April 22, 2014 1:00 pm JST

Immigration rules may hit Singapore back-office business: report

MAYUKO TANI, Nikkei staff writer

SINGAPORE -- Tighter restrictions on who may work in Singapore may lead some global banks to shut down their back-office operations in the city-state, Standard Chartered Bank warned in a recent equity research report.

     Government regulations aimed at boosting local hiring are making it harder and costlier to get work permits for midlevel employees with monthly salaries between 3,000 and 5,000 Singapore dollars ($2,400 to $4,000). Standard Chartered says this may hurt demand for office space in business parks. The bank has downgraded its rent forecast for these properties, predicting rents will remain flat from 2014 to 2016. That is down from an earlier forecast for a 6% increase.

     Banks' back offices and IT firms account for about 30% of Singapore's business park demand, according to the report. Leasing agents that Standard Chartered spoke to indicated four to five banks were considering moving some functions out of Singapore, "as they struggle to fill back-office positions (under) the new salary criteria." 

     Singapore is a popular location for mid- and back-office functions, particularly for technology-related activities such as data processing for trading and clearance, credit card billing and data analysis. In addition to low taxes and business costs, Singapore's flexible employment policies attracted global banks such as Citibank and Credit Suisse. The report cautions the change in Singapore's employment policies and higher inflation will "curtail such offshoring demand." Lower level IT functions in particular are seen as likely to move to lower-cost locations such as India and the Philippines.

     Standard Chartered downgraded its target price for Ascendas Real Estate Investment Trust (A-REIT) and Viva Industrial Trust (VIT), two business-park-focused REITs listed on the Singapore Exchange. While the overall occupancy rate for commercial REITs is expected to hold steady from 2014 to 2016, "There will be a flight to quality," the report said, citing statistics from a property consultant that showed the vacancy rate at older business parks rose to 9.3% in the third quarter of 2013 from 7.5% for the same period a year earlier.