Clear skies for Singapore office sector - but beware potential headwinds

The Business Times - Dec 21
Singapore prime CBD Grade A office rentals are heading into their third year of increases on the back of steady demand amid tightening completion of new office space.

Property consultants are generally still painting a picture of clear skies, with the familiar set of demand drivers - coworking operators and other flexible office space providers, and tech companies - expected to lead the way. Some are also hopeful of more office demand from financial institutions.

However, interest rate hikes, trade wars, geopolitical tensions leading to slowdowns in the global and Singapore economies, are among the factors that could potentially dampen office demand on the island.

Duncan White, Head of Office Services:
Continued new demand seems stable and so long as the economic outlook remains relatively positive, we should see an active market as it is still price competitive within the region comparing to Hong Kong and Tokyo. The Government’s continued push for tech, innovation and R&D, and varied sectorial growth will help to feed the growth in the market. 

We would expect to see more activity within the Flex and Core leasing model, enabling Occupier flexibility and accommodating growth and fluctuating space needs. 
Rightsizing and optimising traditional leased areas will continue to be of specific consideration going into 2019. 

In a rising market and with tightening of space, we would expect to see Occupiers reviewing some short-term flexible positioning, whilst they position for the next wave of new developments in 2020 (ASB Tower), 2021 (CapitaSpring) and 2022 (Central Boulevard Towers). In addition, and as a result of the rising market, we may well see some occupiers reconsidering more decentralised locations, although the office stock is limited and of varying grades outside of the core CBD.

 

Singapore hotels get 'Crazy Rich Asians' boost

The Business Times - Dec 19
After Singapore's residential and office markets made comebacks, the next property sector to bet on might just be its hotels.
 
The hotel industry is heading into 2019 in good shape after boosts to visitor arrivals from the Trump-Kim summit and the romantic comedy "Crazy Rich Asians.
 
Occupancy rates climbed across luxury, upscale, mid-tier and economy rooms. Revenue per available room rose 4 per cent to S$190.40 through October from a year earlier, reversing years of declines. Average daily room rates inched higher for all but luxury accommodation.
 
Govinda Singh, Executive Director, Valuation & Advisory Services:

In line with our forecasts, ADR for hotels in Singapore are likely to finish the year with growth of circa 2% year-on-year, as the rapid new supply of previous years were absorbed by the market. With sustained growth in tourist arrivals and a depressed hotel room supply pipeline, we expect hotels in Singapore – particularly luxury and economy - to continue to perform well in 2019. Broadly, we expect room occupancy rate to likely trend in the region of 86% in 2019 with potential uplifts in RevPAR of between 1-3% as hoteliers pursue a yield maximisation strategy. However, headwinds prevail, with geo-political risks, global trade tensions and foreign currency movements, as well as a looming economic slowdown, particularly towards the end of Q3, potentially throwing a spanner in the works.


Private rental market may be held up by en bloc sellers, lower supply

The Business Times - Dec 25
The outlook for the private residential leasing market looks promising in 2019, with rent and occupancy rates likely to improve as supply eases and demand continues to be supported by displaced owners.

According to data from the Urban Redevelopment Authority (URA), a total of 10,119 private residential units are slated for completion in 2019, higher than the 7,898 units that could be completed this year.

Tricia Song, Head of Research:
In Q3 2018, the overall private residential rental index rose for the third consecutive quarter, up 0.3% QOQ, decelerating from a 1.0% rise in Q2. Rents have lagged prices by three quarters, and are still 11.9% below their peak in Q3 2013.

Given the easing supply going forward, we expect occupancy to continue to improve and rents could recover by another 1% in Q4 2018, and 5% for the whole of 2019, barring any external shocks. Overall rents on psf basis should improve with easing new stock, and smaller and efficient unit layouts. Some projects could set benchmark rents such as North Park Residences in the OCR and Principal Garden could also support the rents in the RCR.  


JustCo to operate GuocoLand's co-working space at Collyer Quay

The Business Times - Dec 21
Singapore-based JustCo has been tapped to operate GuocoLand's 16,800 square foot co-working space at 20 Collyer Quay, which will take the start-up's portfolio to 15 centres in Singapore.
 
This comes as it is gearing up to break into new cities and countries across Asia next year such as Seoul, Melbourne, Sydney and Vietnam. It presently has a total of 23 centres across Singapore, Jakarta, Shanghai and Bangkok.
 
Slated to open in April next year, the new centre at 20 Collyer Quay will attract tenants such as large firms and Fortune 500 companies, expects Kong Wan Sing, founder of JustCo. Initial marketing efforts have yielded strong interest and pre-commitments from enterprise clients, he added.
 
Tricia Song, Head of Research:
According to Colliers International, flexible workspace stock in Singapore has grown to 2.7 million sq ft as at end 1H18, nearly tripling from 1 million sq ft as at end 2015. For 2018 as a whole, Colliers projected that co-working space would grow by 30-35%, or by around 670,000 sq ft. Other major co-working players in Singapore include IWG and WeWork.
 
In 2019, we also expect to see more activity within the "Flex and Core" leasing model, which will see more landlords as well as occupiers embrace the concept of combining traditional office leases with short-term lease tenures in flexible workspace centres.
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