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In your own words: 2020 Real Estate Predictions

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From the trade war to street protests to the inverted yield curve - these were some defining events that have hogged global media headlines in 2019.

They have heaped greater uncertainty on a global economy which is in a synchronised slowdown and weighed on investment decisions.

As we enter into a new decade, Colliers REview asks business leaders in Colliers Singapore's office to reflect on the past year and predict some trends and opportunities that could shape the various real estate sectors in 2020. 

 

INVESTMENT SALES


Tang Wei Leng
Managing Director, Singapore

DESCRIBE IN ONE WORD, HOW 2019 HAS BEEN FOR YOU?

Unprecedented. Everyone had to adjust and respond to the unpredictable business environment and geopolitics which truly have had an impact on real estate and investment decisions. It is safe to say this trend will continue in 2020.

WHAT IS YOUR PREDICTION FOR THE MARKET / SECTOR IN 2020?

Expect the unexpected! Hong Kong could very well be the top investment destination in 2020 amidst all the uncertainties caused by the protests and riots. Hong Kong politics aside, recent global developments have perhaps calmed nerves somewhat in what was an unpredictable year. The so-called Phase I trade deal between the US and China has lowered the immediate tariffs threat, while the UK election outcome is positive for the market because it removes political uncertainty for now and paves the way for Brexit for to happen. Broadly speaking, we believe these developments should buoy investment confidence and encourage capital flows.

Of course, we remain watchful of any risks, but the sense is that beneath all these tensions across the globe, the stakeholders/policymakers are willing to engage with each other in seeking fair solutions. So, I am hopeful that 2020 could still turn out good prospects.

 

HOTEL SECTOR


Govinda Singh
Executive Director, Valuation & Advisory Services

DESCRIBE IN ONE WORD, HOW 2019 HAS BEEN FOR YOU?

Opportunistic. On one hand Singapore hotels benefited from the strong growth in tourist arrivals, the fall-out from Hong Kong, and low hotel supply growth.

Curiously, however, tourism receipts failed to keep pace. Does this signal a fundamental shift in how Singapore is perceived as a must-see versus a value for money destination, one wonders? Hoteliers with a dynamic marketing and asset management strategy were able to grow Revenue per Available Room (RevPar) significantly. Investors with an eye on the long term were the clear winners as we witnessed an unprecedented number of deals and hospitality REIT mergers.

WHAT IS YOUR PREDICTION FOR THE MARKET / SECTOR IN 2020?

We anticipate RevPAR for hotels in Singapore to grow between 0-1% in 2020. Global political and economic headwinds, continued pressure on Singapore’s largest source market (China), Brexit (now with clarity in direction), the US elections, together with the rising value of the Singapore dollar all point to a loss in business and consumer confidence.

However, a tweet can change a lot in a very short time in these modern times. With some mitigating factors such as the muted supply pipeline, and bi-annual MICE events returning in 2020, the outlook can rapidly change! Expect investors to continue to look for value add propositions, with hotel operators doubling down on making the most of Singapore’s much hyped position as a global hub and must-see destination in Asia.

 

RESIDENTIAL SECTOR


Tricia Song
Head of Research

DESCRIBE IN ONE WORD, HOW 2019 HAS BEEN FOR YOU?

Resilient. The residential property sector unexpectedly turned around after just two quarters of correction from the new cooling measures implemented in July 2019. Developers’ sales increased 14% to 10,000 units and average prices moved up by about 2.5% in 2019, reflecting resilient underlying demand.

WHAT IS YOUR PREDICTION FOR THE MARKET / SECTOR IN 2020?

2020 could be a year of stability, after turning in a surprise rebound in 2019. While we expect fewer new launches in 2020 - as developers have pushed out most of the launches in 2019 -  we expect a similar takeup of 9,800 units, given a better economic growth outlook than 2019.

Overall sentiment is cautious, but there is still genuine demand for homes from household formation and the stable employment rate, that should not be deterred by the cooling measures. In addition, the interest rate environment in 2020 will likely be more supportive than most of 2019. We expect private home prices to rise 3% in 2020, relatively in line with the GDP growth.

 

OFFICE SECTOR


Rick Thomas
Head of Occupier Services

DESCRIBE IN ONE WORD, HOW 2019 HAS BEEN FOR YOU?

