Singapore Office Market Review

Singapore entered into a technical recession in 2008, after its gross domestic product (GDP) declined in both the second and third quarters on quarter-on-quarter terms. Full-year GDP still grew 1.1%, albeit much lower than the 7.8% expansion in 2007. The slower growth rate was due largely to a decline in the manufacturing sector.

For the whole of 2008, total employment increased by 227,200, driven by strong gains earlier in the year. This was slightly lower than the increase of 234,900 in 2007. However, employment growth slowed significantly in the fourth quarter of 2008, as the economic environment worsened. For the whole of 2008, the number of layoffs reached 13,400 - a five-year high and substantially higher than the 7,700 recorded in 2007. Manufacturing formed the bulk of retrenchments, followed by financial services and wholesale trade.

The weak global macroeconomic outlook undoubtedly has negative implications for Singapore’s economy going forward, given its exposure to external demand. The government forecast indicates that Singapore’s economy will contract by 2.0% to 5.0% in 2009.

Government Measures Mitigate Impact on Property Sector
To mitigate the impact of the downturn on businesses, the Singapore government announced a $20.5 billion stimulus package, the most expansionary ever, to help companies and individuals cope with the current economic slowdown.

In its Budget announcement on 22 January 2009, the government announced that employers will receive a cash grant for each employee on their payrolls in 2009 under a new Jobs Credit Scheme. This move to reduce employers’ wage costs and save jobs will help maintain the take-up for office space. In addition, owners of industrial and commercial properties will receive a 40.0% property tax rebate. The government will also cut corporate tax rate from 18.0% to 17.0% to boost competitiveness and lure investments to spur job creation.

In addition, to provide some respite to the office supply market, the government announced the following changes:

• The Confirmed List for the first half 2009 government land sales (GLS) programme will be suspended
• The existing ban on conversion of office space in the Central Business District (CBD) to other uses will be lifted
• There will be a reduced supply of commercial space from government agencies, outside the GLS programme, for the first half of 2009.

These proactive measures taken by the Singapore Government to reduce the risk of over-supply in the slowing property market are viewed positively. Likewise, the assurance provided by the government that it is closely monitoring the property market provides an added level of comfort to investors.

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