Singapore may benefit from Hong Kong’s rising office rents

Analysts say that Singapore’s commercial real estate sector will outperform Hong Kong’s in the medium term, with dramatic increases in office rents in Hong Kong this year and next.

According to Today, Property consultancy Savills has concluded from research that office rents in Hong Kong will increase at a rate of 25 per cent this year compared to 10 per cent in Singapore. By 2013, office rentals in both areas are expected to grow at 10 per cent.

“Office rents in Singapore are likely to be more stable in the immediate term, due to new supply coming on by 2013,” said Mr Frank Mariott, head of Savills Capital Markets, Asia-Pacific. 

According to Savills, Hong Kong has very little new Grade A office supply in the pipeline. Its ratio of office supply for this year to 2013 period to current stock for last year is 3 per cent. This is compared to 23 per cent in Singapore.

As a result, Hong Kong’s Grade A office rents have hit historical highs.

In the second quarter of this year, a record price of HK$120 (US$15) per sq ft was registered in Hong Kong. Grade A office rents in Singapore are around S$10 (US$8) per sq ft.

As both economies are financial centres for the region, analysts say the high office rents in Hong Kong may benefit Singapore as more companies will be attracted to come here instead.

In addition, the lack of new commercial land being released in Hong Kong may draw more developers to bid for land in Singapore.

“Foreign developers such as Cheung Kong have been quite successful in bidding for commercial sites,” said Cushman & Wakefield vice-chairman Donald Han.”With returns in the commercial and logistics property sector looking better than the residential sectors, foreign developers are likely to focus more on these sectors.”