Singapore's easing office rents offer cost advantage: analysts

It ranked 18th in world's priciest office space.

The office market continues to suffer slumping rents as it drown in supply. But some analysts see a brighter side to this, saying this gives the market cost advantage.

Based on JLL's latest Global Premium Office Rent Tracker, Singapore ranked 18th in the world's priciest cities for Grade A offices. Its rival Hong Kong topped the list.

According to JLL head of research for Southeast Asia Chua Yang Liang, this has raised Singapore’s office occupancy cost competitiveness.

"For example, while Hong Kong’s office occupancy cost in US dollars was 181% higher than Singapore a year ago, the gap has widened to 261% by September 2016. Similarly, the rental gap between Beijing and Singapore has widened from 104% to 114% during the same time period,” Chua noted.

Meanwhile JLL head of office leasing for JLL Singapore Chris Archibold said the availability of new supply has seen a number of corporations taking advantage of the competitive leasing environment by committing to the new wave of supply.

"The demand is predominantly driven by the efficiencies that can be achieved by relocating from buildings with small floor plates to buildings with large regular shaped floor plates coupled with changes to more efficient work place strategies. Many of these occupiers are seeing efficiency gains of between 8% to 12%," he said.

He added, "It is no longer a flight to quality but more of a flight to efficiency. Given this trend, leasing activity levels have been strong but overall net take up remains weak. The gap between prime building rents and those on secondary buildings has narrowed over the last 18 months as landlords have sought to attract occupiers. This gap is likely to rebalance somewhat in the coming 12 months as rental pressure is set to hit the older buildings when occupiers who have committed to space in the new projects vacate their existing premises”.