Sharp fall in S’pore office rents

SINGAPORE saw the steepest decline in office rents across 25 Asia-Pacific cities, but remains the third most costly office site after Tokyo and Hong Kong.

Grade A office occupancy costs in Singapore fell to US$53.78 (S$76) per sq ft per year in the fourth quarter of last year, down about 46 per cent from US$97.30 psf in the same period in 2008, said Colliers International’s latest Asia-Pacific office market overview.Costs are projected to stabilise at US$53.19 psf this year.

Hong Kong, which saw yearly Grade A occupancy costs fall 24.2 per cent from US$104.14 psf to US$78.92 psf, registered the next highest fall in office rents. The same costs in Tokyo slipped to US$101.39 psf, down from US$128.50 psf a year ago.

‘We are now much cheaper than Hong Kong,’ said Colliers International’s director of research and advisory Tay Huey Ying. ‘A year ago, though we were also ranked third, we were not that far off from Hong Kong and Tokyo.’

The gap in rents between Singapore and the top two most expensive cities – Tokyo and Hong Kong – has since widened to 88.5 per cent and 46.7 per cent respectively, from 32.1 per cent and 7 per cent previously, said the report.

‘With Asia-Pacific leading the world out of recession, the competitive office rent in Singapore now offers businesses a compelling reason to invest in or locate their operations here,’ said Ms Tay.

Average monthly Grade A office rent in Singapore’s central business district was $6.29 psf in the fourth quarter of last year, according to Colliers.

Oncoming supply of close to three million sq ft continues to weigh on the office market in the near term, so there may be some mild price erosion of up to 5 per cent, she said. But barring any external shocks, the local office downcycle is expected to bottom out in the second half of this year, she added.

Source : Straits Times – 11 Feb 2010