The space crunch that has hit the office sector will not be allowed to derail Singapore's aim to be a key financial centre.
THE space crunch that has hit the office sector and sent rents soaring will not be allowed to derail Singapore's aim to be a key financial centre.
The pledge came from National Development Minister Mah Bow Tan, who also pointed out that the tight supply - itself a factor of the booming economy - provides a huge opportunity for developers and investors.'The time is now,' said Mr Mah yesterday. 'There is no better time for investors to consider real estate development and investment opportunities in Singapore, given the robust outlook and comprehensive development plans we have in place.'
Mr Mah told the closed-door Macquarie Asia Forum 2007 that the supply shortage will be tackled in part by land releases that will be calibrated to allow developers to make informed decisions about their investments.
And he stressed that the Government's aspirations for developing Singapore as a major financial centre 'will not be constrained by space availability'.
Mr Mah's comments - the most forthright since the property market took off two to three years ago - could be a sign that the Government believes the problem is reaching a critical point.
'Overall, I think the Government will probably have to prioritise its investment plans, given the tight commercial and residential market and labour markets,' said Citigroup economist Chua Hak Bin.
'We may be reaching an inflexion point, where supply constraints and higher rents and wages are starting to bite.'
Government data shows that prime median rentals of new office leases are now at $11.89 per sq ft per month, compared with $5.05 at the end of 2004.
Rents for prime office space, which are in demand by players in the booming financial and business services sectors, have shot up on tight supply to the point where some companies are resisting the rapid increases by moving further out or to industrial locations.
But this is expected to be a short-term problem, with relief coming in 2010, when major projects such as Phase 1 of the Marina Bay Financial Centre are completed.
The Government has already taken steps to address the supply shortfall by releasing transitional office sites.
More space will be made available, but land releases will be 'calibrated and measured', with a view to meeting needs on a sustained basis, said Mr Mah.
There will also be a focus on developing new zones for financial and business hubs, including in Jurong and Paya Lebar, to take the heat off office space in the central business district.
Mr Chua backed the Government's view that growing the financial centre should remain a major priority.
'But other less important investment initiatives may need to take a back seat, to reduce the intense competition for workers, office space and construction materials,' he added.
Mr Mah also put the rent rises in a broader perspective: 'Despite the recent surge in demand, Singapore's office rentals remain very competitive compared to major cities like London, Tokyo and Hong Kong.'
DTZ Debenham Tie Leung executive director Ong Choon Fah told The Straits Times that London has consistently been the most expensive city in the world in terms of office rents.
'But it has always attracted businesses because that is where the talent and the money is,' said Ms Ong. 'At the end of the day, it's not just the costs but the value proposition that Singapore can offer.'
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