Prime office rents here are expected to soar by 25 per cent over the next five years, global property consultancy Knight Frank Asia Pacific said in a report yesterday.
In terms of rental forecasts, Singapore took the lead with the highest level of growth in office rents among six Asia-Pacific cities, beating Tokyo and Hong Kong, ranked ninth and 12th respectively.
The Republic also climbed 10 places to take fourth spot among 15 leading cities globally, despite sitting at the bottom of the list from 2008 to the end of last year.
According to the inaugural Global Cities Report 2015, which assesses the impact on the office markets of these 15 cities, the world’s top cities will see prime office rents reach “record highs” by the end of the decade.
Its Global Cities Index, which tracks the prime office rents of the 15 cities, is forecast to grow by 19.9 per cent over the next five years, rising even above its pre-global financial crisis level in 2008 around mid-2015.
“Looking ahead, prospects for the office market (in Singapore) are positive, in light of anticipated healthy demand from companies looking to set up business or expand in Singapore,” said market analyst.
“Singapore is increasingly viewed as a strategic launch pad for more global companies to expand into South-east Asian markets, with our robust business, legal framework and physical infrastructure.”
The “fairly modest” supply of new prime-grade office space over the next few years would sustain prime office rental growth.
“This would fuel interest in Singapore office space investments with stable capital values.”
By 2019, office vacancy rates will drop in the top 10 cities globally, including Singapore, reaching an average vacancy rate of 6.3 per cent. This is down from the 7.8 per cent average vacancy rate logged this year.
This is being caused by the “restricted supply of new office stock in conjunction with (a) heightened demand for commercial space”, said the report.
Market expert said the technology sector has become a key driver of office space demand in Asia, while the financial services and banking sectors have stepped back.