Singapore’s office property space trends and outlook for 2014.

Knight Frank Property Research recently released its latest fourth quarter 2013 Singapore office rental trends report which indicated that given the upward trajectory in terms of expected demand, and the relative tight office space market in Singapore, analysts were forecasting that prime office rents will be able to register a 4.0 percent to 5.0 percent annual growth during the final quarter of 2014. The relative bullish outlook for prime office rental space in Singapore is driven by several factors including an expected increase in the number of foreign multinational corporations looking to set up regional offices in Singapore, the tight office space supply, especially in the downtown and Marina Bay regions, stable political and economic environments, among others which generally contributed to healthy demand coming from these segments.

There are two charts which will illustrate the historical trends of office space prices, and rentals in Singapore:

Chart 1: Office space price index in Singapore’s central region:

Chart depicting the office space price index in Singapore as of 4Q13 - Mar 05 2014

Source: The Urban Redevelopment Authority of Singapore (URA)

Chart 2: Office rental price index in Singapore’s Central Region:

Chart depicting the office rental price index in Singapore as of 4Q13 - Mar 05 2014

Source: The Urban Redevelopment Authority of Singapore (URA)

Based on the two charts illustrated above, readers might notice that both charts are showing upward trajectories, with both registering a similar steep hike upwards sometime around the fourth quarter 2012/first quarter 2013. Indeed, this was one of the major points being illustrated in the Knight Frank Singapore property research report which mentioned about the relative robust, and healthy growth in office space demand/supply during the second half of 2013. The second half of 2013 was one of the first significant signs of growth in the office market in Singapore, as there has been a downward trajectory in office space market prior to second half of 2013, where rentals have been declining at an average pace of 0.3 percent quarter-on-quarter (qoq) for five consecutive quarters. These are based on actual readings taken from the Urban Redevelopment Authority’s (URA) latest report on the Office and Space Rental Index for the Central Region.

The Knight Frank research report also indicated that during the fourth quarter of 2013, there has also been a positive year-over-year (yoy) increase since the first quarter of 2012. Office rents for Grade A+ buildings and Grade B buildings rose by 2.3 percent and 1.8 percent respectively as compared to a year ago on a comparable quarter basis. Office spaces in the Suntec/Marina/City Hall regions performed better with yoy growth of 9.2 percent. The Knight Frank research analysts went on to indicate that going forward, they forecasted that with an expected uptick in overall business sentiment, along with the official government projections of 2.0 percent to 4.0 percent annualised economic growth projections, many tenants are opting to negotiate for lock-in leases at more competitive rates, and in the process, they are trying to hedge further leasing rate increases going forward. It also indicates the general bullish sentiment and confidence among many tenants in establishing their business operations in Singapore on a long haul basis, thus generating a healthy set of demand for office space in Singapore.

A chart depicting the future outlook of the Singapore office property space outlook in 2014 and beyond is as follows:

Knight Frank Property Research Singapore office space outlook - Mar 05 2014

Source: Knight Frank Property Research, Singapore

Based on the chart above on the outlook being forecasted by the Knight Frank research analysts, they were generally projecting generally robust healthy take-up rates coming from the suburban regions by 2017, where offices are expected to diversify their operations to more reasonably priced locations such as the One-North regions, near the Buona Vista MRT station, and around the Jurong Gateway regions, where according to the URA Master Plan, the area surrounding the Jurong East MRT station is expected to see major transformations into a vibrant town area where people live, work, and play.

Going forward, I believe that along with the latest research published by the URA and the generally robust forecasts provided by Knight Frank Property Research division, the Singapore’s office property space supply and demand outlooks will generally be displaying a robust upward trajectories as this segment is not particularly impacted by the recent property cooling measures which impacted the commercial, industrial and residential markets. Moreover, the Singapore government is going all out to attract foreign multinational corporations (MNCs) to set up their regional headquarters in Singapore. There has also be a long-term growth trend in the financial services sector in Singapore, with healthy employment levels registered in this segment. As a major financial hub in the region, and on a global basis, the Singapore government will want to continue to see a healthy and robust financial services sector. With the expected global regulations being tightened in many of these MNCs home countries, Singapore seems to be a natural choice for many of them to expand and diversify their operations out of their home bases, and move to Singapore in order to tap into the potential long-term growth in the Asia-Pacific region.

About Hock Meng Tay - Chief Editor, Asia-Pacific Region

Hock Meng Tay, CAIA has written 181 post in this blog.

Chief Editor, Asia-Pacific Region Hock Meng Tay is a CAIA holder and is currently taking CFA qualification. He has over 10 years of experience working as research associate in several investment companies.He is an expert in financial analysis and has published research reports in his current role. He obtained his Masters of Business Administration in Integrated Management and Masters of Arts in Economics while serving his internship in Starsource Inc

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About Hock Meng Tay - Chief Editor, Asia-Pacific Region

Chief Editor, Asia-Pacific Region Hock Meng Tay is a CAIA holder and is currently taking CFA qualification. He has over 10 years of experience working as research associate in several investment companies.He is an expert in financial analysis and has published research reports in his current role. He obtained his Masters of Business Administration in Integrated Management and Masters of Arts in Economics while serving his internship in Starsource Inc

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