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Singapore ranked 18th in the world’s priciest office locations this year as rents for premium offices continue to fall amid a challenging economy forcing companies to consolidate and the looming oversupply.
The city-state’s ranking eased from the 11th spot last year, JLL’s Global Office Rent Tracker revealed.
“Office rents in Singapore continued to ease in 2016 amid the downbeat economy and substantial completion,” said Dr Chua Yang Liang, JLL’s head of Research for Southeast Asia.
Hong Kong tops the list with a significant lead in terms of occupancy costs. Hong Kong’s Central district is more than 50 percent higher than rates in London and New York, which ranks second and third respectively. According to the report, it costs US$302 per sq ft per year to rent space in a top–notch building in Hong Kong alongside US$197 per square foot in London’s West End and US$194 per square foot in Midtown New York.
“This is also a new high for Hong Kong compared to US$262 a year ago. Prices were pushed up due to strong demand and shortage of stock as companies from Mainland China look to have a base in Hong Kong,” the report noted.
Chinese cities Beijing and Shanghai ranked fourth and sixth respectively, while Tokyo took the fifth spot, on the back of high leasing activity and big-ticket pre-commitments. Completing the top 10 is Dehli in India, San Francisco, the city of London and Hong Kong’s island east.
“The world’s most important and interconnected cities dominate the top spots in the rankings,” said Megan Walters, JLL’s head of Research for Asia Pacific. “There is a clear demand for them as seen in how vacancy rates are less than 2 percent in three out of these six gateway cities, specifically Hong Kong, Beijing and Tokyo. And Singapore’s relatively lower rent gives it a competitive advantage over these costlier Asian gateway cities.”
According to JLL, as office rents continued to increase in key financial hubs in Asia while that in Singapore continued its downtrend. the city-state became more competitive in terms of office occupancy costs.
Hong Kong’s office occupancy cost in US dollars was 181 percent higher than Singapore a year ago, and has widened to 261 percent by September 2016. Similarly, the rental gap between Beijing and Singapore has widened from 104 per cent to 114 per cent during the same time period.
“In the Singapore context, despite the uncertain economic conditions, the availability of new supply has seen a number of corporations taking advantage of the competitive leasing environment by committing to the new wave of supply,” said Chris Archibold, head of Office Leasing for JLL in Singapore.
“The gap between prime building rents and those on secondary buildings has narrowed over the last 18 months as landlords have sought to attract occupiers. This gap is likely to rebalance somewhat in the coming 12 months as rental pressure is set to hit the older buildings when occupiers who have committed to space in the new projects vacate their existing premises,” he added.
Nikki De Guzman, Editor at CommercialGuru, edited this story. To contact her about this or other stories email nikki@propertyguru.com.sg.
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