- Vietnam's most populous city recorded a rise of 4.6%.
- Globally, office costs rose 0.3%, down from the Q1 result of 1.1%.
- Fit out costs were a major driver, along with renewed demand for office space.
The latest Savills Global Prime Office Costs (SPOC) analysis has found that Vietnam’s Ho Chi Minh City recorded the largest proportional increase across Q2. The country’s most populous city recorded a 4.6% rise in net effective costs, with both heightened demand and growing fit-out costs driving the increase.
Pace of growth slows from Q1
Net effective costs rose 0.3% for Q2, globally, according to SPOC. The latest rise is down from the 1.1% rise recorded in Q1 this year.
The top five increases in costs were rounded out by Paris, Dubai, New York (Midtown), Mumbai, and Singapore.
- Ho Chi Minh City, +4.6%,
- Paris, +3.7%,
- Dubai, +2.7%,
- New York (Midtown), Mumbai, +1.6%, and
- Singapore, +1.4%.
Singapore’s increase was driven by the high cost of office fit-outs, up 20% compared to 2019. The report also noted that a growing number of Singaporean tenants are avoiding the expense of office fit-outs by staying in their current premises.
Rental lease terms have increased from three years, to five to seven year terms in the city state.
“At the global level, whilst the overall occupational cost for offices has tapered, for Singapore, the issue is slightly different,” said Savills research and consultancy executive director, Alan Cheong.
“Owing to a relative lack of new supply and that tenants having signed on long leases, Grade A CBD office rents in Q2/2023 still eked out a 0.5% QoQ increase.”
“Owing to the challenging business environment, it is safe to say that demand for office space has slowed down significantly,” added Savills Singapore CEO, Marcus Loo.
“Coupled with high construction cost, occupiers in general are renewing their leases. However, there is still movement in the office leasing market especially for those that need to downsize and move to more cost effective location. Whilst some landlords continue to hold firm to their asking rents, there are others who are taking a more practical approach to boost occupancy by offering incentives to attract tenants and increasing fees to brokers.”
Office market report released
A review of the Australian office market was also recently released, with Perth outshining the rest of Australia in the Property Council of Australia‘s July Office Market Report.
Despite nearly 70,000 square metres of office space coming online, the office vacancy rate remained practically unchanged at 15.9%, indeed, it is a minor 0.2% uptick from January this year.
The strength of Perth’s office market was largely down to a healthy resources sector, with the state now claiming the title of world’s largest producer of lithium, gold, and iron ore.
