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Singapore Quarter 4, 2019

SINGAPORE 31 Jan 2020

Market commentary

Soft 2019 economic growth and hopes of market recovery for commercial and residential markets in 2020.



Market commentary

Key economic indicators

Based on advanced estimates released by the Ministry of Trade and Industry on 2 January 2020, the Singapore economy grew by 0.7 per cent year-on-year (y-o-y) in 2019, moderating from the 3.1 per cent y-o-y growth in 2018 (Table 1 and 2). The construction sector had the strongest performance, growing by 2.5 per cent y-o-y in 2019. However, the manufacturing sector contracted by 1.5 per cent y-o-y in 2019.

Global growth is projected to see a modest pickup in 2020, supported by emerging markets and developing economies, while growth of key final demand markets for Singapore such as the US and China is expected to ease amid trade tensions. Market watchers are cautiously positive on the possible easing of trade frictions and improvements in global trade in the coming quarters. The Ministry of Trade and Industry has forecast Singapore’s GDP growth to range from 0.5 per cent to 2.5 per cent in 2020.

Notwithstanding the continuing global trade tensions and economic headwinds, Singapore continued to attract investment commitment. The fixed asset investment totalled 8.3bn from Q1 2019 to Q3 2019, with a greater proportion recorded in H1 2019. The Singapore Economic Development Board (EDB), with its focus on key priorities including ASEAN, advanced manufacturing, digital, innovation and growing new industry clusters, had planned to attract $8bn to S$10bn in fixed asset investments in 2019, in line with previous years.

In EDB’s 2019 year-in-review announcement in 16 January 2020, Singapore far exceeded its forecast for investment commitments in 2019 by attracting $15.2bn, 39 per cent more than in 2018. The strong figures reflect companies’ confidence in Singapore’s fundamentals and its strategic position at the heart of a growing Asia, with strong value proposition of trust and stability along with sophisticated capabilities of its economy.

Table 1: GDP


Table 2: Unemployment rate and fixed asset investments


All monetary values are in Singapore dollars ($)



Investment sales

Against the backdrop of global geopolitical tensions, economic slowdown and business confidence falling to a near two-year low in Q4 2019 (according to the Singapore Commercial Credit Bureau’s Business Optimism Index report released on 16 September 2019), total investment sales value fell 22.2 per cent y-o-y to reach $23.2bn in 2019 (Figure 1 and 2). The private sector accounted for the bulk (or 78.1 per cent) of total investment sales value for 2019, with heightened sales activities for commercial assets by local and foreign institutional investors including REITs.

Sale of sites sold under the Government Land Sales (GLS) Programme (Table 3 and 4) in 2019 was 28.4 per cent lower than in 2018. The decline was attributed to a fall in residential sale sites as property cooling measures and greater investor caution continued to bite homebuyer sentiments.

Figure 1: Total investment sales, $bn


Table 3: Investment sales summary*


Figure 2: Total investment sales by asset type


Figure 3: Estimated Residential GLS supply


Figure 4: Estimated Commercial (excluding Hotels) GLS supply


Figure 5: Estimated Industrial GLS supply


Table 4: Key private investment sale transactions in Q4 2019 (above $100m)


No GLS sites were recorded in Q4 2019.


Sector trends and outlook

  • Residential collective sales remained lackluster, falling from 52.2 per cent of total investment sales value in 2018 to just 16.6 per cent in 2019 (Figure 3, 4 and 5).
  • Office sector continued to stand out, increasing 53.5 per cent y-o-y in total private sector deals and GLS sites. The stronger interest is supported by investors’ confidence in office space demand and positive outlooks for the sector as viable source of stable income-recurring assets.
    The largest transaction in 2019 was Chevron House, which transacted at $1,025m (or $2,739 psf) to US investment firm, AEW from Oxley Holdings. The transaction price represents more than a 35 per cent increase in capital value over the $660m that Oxley Holdings had initially paid to acquire the development in March 2018. Chevron House is currently undergoing addition and alteration (A&A) works to increase the NLA in the building.
  • Hospitality assets emerged as the next investors’ target, with investment sales value increasing 216 per cent y-o-y in 2019, underpinned by yet another record year in international visitor arrivals in Singapore, with 15.9m visitors in the first 10 months of the year – a 2.3 per cent y-o-y increase above the same period in 2018. 2018 recorded a new-high in terms of total visitor arrivals of 18.5m.

