Singapore is a hot spot for corporate HQs

Companies are moving to the city state and boosting its office market

May 13, 2024

Singapore is increasingly home to the regional headquarters of the world’s biggest firms, a boon for the city state’s office market.

In Asia Pacific, Singapore currently has the largest number of corporate regional headquarters than any time in the past decade, according to the country’s Economic Development Board.

“Singapore’s status as a regional business hub is reinforced by its business-friendly tax environment, political neutrality and diversified economy,” says Andrew Tangye, Head of Office Leasing Advisory, Singapore. “These contribute towards the relatively stable demand for office space.”

Both Singapore and Hong Kong have long been actively attracting corporates. The balance can shift from year to year, with preferences currently leaning toward Singapore. Some 4,200 multinationals have made Singapore their regional headquarters in 2021, according to Bloomberg data.

The concentration of HQs is supporting Singapore’s office market. While the government’s Urban Redevelopment Authority reported a dip in the island-wide office vacancy rate to 9.9% at the end of 2023, Hong Kong’s overall vacancy rate rose to 12.8%, according to JLL data.

Rents are moving accordingly. Singapore recorded a 0.7% year-on-year increase in office rents to $8.36 square feet per month.

Tax incentives, geopolitics are key draws for Singapore

Singapore’s strong ties with both the U.S. and China, a diversified economy, broad talent pool, and tax incentives make it a flight-to-safety destination for multinationals.

“Singapore and Hong Kong are two locations in the region with some of the most attractive corporate tax regimes, resulting in vibrant economies with international appeal,” says Tangye.

At 17%, Singapore’s corporate tax remains higher than Hong Kong’s 16.5% figure. However, various schemes offered by the former can significantly reduce that figure to 13.5% and under.

“These tax incentives wear off after some time, so multinationals have to also consider other factors in determining the right location,” Tangye says.

Political stability in Singapore, meanwhile, offers corporates certainty for long-term planning, says Chris Archibold, Country Head, Singapore.

“Companies can make decisions for tomorrow with confidence based on today’s government policies, knowing these policies are unlikely to be changed,” says Archibold.

Singapore a springboard into Southeast Asia

In February, global parcel delivery service provider FedEx moved its Asia Pacific, Middle East and Africa headquarters to Singapore from Hong Kong to be closer to emerging markets. Its new office in the central business district spans nearly 29,000 square feet (2,694 square meters).

“For many companies, Singapore is a good location to set up base to penetrate growth markets,” notes Tangye.

He cites Chinese giants – like online content platform ByteDance and e-commerce conglomerate Alibaba – as examples of multinationals who have set up regional headquarters in Singapore to expand into Southeast Asia.

“Corporates involved in technology, life sciences, and research and development tend to be drawn to Singapore’s regulations around data privacy and intellectual property,” says Tangye.

With rising operating costs, back-office functions like call centers, marketing, finance and administration are being displaced out of Singapore into neighboring markets like India and the Philippines, Tangye notes.

Food processing and packaging firm Tetra Pak announced the consolidation of its Singapore production into neighboring factories in the region. It will retain a Singapore office, one of its largest in Asia Pacific.

“With the nerve centre of the business located in Singapore, operations and production can spread out across Southeast Asia, creating a high-value ecosystem in the region,” says Tangye.

Archibold cautions against viewing location decisions as a competition between Singapore and Hong Kong.

“We should not see it as a Hong Kong versus Singapore thing as the right location depends on what works best for the company,” says Archibold.

“Singapore may currently be attracting more regional headquarters, but it is hard to say if it is at the expense of Hong Kong or any other markets, because many of these multinationals are also setting up offices across Asia Pacific,” adds Archibold.

Looking ahead, Tangye suggests that redevelopment efforts and a limited pipeline of new buildings in the next half-decade could mean rents remaining on an uptrend if occupier demand holds steady.

“Costs could increase as Singapore moves up the value chain,” says Tangye.

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