More businesses may consider expanding in Singapore

More businesses may consider expanding in Singapore, thanks to the supply of office space entering the market.

With office rentals in Hong Kong expected to rise sharply, analysts said that is another reason why companies may find it more cost effective to hire in Singapore.

The office property sector within Asia is expected to see considerable growth in supply over the next three years, according to recent data from property consultant Savills.

In terms of some key cities, Singapore is expected to see a 47 per cent increase in Grade “A” office supply, and Shanghai a 64 per cent jump. But Hong Kong is expected to see as much smaller increase of just six per cent.

Simon Smith, Regional head of Research, Savills, said: “Hong Kong at the moment is almost unique in the region in not having an oversupply situation in the office markets – this is both good and bad. I mean that rents have already found a bottom.

“But it equally means that over the next quarter or two, our markets are going to look quite tight. So that’s going to translate into quite dramatic rates of growth in rents towards the end of this year for many corporates who are looking at weighting their businesses across Asia.

“They may choose to expand in areas other than HK where costs are rising dramatically. So Singapore, where you see quite a lot of office development over the last year or so, could be a net beneficiary.”

Rentals in Hong Kong are expected to move up in the region of 20 per cent for 2010, especially towards the end of the year, while in Singapore, prices are expected to remain relatively stable with the office market expected to see a bulk in supply between 2010 and 2012.

While most market watchers agree that government stimulus packages in the last year helped to push liquidity into the market and stimulate property demand, in the coming year, the slow withdrawal of the stimulus packages is not expected to have any impact on the property market.

Experts added that with governments in the region keeping a closer eye on potential bubble developments and the impact of stimulus package unwinding, they expect residential prices to be quite well supported even if growth moderates.

Source: Channel News Asia, 14 Jan 2010