Commercial property sector remains buoyant in Singapore

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Colliers International’s Asia Market Snapshot Q1 report said that Singapore’s commercial property sector and hotel market remain buoyant. Despite the optimism in the commercial property market, the residential market remained subdued said the report.

Tang Wei Leng, Managing Director of Colliers International, Singapore, said, “In Singapore, the hospitality sector continued to grow in Q1 2019 driven by keen interest from investors and developers who shifted focus to non-residential sectors.”

She added that the commercial property sector also enjoyed some deals after months of negotiations and due diligence thanks to a recovery in the office rental market and limited short-term supply opportunity.

commercial property sector
Screengrab: Colliers Research -Commercial property sector shines as residential assets remain subdued

The commercial property sector in Singapore is expected to remain highly attractive to investors and developers, with office rental growth continuing. Rising visitor numbers combined with tight supply is also raising revenue forecasts in the hotel sector. Activity in the residential space is expected to be relatively subdued in the second quarter as developers focus on new property launches.

The report noted that Singapore’s hospitality sector continued to grow in Q1 2019 driven by keen interest from investors and developers who shifted focus to non-residential sectors.

The commercial property sector also enjoyed some deals after months of negotiations and due diligence thanks to a recovery in the office rental market and firming up of retail market fundamentals. Meanwhile, the residential sector saw a slight pick-up in transaction value as a number of residential sites offered under the Government Land Sale (GLS) Programme were awarded successfully in Q1.

The report highlighted some deals in the commercial property sector:

  • A white site at Pasir Ris Central was awarded at about SGD700 million (USD519 million), or SGD684 psf ppr to a tie-up between Allgreen Properties and Kerry Properties through a Concept and Price Tender. There are plans to develop about 480 residential units atop a 3-storey retail podium.
  • Midtown Development Pte Ltd (part of Worldwide Hotels Group that includes Hotel 81) tendered successfully for a premium hotel site at Club Street, within the Central Business District for SGD562.2 million (USD415.3 million) or SGD2,148 per sq ft per plot ratio (psf ppr). This is the first hotel site made available through the Confirmed List of the Government Land Sales Programme since 2008.
  • A joint venture between ARA Asset Management and Chelsfield acquired Manulife Centre, an office building located in Bras Basah Road for SGD555.5 million or SGD2,305 per sq ft based on net lettable area.
  • An executive condominium (EC) development site at Tampines Avenue 10, offered through the GLS tender, was awarded to the top bidder – Hoi Hup and Sunway Development at a price of SGD434.45 million (USD320.9 million), or SGD578 psf ppr. The achieved land price is the second highest on record for EC land since Sumang Walk’s SGD583 psf ppr in March 2018.

The keen interest in commercial property sector is expected to continue among investors and developers in Q2, driven by steady office rental growth and Singapore’s status as a global business hub, said the report. it highlighted that the assets to watch in Q2 are in the office and hotel sectors.

Commercial property valuation drops as Spas must close by 10:30pm

Colliers also expects the hotel sector to be attractive to investors and developers, with Singapore hotels’ revenue per available room expected to grow at about 3.5% y-o-y in 2019 as tourism arrivals reach record highs amid tightening hotel supply. The report added that the residential market could remain relatively subdued in Q2 2019 as developers focus on new property launches and take-ups.

Besides focusing on Singapore’s commercial property sector, the report also highlighted the opportunities in the property sector in the Asia Pacific region. The report tracked the performance of 15 Asian real estate markets across residential and commercial segments and provides an outlook for the quarter ahead.

The report said that logistics sector thrived on the back of government incentives in the region. It also noted that with Government backing, China’s outlook remained positive. The report added that Japan is cautiously optimistic amid looming consumption tax hike, and that Hong Kong is poised for rebound following announcement of revitalisation scheme.

Commercial property landlords may be recalibrating rents and occupancy levels

Terence Tang, Managing Director of Capital Markets and Investment Services, Asia, at Colliers commented: “Real estate markets across Asia started the new year on a positive note, with friendly government policies, tax reforms and infrastructure spending propping up demand. In the first quarter, investors are seen diversifying away from more traditional sectors such as office space and housing into segments such as data centers and warehousing.”

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