S'pore prime office rents rise 19% in 2013

[SINGAPORE] Despite rents in Singapore's central business district (CBD) surging 19.29 per cent last year, bucking the trend of largely flat rental growth across Asia, office space remains considerably more affordable compared to other major financial centres.

At 803 euros (S$1,389) per square metre (psm) per year, the Republic's occupancy cost was sharply lower than London's West End (2,122 euros); Hong Kong's Central district (1,432 euros); Tokyo's CBD (1,003 euros); and New York's Madison and 5th Avenue (993 euros).

Rental growth here was largely demand-driven, led by the professional services and technology sectors, most notably consumer Internet companies such as Booking.com, said Cushman & Wakefield in its latest Office Space Across the World report.

But while rents have risen, the increases have been tempered by tenants' aggressive focus on reduced budgets and operational expenses discipline, said Toby Dodd, managing director at Cushman & Wakefield, Singapore.

It is worth noting that Singapore's rental growth of 19.29 per cent is from a lower base, after the market reached the bottom of the cycle in Q4 2012.

"Rents will remain competitive due to the Singapore government's strong urban planning, coupled with a healthy supply pipeline - for example, Marina One, DUO and CapitaGreen, with the latter due for completion this year. This should be considered 'good news' for Singapore, as affordability and supply are key to business expansion, job creation and economic prosperity," added Mr Dodd.

In terms of rental growth, Singapore posted the third-largest rental increase in Asia Pacific, behind Jakarta and Bangkok, where prime rents rose 20 per cent in both cities.

Singapore was the seventh most expensive location in Asia Pacific. Hong Kong kept its regional crown (1,432 euros psm per year), followed by Beijing (1,027 euros), and Tokyo (1,003 euros).

Comparing Singapore with Hong Kong, Sigrid Zialcita, managing director for Cushman & Wakefield's research team in Asia Pacific, noted that despite the rental growth here, the Republic's office market continues to be more affordable than Hong Kong's Central district.

"Rents in Central are holding steady at their high levels despite the lack of any strong demand catalyst, notably for prime and large spaces where vacancies are higher," said Ms Zialcita.

"Many tenants still remain loyal to the district. However, tenants in Central will continue to pay a premium especially if demand rises more meaningfully and vacancies remain at ultra-low levels. In Singapore, rents will remain at their competitive level especially with upcoming new supply."

According to the 2014 ranking, Singapore is the 11th most expensive location by country, versus its 14th position last year.

London was the most expensive office market for the second year in a row, followed by Hong Kong. The third position went to Moscow (1,092 euros psm per year) after the city climbed three spots from sixth position a year ago.

Global office rents rose 3 per cent last year, while rents in Asia Pacific went up 2 per cent.

Asia Pacific's performance in 2014 is expected to be similar to 2013, as slow and stable demand keeps rental levels largely unchanged, though incentives will become more competitive, said Cushman & Wakefield.

China, Japan, and South-east Asia are expected to drive the region forward, with demand for office space in these areas gaining momentum in the course of the year, it added.