S’pore up two notches in office costs ranking

But it continues to improve on competitiveness

SINGAPORE has risen two notches on the latest bi-annual list of the world’s most expensive office locations.

But Singapore’s competitiveness – in terms of office occupancy costs – continued to improve, as the gap between rents here and in other major financial centres widened, the report by Colliers International found.

Colliers’ second-half 2009 global office real estate review tracked space in 154 cities worldwide from June to December last year. Singapore was ranked 24th most expensive – up two notches from 26th in the H1 2009 survey.

Hong Kong was again the most expensive office location, followed by London’s West End and then Tokyo.

Although Singapore’s ranking rose, the gap between office rents here and those in rival centres grew bigger. This is because Singapore is a laggard – worldwide and regionally – in the office market recovery, Colliers said. Many cities posted gains or recorded milder declines in office rents in H2 2009.

‘This phenomenon is to Singapore’s advantage,’ said Tay Huey Ying, director of research and advisory at Colliers. ‘The resultant growth in the gap in office occupancy costs against other key financial centres improves our competitiveness and makes Singapore the choice location for business set-ups.’

She also said the gap between Singapore and rival Hong Kong has widened, from 45 per cent at end-December 2008 to 60 per cent in H1 2009 and 67 per cent in H2 2009.

While office rents here have continued to dip, the rate of decline has slowed significantly – to 6.5 per cent in H2 2009, from 42.3 per cent in H1 2009 – in local currency terms.

Colliers expects the local market to ride the economic recovery in 2010 and build on the momentum seen in Q4 2009, when demand for office space expanded by 301,000 sq ft.

Rents for Grade A office space in the central business district bottomed out in Q1 2010, rising 0.5 per cent quarter on quarter to end the quarter at $6.38 per sq ft per month, Colliers said.

‘The flight to quality, as well as expansion by businesses, can be expected to continue in 2010,’ Ms Tay said. ‘Barring any unforeseen external shocks, the Singapore office market is expected to see a modest recovery with up to a 5 per cent increase in rents in 2010.’

Source: Business Times, 6 Apr 2010