The overall investment sales value estimate of $23.2bn for 2019 falls within our previous forecast range of $22bn to $24bn. Despite the increase in investment sales for all commercial assets (barring shophouses), overall investment sales value posted an annual decline in 2019, amid the dearth of residential collective sales. Concerns on the unsold supply glut also weighed on investors’ appetite for new residential sites. Along with existing property cooling measures, residential investment sales activity is likely to be soft in the near term until we observe a continuous recovery in new sales momentum in the next three to four quarters.



Market commentary

Key economic indicators

  • Based on Q4 2019 Urban Redevelopment Authority (URA) flash estimates released on 2 January 2020, private home prices for the fourth quarter of 2019 reflected a marginal 0.3 per cent q-o-q and 2.5 per cent y-o-y increase.
  • Private non-landed property prices declined by 0.7 per cent q-o-q in Q4 2019, a reversal compared to the 1.3 per cent growth in Q3 2019. Of which, prices of non-landed properties in the CCR and RCR declined, except for non-landed properties in the OCR, which increased by 2.9 per cent q-o-q in Q4 2019.
  • URA Landed Property Price Index trended upwards by 4.0 per cent q-o-q in Q4 2019, extending from the 1.0 per cent growth reported in Q3 2019.
  • Housing loans increased marginally by 3.7 per cent y-o-y in Q3 2019 (Figure 6), after four consecutive quarters of decline amid moderated demand for housing loans since the July 2018 property cooling measures with further tightening of loan-to-value threshold for borrowers.
  • New sales volume is expected to outweigh resale volume, including both resale and sub sale, for the second consecutive quarter in Q4 2019, albeit at a lower new sales volume compared to the third quarter due to the lower number of launches for the last quarter of 2019 (Figure 7 and Table 5).


Figure 6: New housing loans limits granted


Figure 7: Private homes sales volume (excluding ECs) and URA All Residential Price Index


Table 5: Non-landed private residential launches (excluding ECs) in Q4 2019 (projects >20 units)


  • Conversely, resale volume is envisaged to decline to about 2,000 units in the last quarter, due in part to the end-of-year seasonal lull and some homeowners are seen to be holding back their divestment plans in anticipation of possible return of buyers from the first quarter of 2020.
  • Total private homes sales volume for Q4 2019 is projected to reach approximately 4,600 units, higher compared to 3,860 units in Q4 2018.
  • With these Q4 estimates, we forecast that total sales volume of private homes could reach close to 19,000 units for the whole of 2019, compared to 22,139 units in 2018.
  • In terms of the private residential leasing market, total rental contracts volume rose by 4.5 per cent y-o-y to reach 27,000 transactions in Q3 2019 (Figure 8). The URA Rental Index for All Residential Property has risen for three consecutive quarters in 2019 with cumulative increase of 2.4 per cent from Q4 2018. These trends were supported by the lower number of completed private homes in 2019 and a firmer overall occupancy of 93.9 per cent for the third quarter. In view of a weakened economic performance for the second half of 2019 and dimmed job market prospects that could have curtailed foreign workforce growth and accommodation budgets, we envisage overall private home rental movement to trend sideways with -0.3 to 0.2 per cent q-o-q change in Q4 2019 (Figure 9).



