Singapore’s Commercial and Office Sector Set to Shine
04 August 2011
It looks as if the office and commercial property sector in Singapore could outperform Hong Kong, at least in the medium-term, according to research from Savills. Although rents for Grade A offices in Hong Kong are expected to increase by 25% during 2011, compared to 10% for Singapore, both economies are expected to grow by around 10%.
The really important factor is that office rents in Singapore are far more likely to be stable in the medium-term due to the amount of new supply which is expected to be ready by 2013. This is completely different to the situation in Hong Kong, which has very little new Grade A offices in the pipeline. The ratio for new office supply until 2013, compared to current stock for 2010 is just 3%, while in Singapore this figure is 23%. This is the reason why rents in Hong Kong are at historically high levels.
During the second quarter of 2011 Grade A office rents in Hong Kong were costing HK$120, or S$19 per square foot, compared to just S$10 per square foot in Singapore. Both cities are major financial centres in the region, and it's likely that high rents in Hong Kong could cause more companies to relocate to Singapore in the future. Another problem facing Hong Kong is the lack of new commercial land, and more developers may turn towards Singapore where land is more readily available. The fact that the logistics and commercial property sector is now looking more profitable than residential sectors may entice foreign developers to focus their attentions on these sectors.