S'pore Has Fastest-Growing Prime Office Rents In The World: Report

Source : The Straits Times, Nov 22, 2007

It outpaces Mumbai as rents, occupancy costs rise 83% to $12.60 psf a month

PRIME office rents have grown faster in Singapore than anywhere else in the world over the past year, a new report has found.

The rate of increase beat even that in Mumbai, now the world's second most expensive office market, after London's West End, according to CB Richard Ellis (CBRE).

But overall, Singapore ranks 11th on the list of worldwide office rentals, which are generally rising quickly.

Rental levels plus other associated costs for Singapore prime office space shot up 82.6 per cent in the 12 months ended Sept 30 to $12.60 per sq ft (psf) a month, said the CBRE's Global Market Rents report. Apart from lease rates, occupancy costs include expenses for management and basic building maintenance.

In terms of occupancy costs, Moscow posted the second-fastest growth, of 65.4 per cent. Third in line was Mumbai, where occupancy costs grew 55 per cent.
The booming economics of the Asia-Pacific region continue to support strong demand for office space and to drive occupancy costs at a faster rate than in any other region, said CBRE in the report.

In comparing the costs, it looked at the typical achievable rent for a 10,000 sq ft unit in a top-quality building in a prime location.

Of the 171 markets it monitored, 85 per cent recorded growth in occupancy costs.

London's West End - which registered 41.9 per cent growth - still has the most expensive office space, at US$328.91 (S$476.76) psf a year.

Mumbai came in a distant second, at US$189.51 psf a year. But it is already 5 per cent more expensive than London City, where occupancy costs came to US$180.80 psf a year.

Moscow is ranked fourth most expensive, at US$180.78 psf a year.

To facilitate comparisons across markets, the report based the most expensive rents on US dollars while rental growth was measured in local currency terms.

Singapore is ranked 11th on the world's most expensive list, at US$102.37 (S$148.39) psf a year.

It came just after Hong Kong, where costs were at US$106.31 psf a year.

At $100.79 psf a year, rents for prime office space in New York's Midtown have come down. Costs in Tokyo ranged from US$154.56 to US$178.61 psf a year.

As was the case with other key Asian financial centres such as Tokyo and Hong Kong, office vacancy rates remained low in Singapore at 5 per cent or less, said CBRE.

It noted that the uncertainty in global financial markets has had no discernible impact on demand for office space in Singapore.

The companies in Singapore that require larger spaces are largely from the fast-growing financial and insurance sectors. And before year-end, several sizeable bookings by companies in these two sectors are expected, CBRE said.

The report also echoed comments by property consultants about rising tenant resistance to rental hikes as rents are at record-high levels.

Companies are now more prepared to move to cheaper space further out of town to avoid paying high rents.