Broad-based recovery seen across Singapore property segments: CBRE

THE first quarter of the year has seen recovery across Singapore's property segments as Covid-19 restrictions were eased, said CBRE in its Q1 2022 report.

The real estate services firm said positive momentum in the office market from end-2021 carried over into the first quarter of this year, with the islandwide office market registering a healthy net absorption of 307,282 square feet (sq ft) - the third consecutive quarter of positive net demand.

With no new completions in the quarter, the average islandwide vacancy rate continued to decrease, from 6.3 per cent in the preceding quarter to 5.8 per cent in Q1.

Rental growth and vacancy rate for core Central Business District (CBD) Grade A offices kept pace with the previous quarter's, with rents up 1.4 per cent to S$10.95 per square foot (psf) per month and vacancy stabilising at 4.5 per cent.

CBRE says the office sector is poised to benefit from a growth in demand as workplace measures were further relaxed and rental growth should gain momentum in the coming quarters. It expects core CBD Grade A rents to grow by 6.9 per cent year on year for 2022, supported by a rapid expansion in demand from agile space, technology and non-bank financial sectors, as well as limited new supply.

In the business parks segment, occupier demand generally improved across all submarkets, with islandwide business parks recording a positive net absorption of 186,982 sq ft in Q1, a reversal from the negative take-up in the previous quarter.

Vacancy rates for the city fringe submarket declined for the third consecutive quarter to 4.7 per cent, while the rest of the island submarket edged up 0.9 percentage points quarter on quarter to 18.1 per cent due to higher vacancies in newly completed buildings.

On the back of stronger demand and limited availability in the city fringe, rents in this submarket rose for the fourth consecutive quarter by 0.8 per cent quarter on quarter to S$5.95 psf per month.

For the rest of the island, rents remained at S$3.65 psf per month, thus widening the gap between the 2 submarkets further.

CBRE says outlook for the business parks market is expected to face less uncertainty in the coming quarters, providing some respite for the rest of the island submarket.

In the retail segment, leasing activity continued to be stable, with more pop-up stores in Q1, food and beverage operators entering the market, and athleisure and furniture stores increasing their presence to capitalise on strong local consumption.

With a strong economic recovery in 2021 and a nascent rise in tourist arrivals, retailers are optimistic, and prime retail rents in Orchard Road, City Hall/Marina Centre and fringe areas remained stable in Q1. Meanwhile, the suburban market continued to register healthy reversionary rents as availability remains extremely limited.

Although the persistent rise in energy and raw material costs, as well as manpower shortage, are now posing additional challenges to retailers, CBRE says the relatively limited new retail supply in the next few years should support a more meaningful retail rent recovery after H2 2022.

Over in the industrial sector, leasing activity remained stable in Q1, with broad-based growth across all segments. Due to limited availability in existing prime logistics buildings, rents inched up by another 1.4 per cent quarter on quarter. Occupancy for CBRE's prime logistics basket experienced a slight dip in Q1 due to the completion of Logos Tuas Logistics Hub, but is expected to bounce back strongly in Q2 2022 due to rising commitments in the project.

Average warehouse rents increased by 1.2 per cent quarter on quarter, followed by factory rents which grew 0.6 per cent.

CBRE expects demand for industrial space to increase, as occupiers seek to increase inventory levels because of supply chain disruptions, increased freight cost and inflationary pressures. Limited availability due to high pre-commitment rates for upcoming pipeline projects in 2022 and 2023 could lead to sustained rental increases for logistics space.

When it comes to residential property, homebuyers and developers adopted a wait-and-see approach, with preliminary data showing 1,716 new private homes (excluding executive condominiums) sold in Q1, below the 5-year quarterly average of 2,614 units. New launches in the quarter were limited to smaller boutique developments.

Private home prices growth plateaued in Q1 as December 2021 cooling measures took effect.

Developers continued to replenish their depleting land bank selectively, with biddings for Government Land Sale sites more robust in March than January. Smaller collective sales also saw some success given the lower cost and development risk.

CBRE expects new home sales to fall between 9,000 and 10,000 units while prices could rise by up to 3 per cent in 2022.

Finally, preliminary real estate investment volume in Q1 expanded 29.4 per cent quarter on quarter to S$9.994 billion, on the back of public land sales and big-ticket commercial deals.

Investment volumes in the quarter reached a 4-year quarterly high, surpassing the quarterly volumes seen in 2021 and just 5.2 per cent below the Q2 2018 peak of S$10.542 billion.

Following December 2021's residential property curbs, investment volumes in the sector took a backseat to the office sector, which surged 79.5 per cent quarter on quarter to S$3.388 billion in Q1.

Retail investment activity also picked up significantly, with an investment volume of S$1.929 billion, due to the transaction of several suburban malls.

CBRE says a further relaxation of pandemic restrictions and full reopening of borders are set to fuel a broad-based recovery in Singapore's economy. The nation could also benefit from increased investment flows as a safe haven for investors amid geopolitical tensions.

It expects 2022 investment volumes to grow 10 per cent to S$31 billion, led by commercial and industrial sales.



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