Office Demand Unaffected By Global Credit Crunch

Source : The Business Times, March 13, 2008

No threat of financial sector redundancies: URA

The credit crunch has so far failed to dent demand for office space in Singapore or derail its bid to become Asia's leading financial centre, a senior member of the city-state's Urban Redevelopment Authority (URA) told Reuters.

Speaking at the annual MIPIM trade fair in Cannes on Tuesday, Choy Chan Pong, head of land administration at the URA, said that Singapore had not felt the threat of vast financial sector redundancies and its construction boom continued.

'We have not seen any evidence of a decline in demand for office space, and for now most financial institutions in Asia are still hiring,' he said.

The URA said earlier this week that it planned to double the size of Singapore's Marina Bay financial district to 2.82 million square metres - or twice the size of London's Canary Wharf financial district - as international financial sector occupiers continued to seek presence in the city.

The authority had set aside 101 hectares of green parkland directly adjacent to the Marina Bay financial district that would serve as 'lungs' for the city, and which would never be sold for office schemes, at any price.

'We have had offers from several Middle Eastern developers and investors to buy the land we have allocated for the Marina Gardens but we will never sell it,' Mr Choy said. 'It stops Singapore from becoming a concrete jungle. It is priceless.'

Standard Chartered Bank and DBS Bank have agreed to take a total of 111,500 square metres of space at the Marina Bay Financial Centre, a 438,000 square metre office and residential project being developed by Keppel Land, Cheung Kong Holdings/ Hutchison Whampoa and Hongkong Land.

According to data from global property broker Cushman & Wakefield last month, Singapore prime office rents climbed 78 per cent in local currency terms in 2007 but Mr Choy quelled fears that this surge in rental costs had begun to price some occupiers out of the market, and towards rival markets of Tokyo and Hong Kong.

'You have to remember this rental increase was from a very low base. Singapore is still cheaper than Hong Kong . . . and Tokyo is almost full,' Mr Choy said.

Hong Kong is the second most expensive office market in the world, behind London, with annual office rents averaging US$239 per square foot. Tokyo is in third place with annual office rents at US$210 per square foot. Singapore is in seventh place.

Its annual office rents average US$130 per square foot.

'We do not expect financial institutions will have to choose one market over another, so we have no concerns about growth of China or Japan,' Mr Choy said.

'Realistically, banks know they have to be in all three cities because we serve different markets, and if banks want access to India or South East Asia, they need to be in Singapore.'