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Singapore Quarter 3, 2019

SINGAPORE 13 Oct 2019

Market commentary

Private non-landed residential sector not ‘buoyant’ but steady despite looming dark clouds.

Key highlights


  • Amid global uncertainty and a slow economy, office investment sales was a bright spark in a generally subdued landscape. Total investment sales value jumped 33.8 per cent q-o-q to $8.0bn, although on accumulative basis, from Q1 to Q3, this is still some 26.7 per cent lower than that of last year’s.
  • Key sales transactions in Q3 were supported by the nearly $1.6bn transaction of DUO Tower and the sale of 313@Somerset for $1.0bn – the top two largest amounts transacted for the quarter – while the residential site along Tan Quee Lan Street transacted for $800.2m under the GLS programme.


  • Residential prices continued to rise for the second consecutive quarter, and, in this regard, appeared to have diverged from economic fundamentals.
  • However, this does not allude to a buoyant market as other factors – such as declining average sell-down rates, higher land costs and compressing developer’s margin – have to be taken into account as well.


  • Net absorption and supply rose significantly, largely underpinned by the opening of Jewel Changi Airport and Funan in Q2 2019 and PLQ Mall in Q3 2019.
  • Nonetheless, given current geopolitical uncertainties, islandwide rental rates are projected to remain subdued and mixed, ranging from -2.0 to 1.0 per cent in 2019.


  • A resilient office market saw islandwide net absorption increasing nearly four-fold to 851,000 sq ft and occupancy rate going up 1.2 percentage points to 94.4 per cent.
  • Activity was catalysed by new office premises in Paya Lebar Quarter coming on stream and a number of international companies (e.g. Pinterest etc.) setting up their regional offices in Singapore.



Market commentary

Key market indicators

Singapore’s gross domestic product (GDP) in Q2 2019 slowed to 0.1 per cent year-on-year (y-o-y) down from 1.1 per cent in the previous quarter. This was the lowest growth since Q2 2009 during the global financial crisis (GFC). Wholesale and retail trade, and manufacturing were the biggest drag on the economy, while finance and insurance, and information and communications sectors were the best performers. Accordingly, the 2019 GDP growth forecast has been lowered for the second time to 0.0 to 1.0 per cent.

Despite the growing global economic headwinds and trade tensions, Singapore still attracted some $8.1bn of investment commitments in manufacturing and services in H1 2019 compared to $5.3bn over the same period in 2018. The top investors continued to come from the USA and Europe with investments in the technology, chemicals and data services sectors.

Government Policies  

  • The development charge rates for the period September 2019 to February 2020 have been revised as follows:
    1. Use Group A (Commercial) has increased by an average of 1.7 per cent, with rates for about half of the 118 sectors increasing by between 3.0 and 7.0 per cent;
    2. Use Group B (Residential, non-landed) was lowered marginally by 0.3 per cent on average, with rates for 7 sectors decreasing by 4.0 to 7.0 per cent; and
    3. other Use Groups remained unchanged.
  • The Government announced during the National Day Rally in August that the Greater Southern Waterfront district, which is expected to be developed in the next 5-10 years, will offer more commercial, residential (9,000 housing units) and entertainment options.


Investment sales  

Total investment sales value jumped 33.8 per cent quarter-on-quarter (q-o-q) to $8.0bn in Q3 2019 (Figure 1), with the private sector accounting for the bulk (or 76.5 per cent) of the total investment sales value, although public investment sales value almost doubled, as more residential sites were sold under the Government Land Sales (GLS) Programme (Table 1 and Figure 2).

Figure 1: Total investment sales, $bn




  • Singapore’s 2019 GDP growth forecast downgraded for the second time to 0.0 to 1.0 per cent, underpinned by continued weakness in the manufacturing sector.
  • Demand for housing loans continued to slowdown in June 2019, declining for the sixth consecutive month by 0.2 and 0.4 per cent month-on-month (m-o-m) and year-on-year (y-o-y) respectively.
  • The Monetary Authority of Singapore (MAS) has maintained in June 2019 that the current cooling measures implemented since July 2018 remain appropriate.

Table 1: New sales volume by market segments (Q1 and Q2 2019)




Figure 2: Total investment sales by asset type













Despite growing global tensions and uncertainties, a slowing local economy and business confidence falling to near two year low in Q4 2019 (according to the latest Business Optimism Index), total investment sales value jumped 33.8 per cent q-o-q with heightened sales activity for commercial assets by local and foreign institutional investors including REITs.

