Sim, Head, CBRE Research, Singapore and South East Asia:
of industrial space across the island declined a total of 9.1% for the past 7
quarters on the back of muted macro economic indicators, despite a recent
improvement in manufacturing performance. The latest figures point to an easing
in rental decline, signalling that a trough might be approaching. Occupancy
levels improved albeit only for this quarter. This is as industrialists maybe
taking advantage of relatively lower rents and has started to occupy industrial
space taken up in recently completed developments. As real estate costs remain
at steady levels, industrialists will be able to focus on investing in
technology to improve productivity and space optimisation.
surprisingly, vacancy levels rose 0.7% q on q as another new development of
lower committed space gets completed. However, the occupancy levels should
improve as more tenants occupy the completed buildings in the months to
come. Still, weak economic sentiments continue to impact demand with
sluggish GDP growth and disappointing employment figures weighing on the office
sector. In overall terms, expansion requirements and take-up from new entrants
remained fairly limited. Leasing activity in 2016 saw an increase in the volume
of renewals and relocations. In particular, a number of large anchor tenant
deals were closed, primarily focused on new development projects. This was
driven by occupiers taking advantage of the current down-cycle to lock in
attractive rental rates. These “flight to quality” moves are unlikely to
improve islandwide occupancy as the lower quality office stock will be under
the same time, occupiers were also motivated by greater efficiency and
flexibility due to the larger floor plates in these newer buildings. Sectors
that were most active included Asia-Pacific banking & finance, technology
to URA, Rental Index for central region fell 1.8% q-o-q, the seventh
consecutive quarter of decline. Nonetheless, rents have seen slower declines in
the past couple of quarters as compared to earlier in the down-cycle.
higher leasing volumes of late and the bulk of new Grade A supply mainly
restricted to Marina One, the prospect for rents to bottom looks possible in
2017. It is likely that the optimum timing for tenants to try and take
advantage of the market pullback is at hand. It should be noted however that
rents for older generation buildings may still face some downward pressure as
secondary space emerges after a few large occupiers complete relocations to the
net increase in occupied retail space in Q4 2016 was heartening and the highest
since two years earlier (Q4 2014).
from the opening of Compass One from September, the uplift in occupancy was
probably supported as well by the continued opening of flagship stores along
with gyms and large F&B clusters. Retailers were also more motivated to
expand in the run up to Q4 2016 to take advantage of festive spending. However,
for the full year, annual net absorption was still behind annual supply. Net
absorption of retail space was 52,000 sqm in 2016 while supply was 75,000 sqm.
On the bright side, supply of retail space will be limited post-2018.
Rents-wise, Central region rents declined for eighth straight quarters,
although the magnitude of quarterly decline in Q4 2016 (-1.2%) was lower than
previous quarters (smallest decline since -0.5% in Q2 2015). That said, we
expect rents to remain under pressure.
fourth quarter showed a slight increase in the islandwide price growth, driven
by healthy sales in the CCR. Despite an increase in the price, quantum remained
low. In fact, average median prices in CCR declined to $2.4 million in 2016
from $2.5 million in 2014 – a clear indication that the market is being driven
by quantum play. The URA residential price index has declined by a total
magnitude of 11.2% over 13 consecutive quarters. During the market downturn of
2000-2004, the price index shed 20% over 14 quarters of decline. It is possible
that the current downturn could stretch to 17 quarters or more, but the price
correction is likely to be minimal, at less than 20%.
Price of new homes
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