From May 25, 2007 Straits Times
(By Fiona Chan)
“OFFICE rents in Singapore have jumped 13 places in the global league table in just six months, and now rank as the 24th most expensive in the world.
They soared 24 per cent in this period, leapfrogging those in cities such as Zurich and Frankfurt, said a report from property firm CB Richard Ellis (CBRE) yesterday. London and Tokyo retained their top spots in the study.
Over the last 12 months, rents here have risen 53.6 per cent to an average of $8.60 per sq ft a month. In most central areas, they are now at all-time highs.
This has put Singapore in fifth spot among economies with the fastest-growing office rents, said CBRE.
A supply-demand crunch is behind the surge. There is an acute shortage of prime office space, while demand for such space is rocketing as businesses continue to expand.
The soaring rents and supply squeeze are making it difficult for firms to find new space and have raised concerns that this will place limits on business expansion.
CBRE’s executive director of office services, Mr Moray Armstrong, said rent is ‘a relatively small component of the overall cost of operating out of Singapore’.
But he acknowledged that ‘tightness of… space is certainly a worry and is placing constraints on business expansion’.
The Government has also taken steps recently to ease the space shortage. These include leasing out state properties and vacant sites for temporary offices. And on Monday, it ruled that offices in the central area could not be converted to other uses.
‘The office squeeze is becoming a crisis and companies are becoming increasingly frustrated,’ said consultancy Savills Singapore regional director Simon Hill.
Some tenants with leases up for renewal have seen their new rents shoot up 300 per cent, said Colliers International commercial properties director Calvin Yeo.
Fearing further rent hikes down the road, some global firms like Standard Chartered Bank have leased space even before the buildings have been constructed in order to lock in rents at current levels.
Mr Hill warned that if the rent surge trend continues, multinationals seeking an Asian base may start looking outside Singapore. And firms already here could consider relocating some operations to cheaper places such as Kuala Lumpur or India.
He added that while ‘Singapore has a lot going for it…at the end of the day if rents continue on this trend, businesses will start moving elsewhere’.