  • Office sector continues to stand out with another major transaction involving the DUO Tower, underpinning investors’ confidence and positive outlook for the sector.
  • The related party sale of two data centres to Keppel DC REIT in a tightly held market suggests the growing interests and demand of data centres as an alternate asset class and Singapore’s status as a gateway and regional hub.
  • Residential en bloc sales remained subdued and limited to smaller developments with the bulk of land sales coming from GLS sites, indicating that developers continue to be cautious amid the growing number of new projects launches and slowing economy.

With total investment sales value already exceeding our earlier lower bound estimates of $18bn, the forecast for the remaining Q4 is likely to increase to range between $3bn and $5bn, bringing the total investment sales value in 2019 to $22bn to $24bn.



Market commentary

Key market indicators

  • Latest Urban Redevelopment Authority (URA) flash estimates indicate that private non-landed prices rose by 1.7 per cent q-o-q vis-à-vis 2.0 per cent in the previous quarter. Prices of non-landed properties in all market segments grew, led by the core central region (CCR) with 2.9 per cent q-o-q, followed by rest of central region (RCR) with 1.6 per cent and outside central region (OCR) with 0.7 per cent.
  • Based on advanced estimates, the seasonally adjusted unemployment rate for residents was up slightly by 0.1 pp to 3.1 per cent q-o-q in Q2 2019. However, retrenchments have not increased but remained low at 2,300.
  • Housing loans fell for the 8th straight month by 1.1 per cent y-o-y, as demand for housing loans continue to weaken since the latest cooling measures were introduced in July 2018.

Investment market

  • Investment sales value doubled on a q-o-q basis in Q3 as more GLS sites were sold compared to the previous quarter (Tables 1 and 3) and accounted for the bulk of land sales.
  • In contrast, private en bloc site sales remain remained subdued and limited to smaller developments as developers remain cautious amid the growing number of existing and upcoming new projects launches as well as current economic uncertainties (Tables 1 and 2).


Private non-landed sales volume, prices, completed supply and rents (excluding executive condominiums - ECs)

  • New sales volume is expected to outweigh resale volume (includes both resale and sub sale) for the second consecutive quarter, as the number of units from new projects launched in Q3 jumped by about 67.0 per cent q-o-q to approximately 4,500 units in Q2.
  • As such, new sales in Q3 are projected to surge by more than 44 per cent q-o-q to circa 3,100 units (Figure 3) led by RCR and OCR due to the launches of the three major new projects mentioned above.

Figure 3: Private non-landed home sales volume (excluding ECs) and URA price index




  • Conversely, resale volume is likely to decline some 9.0 per cent q-o-q to about 1,800 units, as buyers continued to prefer new units over older resale units, with a wide range of projects to choose from.
  • Accordingly, total sales volume in Q3 is projected to reach approximately 5,000 units, which is about 20 per cent more than the previous quarter and a record high since Q3 2018.  
  • With the number of non-landed unit completions projected to average approximately 5,500 units per annum until 2020, which is significantly below the 3- and 5- year averages of 14,900 and 16,500 units respectively, the rental market is expected to remain stable with some positive upside considering that the vacancy rate had remained relatively steady over the past two quarters. As such, islandwide rents are forecasted to moderate slightly to between 0.5 and 1.0 per cent q-o-q growth in Q3, versus 1.4 per cent in Q2 2019 (Figure 4).

Figure 4: Private non-landed completions (excluding ECs) and URA rental index




New non-landed project launches

  • Bulk of the launches were in July and September, as developers typically do not launch new projects during the Hungry Ghost Month in August.
  • The majority of new launches were in RCR, with six projects totalling 2,615 units, up by more than 50.0 per cent from Q2.
  • Initial sell-down rates of the new projects launched ranged from 2.6 to 30.4 per cent with One Pearl Bank achieving the highest sell-down rate, followed closely by Avenue South.


