S'pore Ranked 9th On Costs Of Office Occupancy: CBRE

Source : The Business Times, May 29, 2008

Highest increase in occupancy costs over 12 months is Ho Chi Minh City

AFTER the sharp increase in prime office occupancy costs, Singapore has emerged as the ninth most expensive office market in CB Richard Ellis's (CBRE) latest semi-annual Global Market Rents survey.

Singapore was ranked 11th in the last survey in November last year and 24th in the May 2007 survey.

Mr Armstrong: 'Pace of rental growth in S'pore is moderating and we sense the peak is close at hand.'

The last time it was one of the 10 expensive office markets in the survey was 1991, when it ranked sixth.

However, on a brighter note - for those concerned about Singapore's competitiveness - the latest survey shows that the island no longer holds the title of posting the highest increase in occupancy costs over a 12-month period.

That 'honour' went to Ho Chi Minh City, which posted a 94.4 per cent jump in office occupancy costs - in local currency - over the 12 months ended March 31, 2008. It was followed by Moscow (up 92.7 per cent) and Singapore (86 per cent).

In the previous survey, published in November last year, Singapore posted the highest 12-month increase in occupancy costs, while in the May 2007 study it took fifth spot.

'The pace of rental growth in Singapore is moderating and we sense that the peak of the market is close at hand,' said CBRE's executive director (office services) Moray Armstrong.

'With significant new office supply coming on stream through the next few years, we are confident that Singapore's medium- to long-term term competitiveness in premises costs is assured.

'It's also noteworthy that the range of alternative lower-cost premises options (for example, business park space) has been bolstered. This is a sign of the commercial property market's growing maturity in response to Singapore's status as a global business city.'

CBRE figures show the average monthly Singapore prime office rental rose 92.3 per cent last year to $15 psf in Q4 2007, after appreciating 50 per cent in 2006.

For Q1 this year, the average monthly prime office rental was $16 psf, up 6.7 per cent from the preceding quarter.

CBRE projects that the figure will edge up to $17 psf by end-2008 and $17.50 psf by end-2009.

CBRE's latest Global Market Rents survey shows London's West End retained its position as the world's most expensive office market, while Moscow climbed to second spot, followed by Tokyo's Inner Central Five Wards, Mumbai's Nariman Point and Tokyo's Outer Central Five Wards.

'Office occupancy costs are continuing to defy sluggish economic conditions and the credit crunch, as they rise faster than global inflation,' noted CBRE's global chief economist Raymond Torto.

'These cost increases are dominated by emerging markets, caused by both supply and demand imbalance and the depreciation of the dollar relative to local currencies. In some of these emerging markets, Class A office space is seriously lacking.'

Overall, Europe, Middle East and Africa dominated the list of markets with the fastest-growing occupancy costs, accounting for five of the top 10 and 19 of the top 50 markets.

Worldwide, 88 per cent of the 173 office markets monitored posted higher occupancy costs.

CBRE said that its definition of occupancy costs covers rent, plus local taxes and service charges.

The occupancy cost figures are adjusted to reflect different measurement practices from market to market.