Singapore's office rents still cheap compared to financial centre rivals

Rents almost twice more affordable than Hong Kong.

According to Cushman & Wakefield's Office Space Across The World 2014 report, Singapore remains considerably more affordable, underpinned by a healthy supply pipeline of quality Grade A office space, providing good expansion options to accommodate business growth.

Office space in the Lion City is over 2.5 times lower than London and 1.78 times more affordable than Hong Kong.

Rental growth was largely flat across Asia Pacific over the year, with an overall regional rental rise of just 2% in 2013. Singapore’s CBD proved the exception to this, boasting a 19.29% growth.

This growth is demand-driven, led by the professional services and technology sectors, most notably the consumer internet companies such as Booking.com.

The same cannot be said for Hong Kong – where growth has been stunted by its reliance on the financial sector and China.

Across the region, economic conditions were more fragile in the first half of the year, although growth in core markets of China and Japan advanced as the year progressed.

However, the region is well represented in terms of the most expensive office locations on a global scale. Hong Kong retained its position in second place overall, Beijing came in fourth position and Tokyo in fifth.

Toby Dodd, Managing Director, Cushman & Wakefield, Singapore said: “Across the island, rents have increased gradually through 2013. The CBD has seen a larger increase due to increased demand from the professional services and technology sectors. However, rent increases have been tempered by tenant’s aggressive focus on reduced budgets and operational expenses discipline.

Furthermore, rents will remain competitive due to the Singapore Government’s strong urban planning, coupled with a healthy supply pipeline, e.g. Marina One, DUO and CapitaGreen, with the latter due for completion this year. This should be considered ‘good news’ for Singapore, as affordability and supply are key to business expansion, job creation and economic prosperity.”

Sigrid Zialcita, Managing Director for Cushman & Wakefield’s Research team in Asia Pacific, adds: “The rent growth we saw in Singapore over the past year reflects the continuing improvement in leasing activity particularly for top-grade space on the back of better economic sentiment. The office market is benefitting from continued growth in other professional and business service sectors.

Even with the uptick, rents are still more affordable compared to Hong Kong’s Central district. Rents in Central are holding steady at their high levels despite the lack of any strong demand catalyst, notably for prime and large spaces where vacancies are higher.

Many tenants still remain loyal to the district. However, tenants in Central will continue to pay a premium especially if demand rises more meaningfully and vacancies remain at ultra-low levels. In Singapore, rents will remain at their competitive levels especially with upcoming new supply.”