AN ENCOURAGING performance across most real estate sectors on the back of expected stronger business and consumer confidence in the coming months is setting the stage for a positive year ahead, said Edmund Tie.

In its Q1 2022 quarterly report, the property consulting firm said that despite headwinds going forward, overall real estate performance should remain resilient, with the economic sectors of construction, retail and food services, aviation and hospitality expected to see a recovery.

Total investment sales witnessed a notable 35 per cent increase from Q4 2021 to nearly S$9.8 billion in Q1. This was led by the retail sector which contributed 37 per cent (or S$3.6 billion), followed by the residential sector at 32 per cent (S$3.1 billion).

Looking ahead, the easing of safety management measures at the workplace and social events, as well as border restrictions, will reinforce investors’ strong confidence in Singapore’s commercial market, said the report.

Developers will most likely shift their attention to commercial-zoned sites, and also ride on the popularity of mixed-use developments, of which residential components are not subject to higher Additional Buyers’ Stamp Duty or Qualifying Certificate rules, said Lam Chern Woon, Edmund Tie’s head of research and consulting.

Lam does not expect the Urban Redevelopment Authority’s recent imposition of restrictions on strata subdivision to the commercial component to cause any drastic impact on market sentiment, as investors’ profiles in recent times are mainly those of institutional, with a mid to long-term investment horizon.

“Suburban retail assets are expected to continue to be highly sought after,” he said. “Interest in prime retail assets, especially strata-titled properties and units, may be renewed due to their scarcity, which may, in turn, spur higher transaction activity.”

Meanwhile, brighter prospects are seen in the retail segment, with the fresh easing of Covid-19 measures improving retail sentiment, boosting consumer confidence, and therefore further improving retail sales.

In Q1, prime first-storey retail rents for fringe/suburban submarkets continued to outperform and rose by 1.3 per cent quarter on quarter. In comparison, the Orchard/Scotts Road area registered a slower growth of 0.5 per cent quarter on quarter, while other City Areas notched a marginal 0.3 per cent growth.

The report noted that demand and occupancy of prime retail assets may keep steady or even improve, amid the limited supply of existing strata malls.

“The latest strata policy change may also improve malls’ tenant diversity and allow for more effective control of the mall’s positioning under a single ownership, which may drive higher footfall and spending,” said Lam. “Consequently, malls in these designated areas may enjoy lower vacancy rates and command higher rents over time.”

In the office segment, limited supply of quality spaces continued to support office rental growth in Q1, albeit to various extents. While rents of premium and Grade A offices in the Marina Bay and Raffles Place submarkets saw the strongest uptick, Grade B rents at the Shenton Way/Robinson Road/Tanjong Pagar submarket have also risen for the first time by 0.6 per cent quarter on quarter since Q1 2020.

Looking ahead, the finance sector, particularly the wealth management industry, will remain a key driver for office demand, with rents and prices of strata office units expected to rise, due to scarcity in future supply.

As for industrial property, multiple-user factory rents rose by 0.3 to 0.6 per cent quarter on quarter amid robust manufacturing activity in Q1. Average rent of first-storey space at multiple-user factories stands at S$1.88 per square foot. Buoyant demand for spaces with modern specifications also pushed up rents for hi-tech spaces by 0.6 per cent quarter on quarter.

Amid heightened geopolitical tensions and supply chain risks, stockpiling requirements are likely to increase, which will further increase demand for logistics and warehousing facilities, said the report. This will also drive the push towards supply chain diversification to mitigate cost pressures and operating risks.

It said high-tech factories and city-fringe business parks will continue to be sought after, with rents and capital values expected to rise in tandem.

Said Lam: “We expect to see more redevelopment of ageing assets into future-proof properties with higher specifications and sustainability features.”

Finally, in the residential segment, caveats lodged show that Q1 new sales and secondary transaction volumes dipped 44 and 49 per cent quarter on quarter respectively. Within both new and secondary sales markets, the decline in activity was broad-based and similar across market segments, reflecting the immediate impact of the cooling measures.

“Although price growth is expected to moderate, we do not expect strong pressures on developers to reduce prices, especially for projects with limited unsold inventory,” said Lam. “Looking ahead, the tightening of the Total Debt Servicing Ratio could divert some demand towards suburban homes, which are more affordable. There should also be some rotation of demand from the Rest of Central Region (RCR) to Outside Central Region in 2022, given the strong price increases in RCR in 2021.”

Sales momentum is expected to slow on the back of fewer units from new launches in 2022.

Nonetheless, Edmund Tie expects the overall residential market to be supported by a robust labour market, ongoing economic growth and healthy demand-supply dynamics in the property market, with demand coming largely from local first-time home buyers and Housing Board upgraders who are least impacted by the cooling measures.

It projects primary home sales to reach about 11,000 to 12,000 units for 2022.