Demand for service apartments set to grow further in 2007

Demand for serviced residences has been strong this year due in part to a rise in the number of project-based teams brought in by multinational firms.

Service apartment operators say there are also more expatriate professionals relocating to Singapore, in tandem with an increase in investments.

But even as occupancy rates are hitting the high 90 percent, service apartments in Singapore are still cheaper than other gateway cities.

And industry players expect more growth next year, despite concerns about fewer conventions and a slowing US economy.

The waiting lists for serviced apartments and international schools in Singapore have gotten longer this year.

Operators say besides stronger demand, those are also signs of Singapore’s ability to attract senior-level management with families.

“When you talk about hub business, the CEOs and the lot where it had to be based at, these are people that are actually directly moving out from Hong Kong to Singapore. One reason could be pollution and Singapore has taken over the key business hub. Hong Kong today is no longer the fundamental key hub to go into China because Shanghai now has basically taken over that position,” explains Cameron Ong, MD and CEO of The Ascott Group.

This year’s demand was also boosted by events such as the IMF-World Bank meetings in September, direct and indirect projects related to the integrated resorts, and a growing number of project teams brought in by global firms.

These include financial players brokering syndicated loans for mega property projects, retail consultants and gaming or food and beverage trainers.

At this point, serviced apartments in Singapore now rent for an average of about $8 per square foot, or a corporate rate of about $9,000 a month for a 3-bedroom unit.

Industry players say although prices have gone up quite a bit this year, they are still about one-third less than those in other gateway cities like Shanghai, Hong Kong and even Doha.

“This year we’re seeing how Singapore and the hospitality industry as a whole has picked up quite a bit – probably ranging between a 10% and 15% increase year-on-year rates for both hotels and serviced apartments. It has come to a stage where rates are respectable in terms of key gateway cities but there’s still some ways to go,” says Choe Peng Sum, Chief Operating Officer of Fraser’s Hospitality.

However, operators are bullish on next year’s outlook, despite fears of a slowing US economy, which is a traditional source of long-stay guests for Singapore.

“Manufacturing is probably a big portion but not the only segmentation. Consultancy, shipping, pharmaceuticals, biomed – all these other industries are also very strong. That’s where I’m bullish that we will be able to fill up,” says Choe.

“The other point is that there’s actually very little new supply coming up both for hotels and for serviced apartments. Even if there’s a slight dip in certain sectors, we’re looking at quite a bullish 2007.”

Ong agrees: “For 2007, business should be better than 2006. There are some who feels that with fewer conventions in Singapore in 2007, it’ll affect the business. But we should be more outward looking. Singapore does not rely just on conventions, but on many other sectors to do business.”

There are now some 3,500 serviced apartments in Singapore, and corporate clients make up 95% of the guests.

Source: Channel NewsAsia, 15 December 2006 

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