Singapore office occupancy slumps

Sports Hub in Kallang is being leased out for National Day celebrations on August 9. Source: Wikimedia

Singapore’s office towers are nearing their lowest level of occupancy in almost a decade, with construction of the republic’s tallest building, the GuocoLand Ltd’s 64-floor block in the financial district, being completed as the economy slows.

The news comes as the city-state announced it was spending more on this year’s National Day parade than ever before because it is hosting it at the privately run Sports Hub.

Singapore has been hit by the slowdown in China, which has also put pressure on its marine oil and gas sector, commodity trading and banking. Last year, the economy grew by 2 per cent, the slowest pace since 2009.

Singapore’s prime rents were ranked the 11th most expensive last year. Analysts predict vacancies will rise this year, with JLL saying that top-end office rents will fall between 10 per cent and 20 per cent after dropping 15 per cent last year.

Nicholas Mak, executive director at SLP International Property Consultants, said many of the buildings that were now ready for occupancy were planned about five years ago, towards the end of the global financial crisis.

“Many people thought that this is the new boom, let’s try to capitalise on it. Nobody expected the party to end by the end of 2015,” he said. He predicted that office vacancy levels could hit 13.5 per cent, the highest rate since 2005.

Barclays was planning to cut about 1,000 jobs in investment banking worldwide and close cash equities business in Asia, a leaked internal memo said.

Real estate services firm JLL produced a study of international banks in the financial district earlier this year showing half had either reduced the size of their office space over the last 18 months or had to cope with superfluous space.

Banks’ cost cutting amid the global downturn will have an impact, as financial institutions are key tenants for high-end offices. Societe Generale left two floors in an office tower after selling its private banking activities in Asia to DBS Group Holdings.

Singapore’s landlords are limiting the number of leases that are due to expire over the next few years and diversifying their tenants to cope with the glut.

Lynette Leong, chief executive of CapitaLand Commercial Trust, said: “This will be a short-term blip.”

Clearly unaffected by the downturn, the city-state has announced that August’s National Day parade would cost S$39.4 million (US$28 million). The amount is double that of previous parades, although last year’s 50th-year celebrations cost S$40.5 million ($28.8 million).

This year’s parade is being held at the Sports Hub in Kallang, a far more expensive venue to rent than previous locations such as the Marina Bay floating platform and the Padang.

The Straits Times reported that the Sports Hub would cost S$10 million (US$7.1 million) to rent for the parade, which included 35 days of rehearsals.

Defence Minister Dr Ng Eng Hen said previous parades cost between S$15.7 million and S$20.6 million.

The dome-shaped, 55,000-seat Sports Hub on the site of the old National Stadium will allow 275,000 spectators to see the event live. It was build by a private operator on a 25-year term before it is handed to the government, meaning the authorities have to lease it.