More firms are planning to expand their businesses in Singapore due to the increase in supply of office space in the market.
According to analysts, the expected sharp increase in office rentals in Hong Kong is another reason why firms find it more cost effective to hire in Singapore.
Based on the latest data released by property consultant Savills, the office property sector within Asia is expected to see a considerable rise in supply over the next three years.
Singapore is expected to see a 47-percent growth in Grade "A" office supply, and Shanghai a 64-percent increase, in terms of some key cities. However, Hong Kong is expected to see a lesser increase of just six percent.
“Hong Kong at the moment is almost unique in the region in not having an oversupply situation in the office markets – this is both good and bad. I mean that rents have already found a bottom,” said Simon Smith, Regional Head of Research at Savills.
“But it equally means that over the next quarter or two, our markets are going to look quite tight. So that’s going to translate into quite dramatic rates of growth in rents towards the end of this year for many corporates who are looking at weighting their businesses across Asia.”
“They may choose to expand in areas other than HK where costs are rising dramatically. So Singapore, where you see quite a lot of office development over the last year or so, could be a net beneficiary.”
Rentals in Hong Kong are expected to increase 20 percent in 2010, especially towards the end of the year, while prices in Singapore are expected to stay relatively stable. The office market is expected to see a bulk in supply between 2010 and 2012.