Singapore slips as office rents slow

Source : Today - 27 Nov 2008

Occupancy costs in Middle East the fastest growing

THIS is one ranking that Singapore would be happy not to climb: Cities with the fastest-growing rentals.

According to a semi-annual survey of office markets worldwide, Singapore now ranks 13th in terms of posting the fastest-rising rents among 172 markets, slipping from No 3 position six months ago.

Here, occupancy costs - which include expenses for management and basic building maintenance - rose 27.8 per cent from a year ago in September, CBRE said in its Global Market Rents survey out yesterday.

The pace was much slower than in Abu Dhabi, where occupancy costs in local currency shot up 94.6 per cent from a year ago. The emirate and two other Middle Eastern cities dominated the top three positions in the list of fastest-growing rentals.

”Our current perceptions are greatly affected by the current economic malaise and we tend to forget how fast rents and occupancy costs were rising over the last 12 months,” said Dr Raymond Torto, CBRE’s global chief economist.

In terms of pricing, Singapore is still rather expensive. Rents of US$135.13 per square foot (psf) per year made it No 9 among the world’s most expensive office market in absolute terms. It was in the same position during the survey in May, but ranked 11th in the November survey last year.

The results bode well for Singapore’s competitiveness, said Chesterton Suntec International research head Colin Tan, especially when compared with rival cities like Hong Kong.

Hong Kong’s office rental market is more expensive than Singapore’s - as the Chinese territory ranks No 12 in the category of fastest growing rents - while Hong Kong office rents of US$234.73 psf per year make it No 3 among the world’s most expensive.

Mr Tan expects Singapore to slip further in future rankings: “One of the Government’s major policy is to ensure our competitiveness, and it is more deliberate in Singapore than elsewhere.”

He added that the Government’s recent efforts to increase office supply through the release of transitional office sites would further ease rents in the months ahead.

Worldwide, rents jumped 8 per cent compared to a year ago, almost double last year’s world inflation rate, the survey noted. Still, Dr Torto noted that the rate of change is generally slowing and in some markets, the pricing direction is down. This will bring “some relief to occupiers” but “angst to owners”.

However, he said, “unlike previous downturns, which have occurred simultaneously with extensive overbuilding, the real estate market globally today is in a stronger position to weather the difficulties than in the past”.