Singapore – Office occupancy cost went down by 22 percent, from a yearly average gross lease of US$125.06 per square foot (psf) in H1 2008 to US$97.07 psf in H2.
However, according to the report of Colliers International, Singapore is still the third in Asia-Pacific as the most expensive city.
Occupancy cost is determined as the central business district’s (CBD) annual average gross rent in Grade A office space. Tokyo and Hong Kong remained at their second and first spots, with average gross rents of US$128.40 psf and US$ 177.86 psf, respectively.
Globally, Hong Kong was the most expensive city, while Singapore ranked as the sixth most expensive city.
Colliers’ research and advisory Director Ms. Tay Huey Ying said, “Despite the fact that Singapore’s CBD Grade A office rents registered a 22 percent decline in H2 2008, it has retained a high position in the regional and global ranking”.
“This is because office rents in almost all other cities have been similarly pressured down by the global financial crisis”.
The report of Colliers presents that the nine major cities in the Asia-Pacific surveyed recorded lease falls exceeding 20 percent. Perth and Brisbane suffered the steepest falls of above 28 percent.
As Singapore stays costly, Ms. Tay thinks that cost competitiveness has increased a bit, most especially against other major financial cities such as Tokyo and Hong Kong.
She also cited that office occupancy cost in Singapore is currently 45 percent lower than in Hong Kong. Singapore’s occupancy cost is also 24 percent lower compared with Tokyo.
In Singapore, vacancy rate for Grade A office also increased by 1.4 percentage points to 8.9 percent in H2 2008. The 8.9 percent is higher compared with Tokyo and Hong Kong, both with 4 percent.
The highest vacancy rate was recorded in Guangzhou at 23 percent, while the lowest vacancy rate was recorded in Seoul at .07 percent.
“The growing vacancy rate in Singapore is due to the interplay of dwindling demand and surging supply”, Ms. Tay said.
According to Colliers, the office space in Singapore had shrunk for the first time in December 2008.
On the other hand, new supply also increased to approximately 1.4 million square foot in 2008. This was the largest number since 2002 and surpassed the accumulative net new supply of 2003 to 2007’s office space by nearly one million square foot.
Following the economic contraction, the vacancy rate in Singapore is set to increase and the demand for office space is set to decline in 2009, Ms. Tay said.
“On the supply side, 2.9 million sq ft of office space is estimated to come on stream in 2009, on top of the bumper crop of net new completion amounting to 1.4 million sq ft seen in 2008”, she said.