Singapore is ranked as second top real estate investment market in Asia Pacific as the city-state continues to rebound from the cyclical lows of a couple years ago, according to ‘Emerging Trends in Real Estate – Asia Pacific 2019’, an annual real estate forecast. The report is jointly published by the US-headquartered think tank Urban Land Institute (ULI) and accounting firm PwC.
Singapore rose from its third placing this year. The study covered 22 cities.
Sentiment for commercial property in Singapore continues to improve, despite fears of an impending cyclical reversal as liquidity in the market reaches an all-time high. Rents and yields for prime retail space have been firming across the city, after years of poor performance, as landlords struggle to adapt to new models of retailing. The market was also supported by solid economic growth and high visitor numbers in 2018.
In the office segment, the report notes that rising rents and falling vacancies reflect the possibility of a window of solid opportunity to develop core office space.
Singapore’s “pro-business environment and the growth in crowd data” have “placed the republic as one of the more attractive markets for data centres – an alternative asset class with higher yields”, says Yeow Chee Keong, real estate & hospitality leader at PwC Singapore.
Indeed, as the higher-yielding alternative asset classes continue to gain traction, niche sectors, such as shared/serviced offices and data centres, are still in demand, with Singapore leading the “big four” markets for data centres. Tokyo, Hong Kong, and Sydney follow behind. Co-working and other flexible office space operators have become among the biggest lessees of office space, while tech firms have also been active in the market.
Pauline Oh, ULI Singapore executive director, says: “The improvement in Singapore’s office market has seen the city-state comprehensively rerated by respondents, after falling to 21st place in our 2017 report. This can be demonstrated by a number of major office deals that have been sealed in the past 12 months, with domestic investors the biggest buyers.”
However, one fund manager active in the market says: “It is possible the market is overly bullish towards the office sector, as 2019 could be a challenging year for the Singapore economy and new supply is expected in 2020 and 2021.” While the central business district will see no new supply until 2020, decentralised office markets will see new office openings next year.
Singapore’s residential market has proved to be exceptionally resilient, despite cooling measures being in place for several years. The outlook for the residential market remains clouded, as both developers and homebuyers have become more cautious as a result of the government tightening policies.
The logistics market, however, continues to be plagued with oversupply, which has suppressed rents. But there are signs that excess space is now being taken up, and rents are expected to improve slightly in 2019.
The annual report is based on the opinions of 350 real estate professionals in Asia, including investors, developers, property company representatives, lenders, brokers and consultants.