Singapore's office segment may be losing charm as foreign firms' headquarters

Office rents likely to soften 5%.

According to Colliers International, the outlook for the office leasing market remained dimmed by downside risks relating to the fiscal austerity and high unemployment in the Eurozone, as well as sequestration in the United States (U.S.).

It noted that office rents in Singapore may fall less than 5% in 2013.

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High inflation and accommodation cost, as well as growing labour shortages in Singapore, are also reducing Singapore’s attractiveness as a regional headquarters location for global multinational companies (MNCs). This could temper the recovery prospects of office leasing demand.

Consequently, the challenging global economic environment, coupled with supply pressures in both the primary and secondary markets, could result in Singapore’s office rents continuing to soften in 2013.

Nonetheless, encouraging signs pointing towards improving economic and market sentiments in the coming months could potentially help to cushion the falling office rents over the full year to less than 5%.

In the sales market, buying activities could continue to be shored up by the low interest rate, continued income growth and limited investment options in Singapore. Hence, if the fall in office rents can be contained, there is potential for office capital values to grow by 3% to 5% in 2013.