  • Notwithstanding the new high pricing set by new launch projects in 2019 compared to previous year’s launches, there is growing acceptance from homebuyers on the price premium factors accorded to well-located projects with concepts that appeal in lifestyle and convenience. The Government’s 2019 Master Plan to transform various precincts has provided clarity on Singapore’s future property landscape and instilled confidence on the prospects of residential property investment.
  • The high liquidity in the market, fueled by low interest rates, has also supported demand for residential property investment. With limited attractive options to invest in equities and bonds amid compressed yields and returns, non-institutional retail investors view residential property as a possible long term investment and a hedge against inflation. For foreign investors, the strong Singapore Dollar which has held up well historically against regional currencies, is another attraction.
  • The upcoming launches in the first half of 2020, located mainly in the Core Central Region, will be closely watched as the market assess demand conditions and sales performance.
  • In consideration of a potential recovery in economic outlook with preliminary easing of trade frictions and assuming existing cooling measures to remain status quo, we could expect private home prices to trend at a steady growth path in 2020, akin to a ‘Goldilocks effect’. We forecast 2 per cent to 4 per cent annual price growth for private homes for year 2020, with possible price uptick of 0.5 per cent to 0.8 per cent for non-landed homes in the first quarter of 2020.


Figure 8: Number of private home rental transactions (excluding ECs)



Figure 9: Private non-landed home completions (excluding ECs) and URA Rental Index




Market commentary

Key indicators

  • Retail sales index (excluding motor vehicles) trended downwards for the fourth consecutive quarter by 1.3 per cent q-o-q in Q3 2019 (Figure 10). However, the decline in Q3 2019 was moderated as compared to the -1.8 per cent contraction in Q2 2019.
  • In October 2019, the top three gainers (on y-o-y basis) were wearing apparel and footwear as well as the supermarkets, hypermarkets; minimarts and convenience stores sectors. The furniture and household equipment, optical goods and books as well as watches and jewellery sectors reported the largest contraction y-o-y in the same month (Figure 11). In terms of the Food & Beverage services index, fast food outlets had the largest expansion of 6.3 per cent y-o-y (Figure 12).


Figure 10: Y-o-y change in retail sales index (excluding motor vehicles)


Figure 11: Retail sales index (Oct 2019), y-o-y change


Figure 12: Food & Beverage services index (Oct 2019), y-o-y change



  • The online retail sales proportion has also been on an increasing trend since the start of 2019 supported by the growth in e-commerce (Figure 13).
  • Tourism receipts declined by 1.3 per cent y-o-y to $6.5bn in Q2 2019 and majority of the sectors reported a decline y-o-y. Visitors from Mainland China, Indonesia and India were the top nationalities that visited Singapore in Q3 2019. The ongoing Hong Kong unrest situation have also prompted more Mainland Chinese visitors to visit Singapore.


Figure 13: Retail sales value and proportion of online retail sales



Private demand, occupancy and supply

  • Based on URA statistics (available at the time of this report on 17 January 2020), the retail market saw modest demand with total net absorption moderating to 374,000 sq ft in Q3 2019, from 888,000 sq ft in Q2 2019. Net supply was positive in Q3 2019 with the completion of Paya Lebar Quarter (Phase 2) (NLA: 291,000 sq ft) and A&A to the existing podium of China Square Central (NLA: 80,000 sq ft).
  • From URA’s estimates, island-wide occupancy increased marginally by 0.1 percentage points q-o-q to 91.3 per cent in Q3 2019 (Figure 14).


Figure 14: Retail occupancy rates (Q3 2019)



Rental rates

Based on our estimates, island-wide average monthly rental rates increased marginally by 0.3 per cent to $22.20 per sq ft in 2019. On a q-o-q basis, rents declined slightly in the Orchard/Scotts Road subzone (Table 6).

Leasing demand for first storey/prime retail spaces in other city areas recovered slightly, as retailers sought prime spaces to capture higher footfall and visibility.

