Published September 9, 2008

Singapore office occupancy costs 7th highest worldwide: survey


GRADE A office space in Singapore was the seventh most expensive in the world in June this year, a survey has found.

The average annual Grade A office gross rent here was US$125.06, according to the study by Colliers International.

Cities that were dearer included Hong Kong (US$213.68), London's West End (US$207.42) and Moscow (US$167.29).

Singapore was the third most expensive location in the Asia-Pacific region, after Hong Kong and Tokyo.

In its Global Office Real Estate Review Midyear 2008, Colliers says average annual Grade A office rent in Singapore soared to US$113.49 in December 2007, from US$84.64 in June 2007.

In terms of vacancy rates, Singapore at 7.5 per cent in June 2008 ranked 13th in the Asia-Pacific, below the likes of Perth (0.3 per cent), Seoul (0.7 per cent) and Brisbane (1.2 per cent).

While the vacancy rate here rose marginally from 6.1 per cent in December 2007, Collier's director of research and advisory Tay Huey Ying said: 'Singapore registered a comparatively higher vacancy rate in the first six months of this year. This was due in part to the government providing relief to the supply shortage by leasing out some disused state properties and selling several sites for transitional office use.'

Companies appear to be increasingly receptive to alternative business locations and premises, Ms Tay said.

'Office users, who have had to grapple with the frenzied pace of rental growth experienced since mid- 2006, can heave a sigh of relief as rental growth eased substantially in the first half of 2008 on the back of reduced pressure on supply,' she said.

In terms of supply, Colliers said Singapore had 8.6 million sq ft of offices under construction in June, putting it in 16th position below cities like Dubai (42 million sq ft), Shanghai (41.6 million sq ft) and Guangzhou (19.8 million sq ft).

Office investment held up in the Asia-Pacific but was down in Europe and North America.

Global office investment fell 60 per cent - or 41 per cent excluding portfolio sales - in the first half of 2008 to $108 billion, from $268.6 billion a year earlier.

But Japan saw office transactions increase 103 per cent, followed by Hong Kong (up 86 per cent) and Singapore (up 58 per cent). China registered a drop of 16 per cent.

Capitalisation rates / initial yield in Tokyo (Central Wards), Hong Kong and Singapore were 3.9, 3.42 and 6.19 per cent respectively.

In Spain and The Netherlands, office transactions increased 77 per cent and 14 per cent respectively, while in London they fell 64 per cent.

The US remained the most active office investment sales market, even though volume dropped 69 per cent to US$28.6 billion.