Property consultancy Cushman & Wakefield said on Friday that a supply crunch in prime office space drove the average total occupancy cost for Singapore CBD office space up 9.8 per cent from 2013's level to US$93 per sq ft (psf) a year last year.
This was 49 per cent cheaper than rents in Hong Kong's CBD, where the average total occupancy cost for office space came in at US$184 psf a year last year.
Globally, the most expensive offices last year were in London's West End, where the average total occupancy cost was US$264 psf a year. Prime rents there rose 4.6 per cent last year from the year before, but are still 13 per cent below their 2007 peak, Cushman noted.
Within the Asia-Pacific, Hong Kong's CBD was the costliest, followed by Connaught Place in New Delhi and then Tokyo's CBD.
Singapore's CBD was in seventh place in the regional rankings, below the Lujiazui financial district in Shanghai.
Total occupancy cost takes into account rents, service charges and local taxes that the tenant has to pay.
Office rents in Singapore's CBD shot up 14 per cent last year, the biggest increase in Asia, consultancy JLL said last month. Cushman said it expects Singapore CBD office rents to go up by another 5 to 6 per cent this year on the back of solid leasing demand across several industries and few completions of new developments.
However, it added that prime office rents here may stabilise next year, as the result of a bumper crop of new office space scheduled to be completed then; about 4 million sq ft of new space from major projects such as Marina One in Marina Bay, Duo Tower in Bugis and Guoco Tower in Tanjong Pagar are expected to come onstream.
Mr Toby Dodd, country head for Cushman & Wakefield Singapore, estimated in the report that company relocations and subleasing have opened up about 1.59 million sq ft of office space for lease, which could also slow the increase in office rents this year and next year.
The consultancy forecasts that about 800,000 million sq ft of office space in Singapore will be absorbed this year; more than 1 million sq ft of space could be absorbed next year unless economic conditions hinder take-up rates, he added.
Source: Business Times, 7 Mar 2015