Singapore landlords are paying the penalty for a slowing economy. Alone among the world’s major cities, the cost of renting an office with panoramic views is falling as supply outstrips demand.
Annual rents on the upper floors of Singapore’s skyscrapers fell 7 percent to about $775 a square meter in the first six months, according to a 23-city index compiled by Knight Frank LLP. The biggest increase was in Shanghai, where rents climbed 7.6 percent to $774. In Hong Kong, the most expensive market, rents rose by 5.9 percent to $2,996 a square meter, the broker said.
“There’s a classic imbalance in the Singapore market,” said Will Beardmore-Gray, head of Knight Frank’s tenant representation and agency business. “They had relatively high supply and this has been exacerbated by a poor-performing economy and over development.”
Vacancy rates in Singapore were 9 percent in the second quarter, compared with 3.3 percent in Shanghai, Knight Frank data show. The city-state’s economy will shrink 0.1 percent in the third quarter, according to a survey of 26 economists conducted by Bloomberg News in the week through September 13.
Demand for Shanghai office space has been lifted by the technology and creative industries, Beardmore-Gray said. The city has created 300,000 jobs in those sectors since 2009 and is expected to add 100,000 more by 2020, he said.
Manhattan skyscraper rents increased 1.9 percent to $1,701 per square meter during the first half, the second-highest in the index, while those in Tokyo and the City of London district were unchanged at $1,610 and $1,226 respectively.
Four of the five cities with the fastest rental growth were in the Asia Pacific region, with Toronto the only center outside the region posting a comparable increase.