CBRE’s views on URA’s Q3 2018 statistics

Desmond Sim, Head of Research, Singapore & Southeast Asia

Residential:
• The URA private residential price index crept up by 0.5% to 149.7, compared to the 3.4% increase in the previous quarter. This represents a 9.6% increase since the trough in Q2 2017 and a year-to-date recovery of 7.9%. Only CCR prices grew 1.3% q-o-q; the RCR and OCR registered quarterly declines of -1.3% and -0.1% respectively. Notably, prices for landed property grew a respectable 2.3%.
• Take-up in Q3 2018 was the highest in over four quarters at 3,012 units. Despite the healthy take-up, it was unable to match the number of launches during the quarter – at its highest number since Q2 2013. This resulted in an increase in the number of unsold units to 30,467 units (excluding ECs) in Q3 2018 – from 26,943 units last quarter.
• In addition, there is a potential supply of 14,200 units from the awarded GLS (6,700) and en-bloc sites (7,500), which have not been granted planning approval but will be coming onto the market next year.
• Going forward, CBRE expects growth in the price index to be in the positive region albeit more moderate or zero growth in the next 12 months.

Office:
• In Q3 2018, overall leasing activity was stronger with diversified demand as the key driver of the office market. The increase in occupied space of 45,000 sq m outpaced the expansion of total stock of 28,000 sq m. This led the office vacancy rate to compress for the fourth consecutive quarter to 12.0% as at end Q3 2018.
• The agile space market continued to grow with operators aggressively acquiring market share, while some technology start-ups were on the lookout for space after fresh injections of funds. Most notably, the banking sector saw some signs of improvement with European and Asian banks active while a number of insurance firms have also tied down new lease commitments.
• The fairly tight vacancy environment encouraged office landlords to continue to press for higher rents as they seek to benefit from the market upswing. The URA rental index grew by 2.5% q-o-q, a faster pace of growth than the 1.6% registered in the last quarter.
• Despite some economic risks arising from the trade disputes and currency volatility in the region, the Singapore office market environment looks largely positive. A resilient and diverse occupier demand base allied to a tightening future supply situation suggests that the sector will see further rent growth in the medium term.

Retail
• URA’s retail property rental index for the Central Region declined by 1.2% q-o-q in Q3 2018, after a decrease of 1.1% in the previous quarter. The rental correction can be attributed to the rising vacancy in secondary areas, as private vacant stock in the fringe area increased to 1.35 million sq ft this quarter.
• Vacancies in Orchard Road remain relatively tight at 5.8%, as retail space in this category continues to benefit from improved tourism numbers with no significant supply on the horizon.
• While the medium-term outlook remains positive, the sector is still adapting to structural challenges stemming from high operating costs, labour constraints and disruption from e-commerce. As such, we are expecting a slow and gradual recovery for the retail sector.


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