Volatile. Across industries, occupiers have had to grapple with the ongoing changes in the work environment, uncertain business conditions, and the slowing global economy.

We have observed that uncertainties arising from the US-China trade spat, the turmoil in Hong Kong, and weaker economic outlook were among the considerations when occupiers review their real estate strategy. Given the volatile operating environment and unpredictable headcount projection, we saw occupiers gravitating to flexible workspace as part of a Flex and Core strategy.

In the past decade, we have witnessed a seismic shift in innovation and technology - this will continue as Singapore pushes forward its Smart Nation agenda, with the upcoming 5G network set to bring about further growth in the tech sector.

WHAT IS YOUR PREDICTION FOR THE MARKET / SECTOR IN 2020?

Singapore - a small and open economy - will remain vulnerable to external shocks, particularly on the trade front. That said, it is still a financial bridge between China and the rest of the world, and we believe Singapore’s appeal as a top destination for corporate regional headquarters will only strengthen, given the uncertain geopolitical environment.

For 2020, we are still generally positive on the outlook for the office property market in Singapore, although takeup of space and rental growth are likely to slow on the back of tight supply and years of strong increase in rents. Tech and Flexible Workspace sectors will likely be among the key drivers of demand next year. That said, there may be further consolidation in the co-working sector as operators seek greater synergy.

Other exciting trends to watch: greater adoption of technology by small and medium sized firms; Industry 4.0 and its impact on industrial real estate; modernisation of the services sector; and potentially new opportunities in the urban air mobility market.

 

INDUSTRIAL SECTOR


Dominic Peters
Senior Director, Industrial Services

DESCRIBE IN ONE WORD, HOW 2019 HAS BEEN FOR YOU?

Challenging. We have observed that the decision-making process among industrialists has been very slow in the light of various uncertainties, such as the trade dispute, Brexit etc. The industrial occupiers are more cautious on their space requirements, renewals and expansion plans, preferring a wait-and-see approach given the less rosy economic outlook as well.

That said, as a whole, we saw clearer signs of stabilisation in the overall Singapore industrial property market in 2019 from 2018, with rents and vacancy rates remaining fairly stable.

WHAT IS YOUR PREDICTION FOR THE MARKET / SECTOR IN 2020?

Broadly, we expect the concerns around slowing economic growth and global headwinds to persist in 2020. Industrialists will continue to be prudent and watchful of risks. We are generally more optimistic about prospects in certain segments, such as business parks, hi-tech space, and logistics space due to the continued growth in the technology, media and e-commerce sectors which could help to support demand and rents.

Given the more muted market sentiment, it may also be a good opportunity for industrialists to review their business. Landlords should also consider upgrading their assets, as technologies including automation, machine learning, digitisation, data analytics continue to disrupt industries.

 

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Dominic Peters

Associate

Industrial Services

Singapore

I am a real estate industry veteran, having  an experience of 25 years in development consultancy and the marketing of industrial properties in Singapore. As Colliers' Head of Industrial Services,  I bring to Colliers my leadership strength and a proven ability to drive success in the business.

Prior to joining Colliers International, I held senior positions in other global real estate consultancy firms, helping to develop and grow their industrial property marketing business in Singapore. I also have extensive experience in property management across various real estate segments, including residential and retail developments.

Throughout my career, I have worked with various clients, ranging from private owners to Real Estate Industrial Trusts (REITS). Here are some of the clients that I have represented: 

  • AIMS AMP Capital  Industrial REIT

  • Boustead Projects Ltd

  • Dolphin Engineering Pte Ltd

  • Focus Network Ltd

  • Frameworks Pte Ltd

  • National Semi-conductor

  • OEL Holdings Ltd 

  • Penguin Ltd

  • STIE Integrated Engineering Ltd

  • Stone Marine Pte Ltd 

  • Technics Offshore and Marine LTD

  • Thomson

  • Trinity Offshore

With my wealth of experience as well as passion and deep understanding of the industrial property market, I will be able to provide strategic advice and formulate action plans to spearhead growth in Colliers’ industrial services and consultancy business, including built-to-suit assignments, sale and leaseback arrangements, and lease renewal, space expansion or relocation services.

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