Singapore’s office property market is gradually catching up with that of Hong Kong, the Lion City’s rival business hub, in terms of rents and prices, with Chinese technology giants such as Alibaba Group Holding, Tencent Holdings and ByteDance expanding in the city state.
The gap peaked in 2017, when Hong Kong office rents equalled 173 per cent of the rents charged in Singapore, according to Cushman & Wakefield. Last year, the distance between the rents charged in both cities stood at 108 per cent, still in favour of Singapore.
“As the two cities continue to attract investors and occupiers, we are seeing a more defined role, whereby companies looking for more exposure to China will prefer to have Hong Kong as their regional base, while Singapore is a better location for companies looking to grow and capitalise on the emerging Southeast Asian markets,” said Wong Xian Yang, head of research, Singapore at Cushman.
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“Tech companies have been expanding in the city state. Examples include ByteDance, which has taken up large tranches of space in One Raffles Quay and Guoco Tower, and Amazon, [which has taken] up three floors at Asia Square Tower 1,” he added.
Mainland Chinese companies are playing a driving role in both markets. And their demand for prime offices that will serve as their bases for the fast-growing Southeast Asian markets has reduced the gap between rents in Singapore and Hong Kong.
The trade war between China and the United States has played a role too. Singapore is being preferred as a base by many companies looking to avoid tariffs, said Sing Tien Foo, director of the Institute of Real Estate and Urban Studies at the National University of Singapore.
“The continuous trade tensions and restrictions imposed by the US on China technology firms have pushed some firms to relocate to Singapore. [These firms have] picked up the slack in demand caused by firms reorganising and restructuring their workplaces to accommodate flexible and hybrid work arrangements,” Sing said.
“[Singapore] office rents have not recovered to pre-pandemic levels, but the recent sale of the strata floor at Samsung Hub at more than S$4,000 (US$2,950) per square foot has set the benchmark for the Raffles Place financial district.”
Among the Chinese companies setting up regional offices or hubs in Singapore is Alibaba, which operates one of the world’s largest e-commerce platforms and owns this newspaper. The company bought a 50 per cent stake last year in 50-storey prime office tower AXA Tower, valuing the property at S$1.68 billion.
TikTok, the overseas short video platform owned by Douyin parent ByteDance, has taken up office space in two of Singapore’s most iconic buildings – about 58,000 sq ft in Guoco Tower and about 100,000 sq ft at One Raffles Quay South Tower. The Beijing-based company is likely to pay S$20.88 million in rent every year, based on the average rental charge of between S$10 and S$11 per square foot, according to property consultancy Colliers.
Meanwhile, Tencent has taken up 200 seats at JustCo’s co-working space at OCBC Centre East in Raffles Place. The world’s largest publisher of mobile games is likely to pay S$2.88 million a year in rent, based on a monthly fee schedule of between S$1,000 and S$1,200 per person for co-working spaces in Singapore, analysts said.
In the coming years, the gap between Singapore and Hong Kong is likely to narrow further. The premium Hong Kong enjoys is likely to narrow by as much as 68 per cent in 2023 and then widen again to 70 per cent in 2024, according to Cushman.
This trend owes more to about 5 million sq ft of office space coming on line in Hong Kong between this year and 2023, which will add pressure to rents in the city. In Singapore, meanwhile, only one premium office building will be completed, in the second half of this year, and it is already mostly “pre-committed”, Cushman said.
“When we compare the office rental premium between the two cities in 2015 and look at which city had a more competitive edge ... the rental gap was at 135 per cent in favour of Singapore,” said Keith Chan, head of research, Hong Kong at Cushman. “Five years later, this gap has narrowed to 108 per cent, which creates a positive opportunity for Hong Kong, as it becomes more competitive.”
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