THE race between Singapore and Hong Kong to lure top foreign talent remains tight, with competition in the residential and office segments in particular heating up.

This was indicated by a Thursday (May 4) report by property consultancy CBRE on the attractiveness of both cities in drawing multinational corporations (MNCs) looking to set up their regional headquarters in Asia-Pacific. Key indicators include influence in the region, scalability in the finance and technology sectors, talent availability, as well as residential and office rents and availability. 

In the office segment, the consultancy pointed out that while rents in Singapore’s central business district (CBD) remain cheaper than Hong Kong’s, the latter offers more cost-effective decentralised nodes. 

For instance, CBRE noted that Grade A office rents in Singapore have bounced back after a 10 per cent decline in 2020, and are now approaching a 10-year historical high. 

Still, this is much lower than Central Hong Kong’s Grade A office rents, which remain the highest globally and are around 40 per cent higher than those in Singapore’s CBD, it said.

This comes even after a “deep correction” in Hong Kong’s rental prices, noted CBRE. Hong Kong Central CBD rents have fallen by 30 per cent since 2020, and are not expected to recover to pre-pandemic levels for at least the next three years, it said. Grade A rents in the city are expected to continue declining as well, before eventually stabilising in 2024, said the consultancy. 

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But despite Hong Kong’s higher CBD office rent, CBRE highlighted that rents in the city’s decentralised areas are much lower than those in the Central CBD. Rents in Hong Kong East are 55 per cent to 65 per cent lower than Central Hong Kong, while those in Kowloon East are 67 per cent to 75 per cent lower.

Meanwhile, the gap between Singapore’s Grade A rents and Grade B CBD core rents is 20 per cent to 30 per cent. This increases to between 35 per cent and 45 per cent when compared with Grade B decentralised rents. 

“For high-quality space, this gap drops to 20 per cent to 25 per cent,” said CBRE.

Besides providing more cost-effective decentralised alternatives, the consultancy noted that Hong Kong also possesses a more diverse range of commercial areas, with a third of the city’s total Grade A office stock being located in decentralised areas. 

On the other hand, the vast majority of office space in Singapore – almost 80 per cent – is located in its CBD area. 

This might change in the coming years, as the Singapore government makes available more commercial land sites outside the CBD, said CBRE. This includes the Jurong Lake District, which is slated to host 15 million square feet of office space, making for the country’s second-largest commercial location. 

The recent Government Land Sales (GLS) programme in the first half of 2023, for instance, saw the release of a massive 6.8-ha mixed-use site – with a potential yield of around 150,000 square metres of office space – in the precinct for sale to a master developer. 

“This was the largest GLS office site made available since 2016, and the largest ever in a decentralised location,” noted the consultancy. 

In terms of investment activity, CBRE pointed out that Singapore’s office market has been much more active than Hong Kong’s in the past few years. 

“Investors focusing on core and value-added (portfolios) continue to be attracted to Singapore’s solid economic growth, healthy long-term office sector outlook, and higher availability of investable en bloc office buildings,” CBRE said. “(Its) earlier border reopening also helped secure the city a larger share of foreign investments.” 

Although office capital values in Hong Kong have historically been higher than those in Singapore, CBRE noted that the price gap between both cities has narrowed significantly, from 130 per cent to 135 per cent in 2019 to 30 per cent to 35 per cent in 2022. 

“During this late-cycle period, Singapore’s office sector is viewed as relatively expensive, while Hong Kong’s deeply discounted prime offices are seen as offering more favourable prospects for value-oriented investors,” it said. 

CBRE noted however that total office stock in Singapore is just 73 per cent of Hong Kong’s.

This gap is set to widen further in the next four years, as Hong Kong expects “ample new supply” to come on stream – at around 10 per cent of its existing office stock, compared to Singapore’s 7 per cent. 

On the residential front, CBRE noted that even though both cities have “deep talent pools” in various industries, such as the finance and tech fields, steep residential rent appreciation might deter expats from Singapore. 

Its report showed that residential rents in Singapore grew 30 per cent year on year in Q4 2022, and 44 per cent overall since 2019. 

Meanwhile, rents in Hong Kong were down 6 per cent year on year in Q4 2022, and 8 per cent overall since 2019. This came on the back of weaker housing demand caused by prolonged travel restrictions and the departure of a large number of expatriates, said the consultancy. 

The residential rental gap between both cities consequently narrowed from 82 per cent in 2018 to 12 per cent in 2022. 

“Residential rents in Singapore could soon surpass those in Hong Kong’s decentralised districts of Kowloon and the New Territories,” it added. 

As a business hub, CBRE highlighted that the two cities are both well-connected, serving as gateways to different parts of Asia – for Singapore, to South-east Asia and India, and for Hong Kong, to North Asia. Both countries also dominate in different industries, it said – science and tech for Singapore, and finance for Hong Kong.  

“The reality is that both hubs have great positioning, but with slightly different value propositions,” said Moray Armstrong, managing director of CBRE’s Singapore advisory services. 

“For companies covering the whole of Asia, it is rarely a choice of one location to the exclusion of the other… In effect, the two centres are complementary. As MNCs set out pan-Asia strategies, having a strong presence in both hubs ensures that organisations will be ideally set to capitalise on Asia’s wider growth opportunities.”