Don't worry. The looming flood of new office space will be snapped up so Singapore won't suffer from over-supply, says National Development Minister Mah Bow Tan.
"We take a medium-to-long term view of projections,'' said Mr Mah. "All the supply will be taken up."
As much as 10 million square feet of new office space could be available from 2010 to 2012, said Mr Donald Han, managing director of Cushman and Wakefield in Singapore, citing research from the Urban Redevelopment Agency. However, annual demand for new office space over the past 10 years was 1.8 million to 2.2 million square feet, Mr Han said.
At the moment, demand is high and supply low. But this is about to change.
Occupancy costs rose to a record last year, boosted by demand from banking and business services and the limited supply of top-tier office space.
High rents prompted the Government to release more land for offices and developers to build as much as 6.5 million square feet of space that will be available in 2010 and 2011.
Despite the slowing economy and high inflation, CapitaCommercial Trust chief executive Lynette Leong said demand for office space remains strong.
"We have tenants who want more space but we can't give it to them,'' said Ms Leong. Most of these are financial institutions looking to expand, she said.
"The big question is really what happens after 2010,'' said Cushman's Mr Han. "I think as long as developers and owners of office projects are realistic in terms of rents, there will be take-up, but the pricing will be on the side of the tenants.''
Landlords may have to settle for office rents as much as 20 per cent lower than the $18 to $20 per square foot currently paid for so-called Prime Grade A office space, Mr Han said. — Bloomberg
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