Office location here is 10th most costly

Source : Business Times - 31 Mar 2009

S’pore’s total annual occupancy cost per workstation stands at US$16,540: DTZ

Total annual occupancy cost per workstation in Singapore slipped 3 per cent year-on-year to US$16,540 in the latest 2009 global ranking by DTZ.

This was due entirely to a decline in office rents. ‘Prime office rents in Raffles Place fell 15.8 per cent in Q4 2008, resulting in a drop of 3 per cent for the whole of 2008,’ DTZ Singapore senior director Chua Chor Hoon said.

The latest ranking placed the Republic as the 10th most expensive location out of 114 districts worldwide covered in the latest 2009 survey, which compared the total occupancy cost per workstation measured in US dollars as at end-2008. Singapore was seventh in the 2008 survey, which was based on end-2007 figures.

Tokyo (Central 5 wards) and London (West End) traded places. The former, which had been in fifth position in 2008, is now the most expensive location, while London’s West End, which had been the most expensive office market since 2001 when DTZ first compiled the rankings, was in fifth spot in the 2009 survey.

‘Due to the strong appreciation of the Japanese yen and increase in space utilisation standard per workstation, Tokyo (Central 5 Wards) occupancy costs per workstation grew 26 per cent year-on-year despite weakening occupier demand in the second half of 2008. Similar trends were noted in Hong Kong and Singapore, where occupancy costs started trending down towards the fourth quarter of 2008,’ DTZ said in its report.

Total annual occupancy cost per workstation for Tokyo (Central 5 Wards) rose 26.1 per cent to US$22,820 in the 2009 survey. Paris, the second most expensive location in the latest survey, saw a 0.4 per cent decline to US$22,300. The cost for Hong Kong slipped 13.3 per cent to US$21,930, placing it in third position, followed by Dubai, with total occupancy cost per workstation of US$21,620 per annum.

DTZ defines total occupancy cost as the average total cost of leasing prime net usable space. This includes rents and outgoings such as maintenance costs and property tax, if these are normally payable by the occupier, but excludes rent-free periods, fitting-out costs and other leasing incentives.

The property consulting group’s analysis of office occupancy costs is based on the space allocated to each office-based employee across 114 business districts worldwide.

As space utilisation standards per workstation differ in each business district due to local practices and culture, a comparison of the office occupancy costs based on the amount of space allocated to each employee gives a better comparison of the total costs of office occupation. The space takes into account not only the direct area used for a desk-station or a cubicle, but also common areas which the tenant/occupier has exclusive use over.

In terms of rents and other outgoings per square foot, Moscow, Hong Kong and London (West End) were the top three most expensive office locations in the 2009 survey. However, due to a higher space utilisation standard per workstation, Tokyo (Central 5 wards) was the world’s most expensive office location on a cost per workstation basis. Its space utilisation per workstation was 144 square feet compared to Moscow (84 sq ft), Hong Kong (118 sq ft) and London’s West End (118 sq ft).

The firm noted that apart from local market dynamics of supply and demand, as well as changes in space utilisation standards per workstation, occupancy costs of the business districts studied were also significantly affected by the volatile fluctuations in local currency values against the US dollar, the base currency used in the ranking.

DTZ observed a slight decline in the average space utilisation standard per workstation worldwide to 146 sq ft over the course of 2008. ‘Going forward, space utilisation standards across most regions are likely to decline as companies focus on space optimisation and cost reduction measures. These include flexible work practices like hot-desking and teleworking, thereby utilising existing space more efficiently to avoid taking on more space or to consolidate and free up space for sub-leasing,’ it added.

Looking ahead, the report said that amid the uncertainty of a long global economic downturn and further contraction in occupier demand, occupancy costs are expected to decline in many business districts. ‘Prospects of an impending supply glut in some markets and the wider adoption of flexible work practices leading to reduced space consumption will also be factors helping to drive occupancy costs down, especially across Europe and Asia-Pacific,’ DTZ said. It said that occupancy costs are expected to fall in 2009 for 78 per cent of the 114 business districts studied globally. ‘Only 3 per cent of all business districts surveyed expect a slight increase in occupancy costs, with the remaining 19 per cent expecting occupancy costs to remain stable.’

In Asia-Pacific, 76 per cent of the markets surveyed foresee office occupancy costs to decline while 24 per cent predict occupancy costs will remain stable over the year.