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The annual cost of renting an office and residential space in Singapore per employee declined by 4 percent to US$71,862 in 1H 2015 compared to the previous six months, according to a Savills report.
As a result, the city-state took the 6th spot in the consultancy’s Live/Work Index, behind San Francisco (5th) and Paris (4th). London, Hong Kong and New York bagged the top three spots as the world’s most expensive place to lease an office and residential space.
Savills explained that Singapore’s office market declined significantly after 2005. That is why it was left unscathed by the slower economic growth seen in 2014.
On average, office rents there rose by 12 percent thanks to robust leasing and sales activity with sustained demand from new companies and expanding businesses, mainly from telcos, IT firms and legal service providers.
Notably, the majority of the leasing transactions was for smaller spaces measuring less than 10,000 sq ft that were taken up by real economy companies (firms that manufacture goods or render services).
Although rents are still rising, the report said they are still well below their 2008 peak so construction of office buildings has been relatively slow and the resulting tight supply would landlords a window of opportunity in 2015 to maximise returns over the next two years.
However, the supply of new office space is expected to increase and this could soften rental growth. Additionally, leasing demand is being driven by new-to-market companies and those that already have a presence in Singapore, instead of multinational finance and business firms on the lookout for regional HQ which could mean more demand for smaller spaces with flexible leases, the report said.
Consequently, rents of grade A office space in the CBD measuring less than 10,000 sq ft are expected to increase by 12.9 percent in 2015.
The Savills Live/Work index measures the annual per-person cost of renting and occupying home and office space per employee in twelve global cities, taking an average across its executive unit.
Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this or other stories email nikki@propertyguru.com.sg.
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