Amid cautious consumer sentiment, we observed a slight decline in demand for upper-floor retail spaces in fringe/suburban areas, with a 0.7 per cent q-o-q decline in monthly rentals for the last quarter of 2019

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



Supply pipeline

The supply pipeline from Q4 2019 to 2022 is projected to be limited comprising some 602,000 sq ft NLA (Figure 15). In Q4 2019, 9 Penang Road in the OSR has obtained TOP, comprising an NLA of 15,000 sq ft.


Figure 15: Retail development pipeline, million (m) sq ft




The retail property market remained fairly uncertain in view of the soft retail sales performance, tight labour regulations and the growing e-commerce industry. Despite these challenges, the F&B sector is viewed as the bright spot of the industry as seen from the growth of 4.5 per cent y-o-y in the F&B services index in October 2019. This is supported by the many new F&B concepts introduced in 2019 and some of which have attracted visible crowds of customers (e.g. Shake Shack in Jewel Changi). In H2 2019, various sales events, such as Singles Day and Black Friday have been introduced, which helped to boost retail sales.

Moving forward, integrating physical brick-and-mortar experience with online retailing will be an essential strategy for asset owners and retailers to expand their consumer outreach.

As a case in point, we have witnessed trend reversal from established online retailers – such as Taobao and Love, Bonito – which have moved into physical retail space for an omnichannel approach. Mall owners, together with their business partners, are likely to step up their proactive engagement strategies with retailers and visitors to continuously bring new retail concepts and activities in their retail spaces.

Island-wide overall retail rentals are projected to trend sideways within the band range of -1.0 to 1.0 per cent in 2020 and the limited supply pipeline from 2020 onwards will provide some support to rents and occupancy levels.



Office demand and occupancy rates

  • Based on our estimates, occupancy rates of office developments* island-wide trended upwards by 2.5 percentage points y-o-y to 94.9 per cent in Q4 2019. This was greater than the 0.9 percentage points growth in Q4 2018. In Q4 2019, occupancy in the Central Business District (CBD) increased the most by 3.3 percentage points y-o-y to 95.6 per cent (Figure 16).
  • In 2019, co-working and technology firms remained the major occupiers of CBD office space despite challenges faced by selected co-working operators, notably WeWork and Wotso. Within the co-working market segment, there has been consolidation such as the merger of Collision 8 and Found into Found8. We observed some co-working operators expanding into the CBD fringe locations, in light of the near saturation of co-working spaces in the CBD. A notable example is JustCo, which opened its 50,000 sq ft of space in Manulife Centre and is expected to house about 1,000 members (Table 7).


Figure 16: Office occupancy rates* and y-o-y percentage point change (in green arrows) in Q4 2019


Table 7: Key tenant movements in Q4 2019


Rental rates

The average gross monthly rents rose across most of the sub-locations by 0.0 to 1.7 per cent q-o-q (Table 8). Average CBD rents rose by 1.3 per cent q-o-q and 7.0 per cent y-o-y for Q4 2019.

Table 8: Average monthly gross office rents ($ per sq ft)



Supply pipeline

The total supply pipeline from Q4 2019 to 2023 is estimated to be approximately 4.7m sq ft (or 1.1m sq ft per annum). (Figure 17). 9 Penang Road has obtained Temporary Occupation Permit (TOP) in Q4 2019. Global bank, UBS, will relocate its headquarters to 9 Penang Road, relocating from its offices in One Raffles Quay North Tower and Suntec Tower Five.


Figure 17: CBD office development pipeline, million (m) sq ft




The office market is expected to expand in terms of footprint and leasing activity, albeit at a moderated pace in 2020, in view of the projected modest recovery of Singapore’s economic growth. Demand for office space in the CBD will continue to come from the information & communications and finance & insurance sectors, supported by the healthy demand for IT and digital solutions as well as sustained demand for payment processing services. Firms providing asset management and legal services could be on the lookout for office spaces as inbound investment to Singapore is expected to step up on the back of investors’ search for safe haven investment destinations in Asia.



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 January 2020
Source: Edmund Tie & Company. Reproduced with permission.

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