SINGAPORE OFFICE GLUT

Abstract

The prosperity of Singapore and its rapid pace of urbanisation shifted from, labour intensive industries to a service-based centre has seen the augmentation of office buildings, yet, the office market has not been able to respond in accordance to the dynamic changes in the economy. The property cycle is said to lag the economic cycle due to the long gestation period - time lag; basically the imperfections typical of the Real Estate industry. The recurrence of the cycle through its boom and bust therefore is inevitable. On the contrary, the cycle is recurrent but not periodic, as such, the players in the market have hard times trying to ride the trend. Office glut does not only mean over-building. It could be generated by a synergy of multiple factors ranging from the world economy, the Hongkong's sovereignty, Singapore prosperity and cost of operation to the 'gut-feel' of the players in the market. The fear of an up-coming recession may not be well substantiated, but, the extend of an oversupply of office space for the next few years is apparent. This oversupply from 1992 onwards is not a figure small enough to be easily ignored. Many have resort to quantitative forecasting to find answer to the queries of uncertainties in the market. Yet, acting upon a forecast is like taking a 'prudent' gamble. Nobody, even the governing body that sets the rules of the game in the property scene has a crystal-gazing ball to see the future. On the contrary, a forecast can be reliable if it relates only to the near future. Again, the long gestation does not permit easy prediction of the future. Are these the reasons for the office glut, its severity and duration?