SINGAPORE: Singapore has been ranked seventh for the most expensive place to rent prime offices in Asia Pacific (APAC), according to a recent report by Savills.
The city-state’s office spaces come with a 21% premium price, while APAC stands at 33.7%, as reported by Singapore Business Review.
Alan Cheong, Executive Director of Research & Consultancy at Savills Singapore, attributes Singapore’s high rental costs to a limited supply of new office spaces at the beginning of the year.
“Singapore’s office market rents continued rising, albeit at a low rate, because of the relative dearth of new supply at the start of the year,” he explained.
This lack of new supply gave landlords more confidence, and when new buildings were introduced in the second quarter of 2024 (Q2 2024), owners held firm on rental rates, resisting lower offers.
Mr Cheong expects these conditions to keep rents relatively stable throughout the year, with a projected range of -1% to +1%. He also noted that the most sought-after office spaces might see some rental increases.
Singapore experienced a slight growth of 0.3% this quarter. Meanwhile, net effective costs in APAC stayed flat in Q2 at 0%, partly due to declines in major Chinese markets where companies are reducing operational expenses.
Shenzhen, in particular, has seen the largest drop in rents, falling by 4.4%. This trend has put downward pressure on office rents in several Chinese cities.
Other APAC cities have shown varying trends. Seoul recorded a 5.7% increase in office rents this quarter, driven by strong demand and a limited supply of new office spaces.
Globally, rents for top prime office spaces are now 31.4% higher on average than those for Grade A offices, with North America leading with a 62.5% premium.
Over the past year, gross prime office rents in major cities worldwide have risen by 3%, while tenants’ all-in net effective costs have increased by 3.8%.
In contrast, rents were lowest in Sydney and Seoul, with 13.5% and 20% premiums, respectively.
While cities like Shenzhen and Beijing still command high premiums exceeding 70%, there are signs that these costs may start to decline as rents in some prime Chinese markets have begun to drop. /TISG
Read also: Singapore prime office rents soared to highest levels since 2008
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