Relocations To Singapore From Hong Kong Slowed Down In Q1 2023
SINGAPORE – Company relocations to the city-state from Hong Kong slowed down during the first three months of the year and it’s expected to ease further as firms reassess their moves, reported the South China Morning Post (SCMP) on Monday noon (10 April, SGT).
“In 2022, we saw a number of companies reallocating headcounts and selective business functions from Hong Kong to Singapore, largely as part of their business strategy to be better positioned to capture the growing Southeast Asian market,” noted Jones Lang LaSalle’s (JLL)’s Research Head in Singapore Tay Huey Ying.
“This appeared to have slowed down in the first quarter of 2023, partly as companies opt to put a pause to expansion and relocation plans amid economic uncertainties.”
Still, Savills’ Executive Director of research & consultancy Alan Cheong thinks there’s still momentum” left in the trend of businesses relocating from Hong Kong to Singapore, as decisions made between 2019 and 2021 are still being implemented. “But I don’t think there will be follow-through momentum. The major moves will begin tapering off from now.”
Once all the relocations are “settled” by H1 2023, the status quo will be maintained until firms further improve their strategies. For example, by venturing out to the rest of Southeast Asia from Singapore, noted Cheong.
However, office rental growth in Singapore is forecasted to slow down. “If there’s any softness, it could be felt in the second half of 2023” due to the weakness in the city-state’s economy.
Based on official forecasts made in February, Singapore’s gross domestic product (GDP) is projected to edge up by 0.5 to 2.5 percent for the whole of 2023, down from 3.6 percent last year.
For the first half of the year, Savills expects office rents to inch up by 2 percent, followed by a smaller uptick of 1 percent by H2 2023, leading to an overall rental growth of 2 percent for the entire year. In comparison, office rents in Singapore’s central business district (CBD) rose by 5.9 percent in 2022.
Meanwhile, a credit rating agency expects office rents in Hong Kong to drop by up to 10 percent for the whole of 2023 amidst a significant increase in office supply.
“For offices, we maintain our forecast of a 5 to 10 percent decline in rents in 2023,” said Wilson Ling, a credit analyst at Standard & Poor’s (S&P) Global Ratings.
“We believe office vacancy rate will not meaningfully improve over the next 12 months amid substantial new supply,” said the rating agency, adding office property owners in the Chinese territory are still exerting a great deal of effort to fill up their buildings.