Singapore’s real estate market remains fundamentally sound even as US-China trade tension looms

By Christine Li, Senior Director & Head of Research, Cushman & Wakefield

Photo by William Cho (The Heart of Orchard Road, Singapore) [CC BY-SA 2.0 (https://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons


Office rents rose by 1.6% in Q2, slower than the increase of 2.6% in Q1. The slowdown was attributed to Grade B rental growth lagging behind that of the Grade A segment, as companies continued to show their preference for premium space. Our latest data shows that Grade A rental growth accelerated to 3.8% in Q2, the fastest pace of growth in 17 quarters since Q1 2014.

Office stock was boosted by 646,000* square feet (sq ft) in Q2, largely as a result of the completion of Frasers Tower. Despite the increase in office stock, the islandwide office vacancy rate continued to trend downwards from 12.5% to 12.2%. Notably, net absorption measuring demand increased five-fold by 797,000 sq ft in Q2 compared with the increase of 151,000 sq ft in the previous quarter. This has brought the total net demand islandwide for the first half of 2018 to 947,000 sq ft, even higher than the 646,000 sq ft for the whole of 2017.

The tech sector continues its pace of expansion amidst fierce competition in the e-commerce and ride-hailing sectors. Lazada renewed and expanded its space by 3.6 times in AXA Tower, occupying approximately 109,000 sf in total. Also, Go-Jek announced its plans to recruit ‘hundreds of staff’ in Singapore to support its launch in the city-state and in the region. This would necessitate a further expansion of its office space, also in AXA Tower.

Further expansion in the co-working segment is expected as companies seek to boost employee efficiency by locating offices in a flexible workspace environment. In addition, the current practice of landlords granting an exclusivity clause to serviced office and co-working operators may be phased out, and we could see multiple operators in the same building. For example, according to Suntec REIT’s CEO Chan Kong Leong, Suntec City offers a plethora of serviced office and co-working options such as Arcc Offices, Centennial, Regus, Servcorp, Ucommune and WeWork (page 2 of this press release).

This move could help newcomers in the flexible work space to secure more sites in various existing office buildings, which will further backfill some of the vacant spaces left behind by other corporate occupiers as a result of relocation to newer buildings.

Office prices rose by 1.9% in Q2, faster than the 1.3% growth experienced in Q1. The acceleration of price growth reflected the bullish views of investors on the Singapore office market. The main contributors to the price growth were CapitaCommercial Trust’s sale of Twenty Anson for $516.0 million or $2,503 per square foot (psf) and MYP’s divestment of MYP Plaza for $247.0 million or $3,000 psf. The strata office market is also starting to pick up steam. This was evidenced by the 20th floor of Samsung Hub transacting at $46.6 million, a record price of $3,550 psf.

Office prices are expected to further increase in Q3 due to the Frasers Commercial Trust’s divestment of 55 Market Street. The property was transacted at a high price of $3,020 psf which reflected a low cap rate of 1.7%. It was also reported that British property group Chelsfield was in an exclusive due diligence for Manulife Centre at $2,300 psf, an excellent price for a property in the Bugis submarket.


Central Region retail prices fell by 1.3% q-o-q in Q2, after a 0.1% growth in the preceding quarter. The fall in price was observed in both the central area and the fringe area which fell by 0.7% and 1.7% q-o-q respectively. Many strata-titled malls are struggling to stay relevant in the current fast-paced retail landscape, against the emergence of e-commerce and shifting shopper preferences. As strata-titled malls are owned by many individual owners, it is challenging to get consensus for Asset Enhancement Initiatives or conduct any re-positioning exercises which would incur additional costs.

The new slew of cooling measures in the residential market is expected to shift some demand into the retail space, but retail demand is expected to be non-homogenous and will favour units in accessible locations with strong footfall.

