Investing in Resilience

The retail sector has become a much less crowded space for investors due to uncertainties around changing retail patterns and the impact of online retailing.

03 Feb 2020

By Michael Tay

Investing in Resilience

Will the new decade usher in less turbulent economic times around the globe?

Only time will tell.

Considering EDB’s annual year-in-review reported that Singapore attracted S$15.2 billion in fixed asset investments in 2019, there are reasons to be optimistic. As we cast our eyes towards real estate investment in 2020, resilience is emerging as the main theme.

The encouraging news is that real estate investment volume in Singapore is likely to remain strong in 2020 – with office, hospitality and industrial assets remaining in favour with international investors.

Lower interest rates should support robust capital flows into real estate, with relatively cheaper debt and active fund raising in the capital markets

Singapore is likely to remain a magnet for foreign capital, given the city’s macroeconomic stability and favourable environment for mid- to long-term capital value appreciation. If 2019 is any indication, sustained investor interest in Singapore assets should provide a boost to foreign capital inflows in the coming year.

However, a few challenges remain on the horizon.

In light of continuing geopolitical risks and moderating economic growth, we may see some investors adopting a more cautious approach this year. Another potential challenge is the shrinking universe of investible assets, which may lead to fewer transactions crossing the billion-dollar mark.

As a consequence of these challenges, new opportunities in assets such as shophouses may come on line. Underpinned by the finite supply and diverse occupier profiles ranging from offices to F&B establishments to hotels and more, shophouses have proved resilience and shown strong potential for mid to long term capital appreciation. These unique traits have attracted investors who have demonstrated appetite to accept yield compression for this asset class.

All in all, despite the challenges posed by global geopolitical and economic volatility, Singapore has built a reputation as a stable market and has consistently delivered long term capital value growth.

CBRE believes Singapore will continue to be an attractive market for real estate investments in 2020.

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