Rentals of Grade A offices in Singapore are expected to continue rising this year.
According to property consultant Savills, average office rentals here may even nudge above that of Hong Kong's, currently the highest in the region.
They added that Singapore's office property sector will continue to remain buoyant despite worries over the US sub-prime crisis.
One Raffles Quay in Singapore's Central Business District"Even in the current environment which is rather uncertain, we noticed that the financial services community is continuing to grow in Asia. And we noticed this in HK and in Singapore, so demand remains very strong here. That is going to continue to push up rents in the grade A office market," said Simon Smith, Deputy Managing Director, Savills Valuation and Professional Services.
Savills is expecting prime office rents in Singapore to jump by 15-20% this year, down from the 90% jump in 2007. Vacancy rates for offices hit as low as 0.2% late last year.
Savills said Singapore is attractive to overseas investors looking at the office property sector in the region.
Robert McKellar, CEO (Asia Pacific), Savills Asia Pacific said: "Office is primarily very attractive. Of course, (there are) very few assets for sale and that makes it very difficult for any overseas investor to get access to stock. Nevertheless, if the opportunity arises, then definitely we'll go for a secure investment in Singapore.
"For example some of the German open-ended funds that are increasingly wanting to have a bigger slice of the Asian real estate markets; they see Singapore as an attractive market because of the fact that its lots are risk-free.
"They are looking to have a base from which to invest into the region, and (it's) ideal for them, acquiring an asset in Singapore which is risk-free, which has stabilised market, strong economy and low taxation."
Meanwhile, another property consultant CB Richard Ellis (CBRE) is estimating that about 10.1 million square feet of new office space in Singapore will be completed by end of 2012.
Some 67% of the supply coming into stream within the next three years is expected to be Grade A office space. This means a doubling of prime office space.
CBRE said monthly rentals for prime office space averaged S$15 per square foot from October to December of last year, up 92% on year. It is expecting these to average S$17 per square foot by the end of the year.
Meanwhile, luxury residences will also see prices jumping between 8-12% in 2008. - CNA /ls
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