Impact of Recent Rise in Rental Prices of Commercial Properties on Singapore’s Competitiveness as Business Destination

Mr Deputy Speaker, globally, inflation has stayed elevated and the cost of doing business, which includes rental prices, has also increased. The rental index of office spaces in Singapore has increased by an average of about 1.35% per annum in the last three years. While rental for office spaces is higher than the pre-pandemic level, it remains below historical peaks in 2008 and 2015. In the same period, the vacancy rate for office spaces has remained stable at around 11% to 13%.

Between 2023 and 2025, more than 530,000 square metres of office space is expected to be completed. This is about 40% higher, compared to the past three years combined, and can help to cater to the demand and moderate rent increases over time. Rental continues to comprise a modest proportion of overall business costs for most sectors in Singapore. The Government will continue to monitor the market. We are committed to ensuring Singapore’s competitiveness and attractiveness as a business destination.

I thank the Minister of State for the reply. I would like to further ask the Minister of State whether she can share the insights as to how the Government intends to calibrate the supply of commercial spaces. In particular, can she elaborate on the 530,000 square metres of office space that are in the pipleline? Where will this space be located and what kind of businesses would they cater for?

The second question is: the Minister of State mentioned in her reply that rentals form a modest proportion of the business costs for most sectors. I think, to some, it is still quite significant. Can I ask how would the Ministry of Trade and Industry (MTI) ensure that Singapore remains overall competitive to be able to attract investments to Singapore with a rental that is reasonable and affordable to those companies?

Mr Deputy Speaker, I want to thank the Member Mr Liang Eng Hwa for his three supplementary questions. If I heard correctly, there are two parts to the first one. I also wish him a speedy recovery after his ankle operation.

I want to thank him and assure him that the Government keeps a close eye on the cost of doing business and the impact on the economy as well as the impact on Singapore's attractiveness as a business location.

To the first part of his first supplementary question, that is, to moderate the commercial rental prices, Mr Liang and Members will know that the Government has, in the past, implemented various supply-side measures, for example, calibrating sufficient supply to meet longer-term demand through the Government Land Sales (GLS) programme. I will give Members a quick example. Just a few months ago, in December last year, the Government announced a mixed-use site at Jurong Lake District that is potentially yielding about 150,000 square metres of commercial space and that will be released via the confirmed list in June 2023.

In addition, a 30-year lease commercial site in Punggol, potentially yielding about 8,400 square metres of office space as well as a mixed-use site in Woodlands, about 78,000 square metres of commercial space were also made available on the reserve list via the first half of 2023 GLS. I cite all these examples to share and give assurance to the Member that these sites can be triggered by the developers to cater for additional commercial space demands. So, that is one.

And, of course, another important data to look at is the vacancy rate and I cited the figures of 11% to 13%.

If I hear correctly, the second part of the Member's first question is about whether I can give some breakdown to the 530,000 square metres. Sir, I cited earlier that in the next three years, starting from this year, we will see about 530,000 square metres of commercial space being completed and this figure represents 40% higher, compared to the last three years combined.

And to cater to companies in different sectors with different locational preferences, new office spaces will be distributed geographically across the island. I will cite some quick examples.

In the Central Business District (CBD) area, for example, this year, we will see the completion of the IOI Central Boulevard and that will yield 139,000 square metres.

In the city fringe, that includes the Keppel South Central project that will be completed sometime next year and yield about 57,000 square metres.

Outside the CBD area, Punggol Digital District is expected to have an additional 39,000 square metres two years later in 2025.

As other examples, next year, we will see completion of Labrador Tower, 75,000 square metres; next year as well, Paya Lebar Green, 36,000 square metres. Two years later, 2025, Shaw Towers Redevelopment, 44,000 square metres; and two years later as well, Solitaire on Cecil.

So, I just want to give the Member assurance that we are seeing the completion of a combined gross floor area (GFA) of 530,000 square metres over the next three years.

To the Member's second question about Singapore's overall competitiveness, he would have read some of the recent ranking reports, including the Economist Intelligence Unit (EIU). Today, our city state continues to be one of the most competitive economies of the world and this is attested to by the recent EIU ranking which indicated that Singapore has retained the position of having the world's best business environment for 15 years. But we should not rest on our laurels.

More importantly, I think the point here is that Singapore does not compete on cost alone. Other factors that contribute to our city state's overall competitiveness include a stable political regime, strong rule of law, favourable policy towards foreign investment and trade, good digital and logistic connectivity, a skilled workforce as well as our technological infrastructure. But I want to reassure Mr Liang and all Members that the Government will certainly continue to monitor the market closely and, where needed, calibrate the supply of commercial properties to ensure the stability as well as the sustainability of rentals for business over the medium to long term.