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SINGAPORE: The lower office rents in Singapore could be an attraction to some businesses in Hong Kong to relocate here. This is according to a report issued on Monday by property consultant Jones Lang LaSalle (JLL).
Chua Yang Liang, Head of Research for Singapore and Southeast Asia at JLL believes that there could be some spill over effects from the Hong Kong office market which is experiencing rapidly escalating rents.
He noted that while the strong growth in Singapore office rents in the past few quarters has already propelled the office market here to be among the most expensive in the Asia Pacific region, the supply crunch in Hong Kong has caused rents to spike to almost double that at Raffles Place.
Still, he added that Hong Kong's proximity to China continues to be a big draw for front office jobs.
"While we expect some relocation to Singapore, we do not foresee a mass exodus," said Dr Chua.
Unlike Hong Kong, office rents are stabilising in Singapore.
According to JLL, rental growth in the Singapore office market moderated to a more sustainable rate in Q2 2011 on the back of adequate supply being phased in.
JLL data showed that the average CBD Prime Grade A gross effective rent increased 1.5 per cent quarter-on-quarter to S$10.15 per square feet (sq ft) per month in Q2 2011, up from S$10.00 per sq ft per month in Q1 2011.
This translates to a 27.7 per cent year-on-year increase from S$7.95 in Q2 2010.
"The moderation in the growth rates in Q2 2011 ensures that we do not get ahead of ourselves and remain competitive. This moderation is a healthy sign and together with ample supply in the market, we should expect rents to grow with the broader economy, rather than outpacing it like in 2008," added Dr Chua.
Rental values across the Asia Pacific region continued to grow with ongoing corporate expansion and hiring in Q2 2011. JLL data shows that out of 27 office markets tracked, 15 registered increases in rents while the remainder stabilised or recorded small declines.
In Q2 2011, net effective rents for prime office space in Singapore came in just behind Hong Kong and Tokyo.
Office rentals in Hong Kong surged ahead with 6.6 per cent growth quarter-on-quarter as a result of both China's continued economic strength and a supply crunch in Hong Kong.
Nevertheless, JLL said there is still strong interest in newly completed and upcoming Grade A buildings in Singapore.
JLL noted that rents at newly completed buildings such as OUE Bayfront and Ocean Financial Centre edged up more than five per cent since the issue of their temporary occupation permit (TOP) in Q1 2011.
But Jones Lang LaSalle expects available space in the CBD Core to increase by about two million sq ft in 2H 2011, or about 7.5 per cent of total CBD Core stock, with about 1.2 million sq ft of uncommitted space in the new developments and 800,000 sq ft of space given up by tenants relocating to the newer buildings.
This will likely moderate rental increases over the next six months, added JLL.
-CNA/ac
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