SINGAPORE'S office rents are set to rebound from their first annual decline in three years as new supply shrinks and more businesses expand, according to the biggest office property trust in Asia outside of Japan.
Rents in the city are reaching a trough and demand may rise as the country positions itself as a regional business hub, said Lynette Leong, chief executive officer of CapitaCommercial Trust (CCT).
Supply for the next three years will be about 0.8 million square feet a year, down from 1.3 million sq ft over the past two decades, she said.
"Rents are poised for a recovery," Ms Leong said in Singapore on Jan 24. It's "a no-brainer that rents are not going to go down very much further so it's more when the rents will turn and to what extent", she said.
Ranked by the World Bank as the easiest place to do business for a seventh year, the country that's smaller than New York City is also emerging as Asia's wealth management centre, driving demand for banking services with an increase of millionaires.
Singapore office rents are the 19th-highest globally, according to CBRE Group Inc, and are cheaper than Hong Kong, Tokyo, Beijing and New Delhi.
CapitaCommercial estimates new demand accounted for 1.5 million sq ft to 1.8 million sq ft annually in the past three years, Ms Leong said, without giving a forecast for 2013.
Singapore's office rents fell 0.3 per cent in the fourth quarter, extending the decline in 2012 to 1.3 per cent, the government said on Jan 25. They climbed 8.4 per cent in 2011 and 13 per cent in the previous year, government data showed.
The country's millionaire households expanded 14 per cent in 2011, according to a Boston Consulting study. The proportion of millionaire homes in the city of 5.3 million people was 17 per cent, the highest in the world, followed by Qatar and Kuwait.
Additional office space in the past two years came mainly from the downtown Marina Bay area, with banks including Standard Chartered plc and Barclays plc taking bigger offices. Standard Chartered relocated from 11 buildings across the city to one tower in the new office area, while Barclays moved from six to two in the district.
Average gross rents of prime office space declined 11 per cent in 2012 and could fall 5 per cent to 10 per cent this year, Colliers International said in a Jan 25 report. Leasing rates climbed 14.6 per cent in 2011, the property brokerage said.
New tenants took up 1.9 million sq ft of space last year, a 17 per cent drop from the five-year high of 2.3 million sq ft in 2011, Colliers said.
"It's still too early to pinpoint a time for a recovery," Chia Siew Chuin, director of research & advisory at Colliers, said yesterday. "Global economic headwinds are a concern and there is also a risk of secondary space that can be returned to the market should occupiers or tenants relocate to new buildings."
Singapore's economy expanded 1.2 per cent last year, less than a quarter of the pace in 2011. Growth is expected to range between one per cent and 3 per cent this year, based on official estimates.
The city also became the first in Asia to introduce curbs on industrial properties. The government on Jan 11 imposed as much as 15 per cent in stamp duties on sellers of warehouses and logistics buildings to curb speculation after prices doubled in the past three years and outpaced the increases in rents. - Bloomberg
Source: Business Times, 31 Jan 2013