Singapore, Grade A CBD office rents soared from S$6.31 per sq ft per month in 3Q 2009 to S$8.90 per sq ft per month, in 2Q 2011 – reflecting that Singapore has maintained its competitive edge during this period.

Beijing and Singapore were the two key performers in the region

Though there was a general moderation in leasing activities across most of the cities in 2Q 2011, Beijing and Singapore remained the two key performers in the region.

Grade A CBD office rents in Beijing grew by 13.9% quarter-on-quarter, or 12.4% in local currency terms, while Singapore grew by 9.0% QoQ, or 6.2% in local currency terms. The growth in both cities is supported by continued robust demand for office properties, as well as their strong currency rates.

Office rent differential and competitiveness between Singapore and its closest rival, Hong Kong, has narrowed from 32.1% in 4Q 2010 to 28.8% in 2Q 2011.

This is due to the slowing down of Grade A CBD rental increase in Hong Kong to a mere 3.8% in US$ terms, or 3.9% in local currency terms, in 2Q 2011, against Singapore’s QoQ rental growth of 9% in US$ terms, or 6.2% in local currency terms, during the same period.

Singapore’s office rents is expected to grow, albeit at a slower pace
Moving forward, the office sector in Singapore would continue to be supported by healthy demand drivers, particularly in the banking and professional services sectors.

Market optimism, however, could be tempered by the persistence of downside risks arising from the unresolved sovereign debt crisis in Europe, a slowdown in China’s economic growth, as well as the uncertain US economic recovery.

Consequently, while the office market is expected to remain on the growth trajectory in 2H 2011, rental growth is projected to moderate further.

Rents for Grade A office space in the CBD and the Raffles Place/New Downtown micro-market could slow to not more than 8% for the remaining six months in 2011.