By Harsha Jethnani

HONG KONG has a shortage of prime office space, and Singapore has a glut, so a bit of lateral thinking could easily see local landlords benefiting.

Mr Simon Smith, deputy managing director and head of research and consultancy at Savills Hong Kong, believes Singapore is well placed to take advantage of the imbalance.

Savills research found that Grade A office supply in the Central Business District here is expected to increase by 47 per cent over the next three years compared with only 6 per cent in Hong Kong.

The property consultancy also forecasts that rents here could fall by 20 per cent to 25 per cent and further consolidate this year - an improvement over last year's 36.2 per cent decline but still painful for landlords.

Rents are expected to hover around US$4 (S$5.60) to US$6 per square foot, it added.

The research suggests an opposite scenario in Hong Kong where rents are expected to increase by about 5 to 10 per cent to about US$12 psf.

As Hong Kong lacks cost competitiveness, Singapore is well placed to attract surplus office demand, said Mr Smith.

Prices for prime office space in Singapore are expected to increase by up to 5 per cent this year.

In a two-tier Grace A office market, newer buildings are likely to include a premium compared with older ones.

In Hong Kong, prices are expected to increase by a modest 5 per cent to 10 per cent after a 50 per cent increase last year.

Much of Hong Kong's growth is coming from mainland Chinese investors but this is expected to slow as the Chinese government gradually cools off its stimulus measures.

But not all is different for Hong Kong and Singapore.

Prices for luxury residential property are expected to increase by 10 to 15 per cent in both cities.

Prices in Singapore have yet to reach their peaks, said Savills.

Attractive prices and interest from foreigners, especially strong due to the upcoming integrated resorts, will keep prices heading north.

Prices could perhaps reach a high $3,000 psf from around $2,100 to $2,600 psf now but even if so, it would take around 12 to 18 months, said Savills.

This article was first published in The Straits Times.