Since the start of 2019, approximately 41 new projects comprising more 12,000 units have been launched with an estimated average sell-down rate of 27.0 per as at Q3. An additional 2,500 to 3,500 units is anticipated to be launched in the remaining quarter. With total new sales volume over the past three quarters likely to exceed 7,000 units, new sales are expected to be within our earlier forecast of 8,000 to 10,000 units for 2019. Although the rise of the price index for two consecutive quarters appears to be ‘diverging’ from economic fundamentals, this does not necessarily imply that the market is ‘buoyant’ and / or developers are profiteering. To put things in perspective, the following factors should be considered as well:

  • New unit prices tend to be higher than resale units, especially after factoring the higher land prices paid by developers during the en bloc fever. Consequently, the higher proportion of new sale volume vis-à-vis resale would result in higher prices, all else being equal. Additionally, our analysis shows that land cost as a percentage of average selling price has been trending upwards, which means that developers’ margins are likely compressing.
  • The estimated average sell-down rate for the 41 new projects launched since the beginning of this year was approximately 27.0 per cent. In comparison, the sell-down rate of new projects launched 12 months prior to the cooling measures in July 2018 were averaging some 47.0 per cent. Furthermore, the number of new launches and units were substantially lower than the first three quarters of this year. Hence, this does not suggest that the market is ‘buoyant’.

Accordingly, although overall unit prices are forecasted to rise by between 2.0 to 4.0 per cent this year, barring any economic shocks.



Market commentary

Key market indicators

  • Retail sales index excluding motor vehicles (ex MV) fell for the sixth consecutive month, down 2.4 per cent y-o-y in July 2019 (Figure 5). Every subsector fell except for medical goods & toiletries and supermarkets, with the main drags coming from furniture and household equipment (-8.3 per cent), computer and technology (-7.7 per cent) and watches and jewellery (-6.2 per cent).

Figure 5: Retail Sales Index (ex MV) and F&B Index (up till July 2019)




  • In contrast, the Food and Beverage (F&B) Services Index expanded for four consecutive months, up 3.2 per cent y-o-y in July 2019 with all subsectors growing led by fast food outlets (+5.2 per cent)
  • Additionally, tourism receipts for shopping and F&B in Q1 2019 fell 7.0 per cent y-o-y. However, Mainland Chinese visitors continued to be the highest spenders with almost half of total spending on shopping.

Investment market

  • The total investment transaction value grew by 7.7 per cent mainly due to the sale of 313@Somerset for just over $1.0bn to Lendlease Global Commercial REIT which is expected to be listed on 2 October 2019 (Tables 1 and 2).

Private demand, occupancy and supply

  • Net absorption and supply rose significantly largely underpinned by the opening of Jewel Changi Airport and Funan in Q2 2019 and PLQ Mall in Q3 2019. Totalling more than 1.0m sq ft of retail space, these new malls were more than 90 per cent pre-leased. Accordingly, occupancy rates increased by 1.1 percentage points q-o-q to 91.2 per cent.
  • Despite the improved occupancy rates, the retail environment remains challenging with further closure and downsizing of departmental stores and bookstores. Conversely, F&B appears to be ‘bucking the trend’ and continues to play an increasingly important component as part of a mall’s retail mix.

Orchard/Scotts Road (OSR)

  • Net absorption increased from 12,000 sq ft to 36,000 sq ft in Q2 2019.
  • Occupancy rate inched up 0.4 pp q-o-q to 94.3 per cent in Q2.
  • There were a few notable closures at Centrepoint including Metro’s flagship store, Times Bookstores and TianPo Jewellery. However, Decathlon will replace Metro as the anchor tenant and is expected to open in H1 2020.
  • Other new F&B outlets in Q3 2019 included: Japanese Emma dessert opening its first overseas outlet at Plaza Singapura, Los Angeles ice cream shop, Little Damage, debuting at Wheelock Place, and Hong Kong café Tsui Wah with its second outlet at The Heeren.

Other City Areas (OCA)

  • Net absorption reversed from -16,000 sq ft in Q1 to 382,000 sq ft in Q2 2019 with the opening of Funan on 28 June 2019.
  • Occupancy fell marginally by 0.1 pp q-o-q to 90.5 per cent in Q2.
  • Some notable new tenants in Q3 2019 included:
    -  Man Man Unagi (F&B), Tendon Kohaku (F&B) in Clarke Quay Central
    -  American dessert shop Beverly Hills Cheesecake (F&B) in Raffles City
    -  Japanese cafe 108 Matcha Saro (F&B), Taiwanese restaurant The Salted Plum(F&B) in Suntec City
    -  JD Sports (Sports) and Taobao Store by Virmall (6,000 sq ft - department store and value store) in Funan
    -  Japanese Meidi-Ya (supermarket) in Great World City
    -  The North Face (footwear and apparel) at The Shoppes at Marina Bay Sands

Suburban Areas (SA)

  • Net absorption jumped from 9,000 sq ft to 469,000 sq ft in Q2 2019 with the opening of Jewel Changi on 17 April 2019.
  • Occupancy rate improved 2.0 pp q-o-q to 90.7 per cent.  
  • PLQ mall started trading on 30 August 2019 with the main retail mix by tenants as follows: F&B (44.0 per cent), beauty & health (18.0 per cent), fashion (16.0 per cent) with the anchor tenants being Shaw Theatres (leisure), FairPrice Finest (supermarket) and KopiTime (F&B).
  • Other notable openings in Q3 included Apple’s (IT) second store at Jewel Changi Airport, Fairprice Xtra (90,000 sq ft - hypermarket) at VivoCity replacing Giant and Chinese tea chain Heytea (F&B) at Westgate.


