Singapore’s soft rental market can be attributed to increased supply combined with lower housing budgets for expatriate workers, according to new research from Knight Frank.
Tenants around the world, as well as in the city-state, have more bargaining power while, in many cases, landlords have been accepting lower rents to sustain cash flow.
As companies look to expand their global operations into emerging market and strengthen their foothold in existing locations, demand for corporate relocation services has risen according to the Knight Frank Global Corporate Lettings Review.
Taking official government statistics on the number of employment visas issued to skilled workers, as well as data from Knight Frank’s global network, the 2014 Global Corporate Lettings Review looked in detail at the demand for prime residential accommodation by multinational corporate firms, analysing the different market trends and lettings practices in key cities around the world – with a particular focus on markets in the UK, US, Hong Kong and Singapore.
The report revealed that prime city rents in Nairobi saw the strongest rise in 2013, while the U.K., the U.S. and Hong Kong saw the number of employment visas rise by an average 12% percent in 2013. As the number of individuals moving abroad for work increases, demand for corporate relocation services has risen
In 2013, the number of lets to corporate tenants in New York rose by 21 percent compared to the previous year. The comparable figure for London and Hong Kong was 7 percent and 16 percent respectively
Liam Bailey, Global Head of Research, Knight Frank, said: “While demand for corporate accommodation is up, cost remains an issue with corporate budgets for housing generally lower than before the financial crisis. This is partly as a result of companies keeping a keen eye on costs, and partly as a result of a shift towards personal leases as individuals opt to make savings on their housing budgets.”
Singapore’s rise as a global financial hub has been rapid. The city-state has cemented itself as a thriving financial centre that serves not only its domestic economy but also Asia-Pacific and the wider world.
As a result, Singapore’s workforce has grown at a fast rate in recent years. Official statistics show a 21.2 percent rise in the number of workers in the financial and insurance sector since 2009, with the sector attracting a significant number of highly-skilled foreign employees from all over the world, as well as local talent.
The availability of a large pool of finance professionals in Singapore is a key reason why global financial institutions operate there (over 200 banks), and use Singapore as a regional or global hub. However, growth has not been limited to just one sector. Alongside Singapore’s escalation as a banking and finance centre, strong growth has also been seen in the manufacturing, construction and service industries.
Advanced estimates by the Ministry of Trade and Industry show that Singapore’s economy expanded by 5.1 percent in the year to Q1 2014. The city-state’s manufacturing sector led this growth expanding 8 percent year-on-year. The construction sector grew by 6.5 percent on an annual basis, while growth in the services producing industries was 4.7 percent over the same time period. All of this has contributed to a rise in the numbers of high-skilled foreign workers relocating to Singapore. Indeed, the number of foreign professionals working in managerial, executive or specialised jobs has increased by 53 percent since 2009.
In the second half of 2013, the rental market in Singapore softened. This was mainly attributable to the increased supply of properties on the market and, as is the case in other markets around the world, lower housing budgets for expatriates.
As a result of the increased supply, tenants had more bargaining power, while landlords have started to review their asking rents in light of the more competitive market and were happier to accept lower rents for now in order to sustain cash flow.
Credits: Property Guru