MENU

Property research suggests trade friction weighing on commercial properties

by • August 14, 2019 • Commercial Property Loan, Industrial Property, RetailComments (0)109

– The property research suggests retail rents in general remained weak in H1 2019, with ground-floor rents at Orchard Road falling 1.5% compared with H2 2018

– Trade conflict and heightened economic risks could dent consumer sentiment said the property research reports

– Colliers Research expects rental gap of business park/high-spec space and the general factory/warehouse space to widen towards the end of 2019

– With deteriorating manufacturing and trade statistics, industrial rents and occupancy could come under fresh pressure, the property research reports noted

Colliers International today released two half-yearly property research reports that examine the performance of and outlook for retail and industrial properties in Singapore during the first half of 2019 (H1 2019).

Both the retail and industrial real estate markets have been bottoming out but Colliers Research cautions that threats from the frayed US-China trade relations and gloomy economic outlook looms large and could stifle any recovery in the two property segments in the near-term.

Ms Tricia Song, Head of Research for Singapore at Colliers International, said, “With the dimmer economic outlook ahead we expect the retail and industrial property markets to face some pressure. A prolonged economic downturn, should it happen, will likely crimp consumer confidence, resulting in cutbacks on discretionary spending among households. Meanwhile, industrialists may be more cautious about their space needs and could shelf expansion plans. That said, there are pockets of opportunities for investors in both markets that will likely provide a decent yield.”

property research

Image credit: Capitaland

Retail
Data tracked by Colliers Research showed that ground-floor rents at Orchard Road declined 1.5% half-on-half (HOH) in H1 2019 to SGD40.60 per sq foot per month (psf pm), while that of Regional Centres remained flat at SGD33.60 psf pm. This is consistent with Urban Redevelopment Authority’s (URA) reported rental decline of 1.7% in H1 2019 for the Central Region.

The Colliers property research noted that rental declines have slowed since early 2018, and the large retail space completions since 2013 should finally taper off from 2020 onwards, helping to support occupancy. It estimates that average annual new supply from H2 2019 to 2023 should hover around 380,000 sq ft versus 1.04 million sq ft over the last 10 years. One of the malls slated to open later this year is PLQ Mall, the 340,000 sq ft retail component of Paya Lebar Quarters.

Meanwhile, island-wide retail vacancies have declined by 0.8 percentage-point (HOH) to 7.7% in H1 2019, likely boosted by the good takeup at Jewel at Changi and Funan. Colliers Research expects the vacancy rate to continue to trend down over 2020 to 2023 as front-loaded supply in 2018 and 2019 get absorbed.

Ms Song added, “Headwinds prevail for the retail sector as the soft economy could impact the still-fragile consumer sentiment and dent any hopes of recovery in retail rents. On a more positive note, the surge in investment sales of retail malls during H1 2019 reflected rising optimism among investors. We observed that the buyers of these malls are spread across strategic and financial buyers with developers and REITs seeking yields or future redevelopment potentials while institutional funds look for yields and value-add opportunities.”

Total retail investment sales transactions jumped 137% HOH to reach SGD2.13 billion in H1 2019, driven by higher investors’ interest. This is markedly higher than the SGD1.42 billion transacted in the whole of 2018.

Industrial
The industrial real estate sector in Singapore seemed to have found its footing, with overall rents bottoming out. However, with deteriorating manufacturing and trade statistics, industrial rents and occupancy could come under fresh pressure. Leasing demand is expected to lag behind supply in 2019 to 2021 due to the weaker trade conditions. Colliers Research estimates the 2018 to 2023 annual net absorption to come in at 8.6 million sq ft, 25% below the 10-year historical average.

Mr Dominic Peters, Senior Director of Industrial Services at Colliers International, said, “Industrialists have already become more cautious on their space requirements, renewals and expansion plans, preferring a wait-and-see approach given the gloomier economic outlook. They would also be watching the US-China trade spat closely and assessing its potential impact on their business. For landlords, we would recommend that they take this opportunity to consider upgrades and asset enhancements – especially for ageing properties – to be ready for Industry 4.0.”

Colliers Research expects the rental gap of business park/ high-spec space and the general factory/warehouse space to widen towards the end of 2019. This comes as new business park properties and high-spec spaces should continue to enjoy favorable rental growth due to their premium quality and limited stock, while older factory space may see flat to declining rents.

Business park monthly rents increased 0.5% HOH and 2.1% YOY to SGD4.33 psf in H1 2019 amid very tight supply. Colliers Research notes that tech firms continued to gravitate towards newer business park and high-tech spaces for good amenities and cost savings. Monthly rents for high-spec industrial buildings located outside of science parks and business parks increased 1.0% HOH and YOY to SGD2.93 psf. In contrast, average gross monthly rents of warehouse-logistics properties slipped 0.8% HOH and YOY to SGD1.24 psf.

Colliers Research expects capital values for prime industrial properties with freehold or longer land tenure to be firm in the near future due to their scarcity. Overall industrial capital values are expected to hold steady with yields at about 6.0% for 30-year leasehold industrial properties through to 2023.

How to Secure a Commercial Loan Quickly

Are you planning to purchase a similar prime commercial redevelopment site but unsure of funding? Don’t worry because iCompareLoan mortgage brokers can set you up on a path that can get you a commercial loan in a quick and seamless manner.

Alternatively you can read more about the Best Commercial Loans in Singapore before deciding on your purchase.  Our brokers have close links with the best lenders in town and can help you compare Singapore commercial loans and settle for a package that best suits your commercial purchase needs. Our services are also very personalised and tailored to the unique needs of the buyers.

Whether you are looking for a new commercial loan or to refinance and existing one, our brokers can help you get everything right from calculating mortgage repayments, comparing interest rates, all through to securing the final loan. And the good thing is that all our services are free of charge. So it’s all worth it to secure a loan through us for your next purchase.

If you need advice on a new commercial loan  or Personal Finance advice.

If you want to speak to our trusted Panel of Property agents.

If you need refinancing advice.

Pin It

Related Posts

Simple Share Buttons