You are here
Outbreak poses near-term downside risks to Singapore's retail, industrial markets: Colliers
THE escalating Covid-19 outbreak that has killed more than 1,300 people and infected over 60,000 at last count poses near-term downside pressure on Singapore's retail and industrial property markets. This is according to research by Colliers International, released on Thursday.
Based on Colliers' research, both the retail and industry property markets in Singapore showed signs of bottoming and will likely continue to stabilise into 2020. However, downside risks persist and any recovery will likely be marginal, particularly for the retail property market which remains vulnerable, Colliers said.
For the full-year 2019, rents fell 1.3 per cent year on year (y-o-y) for Orchard and stayed flat for regional centres.
Tricia Song, head of research for Singapore at Colliers International, expects rents to stabilise and recover gradually, as new supply pipeline eases over 2020 to 2024.
Nonetheless, she pointed out that retail sales remain fragile, with retail sales excluding motor vehicles declining by 1.2 per cent in 2019.
Added Ms Song: "In the near-term, the outbreak of Covid-19 could dampen consumer sentiment and delay a recovery. The situation is evolving, and no one really knows how this will turn out at this point; the outbreak could be the proverbial black swan that will hurt the retail sector."
That said, retail tenants typically sign two-year leases where rents are locked in during the period, hence rents do not necessarily mirror retail sales volatility, Colliers said. In the longer term, barring a protracted downturn, Colliers believes that Orchard Road rents are likely to lead a gradual recovery, with potential boost from Orchard Road rejuvenation plans, as well as a recovery in visitor arrivals and tourism receipts.
In H2 2019, investment volumes contracted 6.7 per cent compared with the first-half last year on a high base. Meanwhile, overall retail property transaction volumes hit a decade high in 2019 at S$4.1 billion. This was driven by keen investor interest and mergers and acquisitions, Colliers said.
Major transactions last year included The Star Vista, Duo Galleria and Liang Court in H2 2019, as well as Chinatown Point and Rivervale Mall in H1 2019. In addition, 313@somerset was injected into newly-listed Lendlease Global Commercial Reit, while the merger of OUE Hospitality Trust and OUE Commercial Trust priced Mandarin Gallery at S$3,908 per square foot.
Separately, Singapore's industrial property market continued to navigate economic headwinds, remaining soft in H2 2019, particularly in the warehouse and factory space segments.
According to Colliers' data, average monthly gross rents of factories fell by about 1.8 per cent y-o-y to S$1.67 per sq ft per month (psf pm) as at end 2019. Meanwhile, warehouse and logistics rents eased by 1.6 per cent y-o-y from S$1.25 psf pm to S$1.23 psf pm.
Dominic Peters, senior director of industrial services at Colliers International, noted that the virus outbreak could hit manufacturers and cause disruption to the global supply chain in the near-term. He said: "Coupled with ample new stock, factory rents would likely remain under pressure. In general, we forecast continued two-tier performance between older lower-specifications and newer higher specifications facilities.
"Centrally-located business parks and high-spec buildings with good amenities should continue to attract healthy demand while those older and further away from MRT stations or in suburban areas could face more pressure."