PLUNGING rents in the second quarter have seen Singapore slip from being the region's third most expensive city for office space to fourth place.
Office rents fell 26.2 per cent from the first quarter, according to Colliers International's new Asia Pacific Office Market Overview.
It was the biggest decline in the region, with Hong Kong next, with a fall of 10.3 per cent.
Tokyo is the priciest, with Hong Kong and Ho Chi Minh City second and third, respectively.
The survey assesses monthly gross rents for Grade A offices in central business districts of 26 cities in the Asia-Pacific region.
'Monthly office rents here have fallen 41.5 per cent for the first half of this year to average at $6.73 per sq ft,' said Ms Tay Huey Ying, director of research and advisory at Colliers International.
This was due to both the large supply of office space looming and firms giving up office space because of the financial crisis, she said.
However, the average occupancy rates of such offices stabilised in the three months to June 30, 'declining nominally from 94.3 per cent to 93.9 per cent', said Ms Tay.
Ms Chua Chor Hoon, DTZ's head of South-east Asia research, pointed out that falling rents do not reduce business costs for all parties.
It is only good for tenants with leases due for renewal or those looking to rent.
'If your lease is not due for renewal, you still have to pay at the rate you signed on earlier,' said Ms Chua.
Ms Tay said office rents here would remain depressed over the next 12 months.
'Given that the economy is expected to contract at a reduced pace, growth in demand for office space will likely stay subdued,' she said.
Ms Tay also cited a large supply of upcoming office space and shadow space. This is space already leased to a tenant who wants to sublet it.
She said that Singapore is likely to keep slipping in the ranks because all the other Asian cities in the survey have relatively brighter outlooks.
This will improve Singapore's competitive edge, as office rent would be cheaper here than elsewhere.
Most expensive cities
Asia Pacific Office Rents* Ranking in the second quarter of this year:
1. Tokyo (1)
2. Hong Kong (2)
3. Ho Chi Minh City (4)
4. Singapore (3)
5. Brisbane (7)
6. Mumbai (5)
7. Sydney (8)
8. Perth (6)
9. New Delhi (9)
10. Shanghai (10)
* Monthly gross rents for Grade A offices in the central business district. Numbers in brackets are the cities' rankings in the first quarter.
Taken from Colliers International's Asia Pacific Office Market Overview.
Source: Straits Times, 4th Aug 2009