Rental rates

Accordingly, rental rates are expected to remain largely flat with marginal rises in Q3 (Table 4).

Table 4: Average monthly gross rents in Q3 2019 ($ per sq ft)




Supply pipeline

The supply pipeline from now until 2022 is projected to be limited comprising some 692,000 sq ft NLA (Figure 6) with the China Square Central retail podium (80,000 sq ft) expected to be completed by Q4 2019.

Figure 6: Retail development pipeline, million sq ft





With growing economic headwinds and weak retail sales, islandwide rental rates are projected to remain subdued and mixed ranging from -2.0 to 1.0 per cent in 2019, although the limited supply pipeline from 2020 onwards will provide some support to rents and occupancy.

In addition, the continued investment sales activity since early 2019 suggests investors’ confidence in the sector, although the landlords and retailers’ ability to transform and adapt to the changing retail landscape is increasingly becoming more important.



Market commentary

Key market indicators

  • The finance and insurance, information and communications, and business services sectors continued to contribute positively to Singapore’s GDP in H1 2019.

Investment market

  • Total investment sales value continued to grow by 12.5 per cent q-o-q with the sale of DUO Tower and 71 Robinson Road and Anson House (Tables 1 and 2). These increased and sustained sale activities since the beginning of this year indicated confidence and optimism for the sector despite global headwinds and a slowing local economy.

Office occupancy and new completions

  • Islandwide net absorption increased nearly four-fold to 851,000 sq ft in Q3 2019 and occupancy rate improved 1.2 percentage points (pp) q-o-q to 94.4 per cent.
  • Occupancy rates in the decentralised area improved the most, mainly driven by new tenants progressively moving to their new office premises in Paya Lebar Quarter (PLQ), followed by the CBD and City fringe which remain unchanged q-o-q (Figure 7).  

Figure 7: Office occupancy rates in Q3 2019




  • Co-working and technology firms continued to be the key occupiers of CBD office space with several international companies setting up their regional offices in Singapore (Table 5).

Table 5: Key tenant movements in Q3 2019




  • With tightening vacancy rates and limited new supply, the average gross monthly rents rose across most of the sublocations by between 0.0 and 1.5 per cent q-o-q (Table 6).

Table 6: Average monthly gross office rents ($ per sq ft)




Supply pipeline

  • The total supply pipeline over the next 4 years to 2023 is approximately 4.6m sq ft (or 1.1m sq ft per annum). This is much lower than the 3- and 5-year average net supply of 2.1m sq ft and 1.7m sq ft respectively (Figure 8).

Figure 8: Office development pipeline, million sq ft




  • 9 Penang Road, 139 Cecil Street and the renovation works at China Square Central are expected to be completed by end 2019. All these buildings have been fully preleased, except for China Square Central.



Underpinned by tightening vacancies and increased investment sales activity, the office market continues to outperform the other asset classes despite weakening market conditions. This appears contrary to the past 10 years (post GFC in 2009) when the office market was relatively correlated to GDP growth. While average rents and capital values remain below pre-GFC levels, the fundamental basis for future high single- to double-digit rental growth appears ‘unsustainable’ as the underlying driver for current rental growth is largely due to the limited existing Grade A stock and future supply pipeline in the CBD. Hence, CBD rental rates are expected to increase by 5.0 to 10.0 per cent this year with 2020 levels likely to moderate.



This report should not be relied upon as a basis for entering into transactions without seeking specific, qualified, professional advice. Whilst facts have been rigorously checked, Edmund Tie & Company can take no responsibility for any damage or loss suffered as a result of any inadvertent inaccuracy within this report. Information contained herein should not, in whole or part, be published, reproduced or referred to without prior approval. Any such reproduction should be credited to Edmund Tie & Company

© Edmund Tie & Company October 2019
Source: Edmund Tie & Company. Reproduced with permission.

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