Singapore offers one of the highest effective yields and market yields for central business district (CBD) Grade ‘A’ office spaces in the world according to the latest research report from real estate firm Savills.
Based on the consultancy’s report World Office Yield Spectrum, CBD Grade ‘A’ office space in the city-state has an effective yield and market yield of 4.85 percent and 5.29 percent respectively.
Alan Cheong, Senior Director for Research & Consultancy at Savills, said: “Top notch Grade ‘A’ office headline yields in Singapore have been relatively high because of a two tier market structure here.
“For one, the republic’s office market is dominated by institutional investors, corporations and REITs due to the large quantum of investment needed of more than S$1 billion.
“At another level, there are the strata titled office space which commands a much higher value on a per unit floor space measurement basis. With copious amounts of liquidity in the system, these have been transacted more frequently and thus capital values are more an observed fact,” he added
Meanwhile, San Francisco was consistently the top placer in terms of effective yield and market yield, while Hong Kong was consistently at the bottom.
In ascending order, the markets with the lowest and highest effective yields are Hong Kong (2.85 percent), New York (3.29 percent), L.A. West (3.31 percent), London (3.39 percent), Tokyo (3.65 percent), Paris (3.84 percent), Munich (4.04 percent), Sydney (4.21 percent), Shanghai (4.25 percent), Singapore (4.85 percent) and San Francisco (5.39 percent).
In the same order, the markets with the lowest and highest market yields are Hong Kong (3.11 percent), Tokyo (3.95 percent), Munich (4.25 percent), London (4.38 percent), Paris (4.52 percent), Shanghai (4.71 percent), New York (5.04 percent), Singapore (5.29 percent), L.A. West (5.34 percent), Sydney (6.62 percent) and San Francisco (6.97 percent).
Market yield is derived by capitalising current market rents (Net Face) against current capital values of office buildings. The Net Face rent is the rent payable by the tenant excluding both statutory and operating outgoings (recoverables) and includes the value of any incentive paid to the tenant by way of fitout, cash, rental rebate or rent free.
As for effective yield, its Net Face excludes the value of any incentive paid to the tenant by way of fit out, cash, rental rebate or rent free.
The World Top Cities (not Core cities) in the report were chosen because of the size of the markets and the “international” nature of the cities. They have a wide range of international investors/owners and occupiers. Bangkok did not feature in the report.
Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this or other stories email nikki@propertyguru.com.sg.
