S'pore office rents set to fall as other cities see spike

Office rents are poised to slide in Singapore even as those in other key global cities shoot up, a new report by Knight Frank has found.

In a comparison of 20 cities, Singapore was the only city where office rental falls were expected from now till the end of 2018.

The 3 per cent rental slide forecast is thanks to slowing demand and consolidation of office space in the face of a slowdown in the region.

Overall, Knight Frank said that increased urbanisation and greater demand driven by economic growth will cause office rents to rise in the key global cities.

Madrid topped the table with a 22.2 per cent rise in office rents by 2018, followed by Mumbai at 21.3 per cent and San Francisco at 20.2 per cent.

In terms of foreign investments in real estate, India emerged as an investment hot spot. In the first half of this year, foreigners accounted for the largest share of 67 per cent of real estate transactions or about US$998 million (S$1.3 billion).


ST GRAPHICS

United States and Singapore investors were the most prominent in the Indian real estate market, said Mr Nicholas Holt, head of Asia-Pacific research for Knight Frank.

Malaysia received the second highest share of 59 per cent or US$1.454 billion foreign investment in real estate over the same period. Singapore was third, with a 43 per cent share or US$2.259 billion.

Foreign investors active in the Singapore property scene are mainly from China, Australia and the Middle East, said Ms Alice Tan, head of research for Knight Frank Singapore.

Also, a growing wave of Asian outbound capital is targeting core real estate assets in Western markets, the report noted.

Over the last two years, Asian investments into the US, Britain, Australia and Europe totalled US$78.4 billion. This is as Asian investors seek to diversify their holdings into markets outside Asia, and substantially sell down assets in China amid worsening economic conditions.

"Singapore and China have led the way, with sovereign wealth from the former, and developers and insurance companies from the latter some of the most notable buyers," said Mr Holt.

Knight Frank's report also forecast prime yields, with Indian cities Bangalore, Mumbai and Delhi topping the table with yields of 10.5, 10.0 and 9.5 per cent each. Singapore came in 17th at 3.7 per cent, similar to Tokyo. Hong Kong was at the bottom with 2.9 per cent yield.

A version of this article appeared in the print edition of The Straits Times on October 16, 2015, with the headline 'S'pore office rents set to fall as other cities see spike'. Print Edition | Subscribe