Despite firm economic growth and improving retail sales, central region retail rents fell 1.1% q-o-q in Q2 2018. The fall in rents was led by Fringe Area rents which fell by 1.6%, whereas Central Area rents fell by 1%. A two-tier market is forming in the retail segment, as accessible and well-managed malls attract the bulk of pedestrian footfalls. Retail rents could remain pressured by a high operating cost environment, competition from e-commerce and a healthy supply pipeline for the rest of 2018 including PLQ Mall and  Jewel Changi Airport. As such, retailers and landlords have to continue to re-invent themselves, investing in technology and focusing on lifestyle and activity-based experiences to keep pace with the fast-changing retail landscape.

Nevertheless, take-up of retail space island-wide remains healthy, as around 226,000 sq ft of retail space were absorbed in Q2, higher than the 108,000 sq ft of net supply in the same quarter, improving the islandwide occupancy rate by 0.2 percentage points to 92.7% for Q2 2018. The bulk of net absorption was in the suburban (Outside Central Region) which saw 258,000 sq ft of space being taking up. Prime suburban space remains highly sought after by retailers, as evidenced by the strong take-up of space at the recently opened Century Square after a nine-month makeover.


*All supply and absorption numbers cited in the commentary are from URA Q2 release and have been converted from square metres to square feet.


“Private residential prices continue to rise for the fourth consecutive quarter, rising 3.4% in Q2 2018. Price growth was broad-based, with landed and non-landed prices rising 4.1% and 3.2% in 2Q18. Prices rose in tandem with volumes and a total of 7,186 private residential units (excluding Executive Condominiums) were transacted in Q2 2018, a 5-year high since Q1 2013  when 7,811 units were sold.

The recent property cooling measures have raised the barriers for entry for all categories of buyers from first timers to investors and foreign buyers. As a result, the current price momentum of 3-4% increase per quarter will no longer apply to the second half of the year.

Matching buyer and seller expectations will be the key to maintaining healthy transaction volumes in the coming months or quarters. As such, prices are unlikely to run away, nor will they dip unless the primary residential market sees a more severe downward adjustment in terms of prices of new launch prices.

With the escalation of US-China trade tension, rising mortgage rates and the recent dose of cooling measures, the feel-good factor is no longer present in the residential market. Hence, developers might either delay the launches until there is further clarity on the demand front, or set a more realistic pricing during the initial launch phase to keep buyers interested, holding back the better units for higher margins when they clear the stock progressively during the construction period. With no immediate deadline looming for most of the land parcels acquired over the last two years, developers will continue to refrain from making major price cuts due to their tight margins.

In the non-landed segment, mid-tier ( Rest of Central Region, RCR) prices outperformed the other segments, rising 5.6% q-o-q, as compared to high-end ( Core Central Region, CCR) and mass market ( Outside Central Region, OCR) prices which rose 0.9% and 3% respectively. The outperformance in RCR prices was fueled by a 54% q-o-q increase in volumes. The top selling RCR projects in 2Q18 include Park Place Residences at PLQ (No. of units sold in 2Q18: 186 units, Median price in 2Q18: $2,045 psf ), The Verandah Residences (170 units, $1,838) and Margaret Ville (105 units, $1,873).

The market is expected to quieten down in Q3 2018 after the slew of new cooling measures, which were announced in early July. Transaction volume is expected to fall in Q3 2018, hit by a double whammy of cooling measures and the hungry ghost festival, when superstitious buyers tend to hold back on buying.

Nonetheless, the fundamentals of the residential market stay unchanged given that rents and occupancy rates remain positive. Against tapering supply and strong economic growth, rentals for the non-landed segment grew by 0.6% q-o-q, faster than the growth of 0.3% in Q1 2018. Occupancy rates continued to strengthen to 92.9% in Q2 2018. Barring any unexpected deterioration in the global economy, rents and occupancy levels could continue to strengthen over the next two to three years as incoming supply remains low.”


 Christine Li is a Senior Director & Head of Research at Cushman & Wakefield. 




  • Regions

© 2019 Cushman & Wakefield, Inc.