Demand for Shophouses on the rise

Shophouses are a rare commodity in land-scarce Singapore, what with their heritage, location and floor area. Though the property cooling curbs of 2013 have caused a dink in the market with limits placed on bank lending but recent figures have shown an increase in transaction value over the past 2 years.

NorthBridgeRoadShophouseThe total value of shophouses sold since 2015 have risen 7.6 per cent from $657.3million to $707.07 million last year. Though the number of caveats lodged remained steady at about a 100 a year, property players are beginning to see a renewed interest in these properties as investors continue to view them as rare with considerable growth potential. Rental rates for shophouses fall within the 2.5 to 3.5 per cent range. Most of the investors who are able to afford these valuable real estate are however wealthy individuals or family businesses or international property funds with $10 million to $50 million to spare.

JalanBesarShophouseSome of the more notable transactions last year included 3 adjoining 99-year tenure shophouses in Amoy Street which were acquired for $59.6 million. Another shophouse in Boat Quay sold for $12.9 million to a family business and CBRE currently has 3 commercial shophouse units in Holland Village, Chinatown and Kampong Glam available for purchase. The units are priced between $6 million to $28 million. Changes in the office sector may have slight effect on the shophouse market, but even as more units are put up for sale this year, industry experts are expecting a 5 per cent rise in shophouse prices.

Many new office buildings pre-leased

A sense of strength is coming back into the property market this year, with the bottom of the cycle possibly closing in. And consumer interest, in both the residential and commercial fronts, are on the rise too.

FraserTOwersWith news of Facebook pre-leasing space at Marina One, the upcoming Frasers Tower in the heart of the Central Business District (CBD) has also received leasing proposals for 30 per cent of its 38-storey office building from various interest tenants. Most were from multi-national conglomerates, legal services, technology firms and a serviced-office provider, The Executive Centre who expressed interest in taking up an entire 20,000 sq ft floor space.

New office buildings are gradually filling up even before they are completed or ready for occupancy. There is however some movement from other existing buildings as tenants take the opportunity to relocate or upgrade, as seen in the mix of tenancy in Marina One and Guoco Tower. Frasers Tower has a 663,000 sq ft of total net leasable area. More new office spaces are currently being developed in the CBD, including UIC Building and the new property which will sit on the site of the previous CPF building. Though office rents have been falling, it may be a good sign after all as the market would have picked up by the time these new buildings are

Office leasing market recovery expected in 2018

AXATowerWith predictions of prime office rents recovering in 2018, could this be the year to invest in commercial properties, in particular Grade A office spaces?

Despite fewer commercial spaces being released and slight holdbacks from tenants in the leasing market – office rents have fallen 20 per cent since 2015 – property analysts are still hopeful for a 3 per cent overall rental growth in prime Grade A office space, mostly in the Central Business District (CBD). The rebound in rental prices is expected to happen in the later half of 2018, with stabilisation possibly occurring even earlier.

At the moment, average monthly rents of an office space in Marina Bay hovers around $9.05 psf, followed by $8.72 psf in Raffles Place, $8.42 psf at City Hall and $7.86 psf in ShentonWay and Tanjong Pagar. The weakening oil and gas sector has put pressure on businesses and affected market sentiments all round.

SouthBeach3
Photo credit: www.southbeach-sb.com

But with announcements of multi-national companies such as Facebook moving into the Marina Bay area and upcoming city fringe developments such as South Beach giving more traditional office districts a run for their money, 2017 could be the time to pick off potential units which may be affordable options when rents do rise come next year. The next wave of new office spaces which will enter the market is projected for 2020 and 2021.

 

Long-term potential of Commercial property in Singapore

Commercial properties in Singapore still hold a special place in the hearts of investors, if the activity in the market last year was anything to go by.

straitstradingbuildingThere were some massive bulk purchases of prime sites from foreign entities in 2016 and developers were actively buying up land sites. Investors are obviously seeing huge potentials of the commercial property market here. The 43-storey Asia Square Tower 1 for example was sold at $3.38 billion to Qatar Investment Authority’s sovereign fund in June 2016. This record sale by investment firm BlackRock was the largest single-asset and office transaction in the Asia-Pacific region. On a smaller but not any less worthy scale, is the sale of the Straits Trading Building to Indonesia’s Mayapada Group for $560 million. At $3,250 psf, it set a record for psf prices in the district.

Investors from all over the world are spotting the potential for long-term positive growth in this region and in extending their reach in Singapore. Large assets here are of particular interest and 2017 may see more such transactions taking place.

sbf-centerNot only are they investing in completed commercial properties, but also in land with developmental potential, such as a white site in Central Boulevard which was purchased by Malaysian plantation and real estate tycoon, Lee Shin Cheng. This Marina Bay mixed-use site was released under the Government Land Sales (GLS) programme. Though the office rental market has not been in its best form last year, there is hope that it will bounce back up by 2021.

 

Will current property bright spots continue to shine in 2017?

Private home prices have continued to fall in 2016, and while that may have coloured the market atmosphere somewhat grey, bright spots are beginning to shine through the gloom, with 3 sectors performing particularly well this year.

Miro condo on Lincoln Road, just off Novena at the City Fringe districts.

Miro condo on Lincoln Road, just off Novena in the city fringe.

The luxury residential property, commercial office and collective sales segments have all shone this year. And industry players are no doubt hoping that the positive streak will continue in 2017. In this year alone, 3 en bloc sales were closed. Only 1 such transaction was recorded for 2015 and none in 2014. Even for the private home market, sales volume has risen 9.8 per cent this year despite 10.8 and 10.7 per cent fall respectively in sale prices and rents in 12 consecutive quarters.

Some property analysts however consider the fall in property prices a good thing, as this has enticed more buyers back into the market. Buyers who may have previously stayed away from the market due to the increased stamp duties and fees implemented by the authorities in the past few years to attempt to cool the market, have now returned and are now swiftly closing transactions.

2 RVG condo apartment in River Valley

2 RVG condo apartment in River Valley

In the prime districts of 9, 10 and 11, private home transactions were already 42.6 per cent higher than the total in 2015. 2,601 deals were sealed in the Orchard, River Valley, Bukit Timah and Novena areas as of mid-December. With more land allocated under the Government Land Sales (GLS) scheme and developers on the lookout for smaller prime location sites, the market may see a lot more activity quite soon.

Economic slowdown affects industrial property market

2016 has seen quite a few political shakeups and the economy has been suffering the aftershocks. The  gas and oil market have been slightly flailing, with some companies stripping down to the minimum or moving out entirely hence the pickup for new industrial units or renewal of older leases have been lesser than optimal.

az-paya-lebar-industrial-propertyIn Singapore, industrial property prices and rental demand have declined in the third quarter, in particular sites or units with 30- and 60-year leases. Following the recent Trump win in the US elections, global uncertainty continues as countries question what future moves the newly elected US president in terms of trade agreements. With one of the most fast-moving industries of late begin e-commerce, which may not require as much space as manufacturing, storage and smaller boutique spaces could be the next wave.

Economic analysts say that global trade needs some rejuvenating or the industrial and warehousing sectors may continue to decline. Freehold industrial developments saw the smallest fall in prices of 1.4 per cent while 60-year leases fell 4.7 per cent and 30-year leases, 2.1 per cent. Rental demand is lower than supply and it continues to be a tenants’ market.

jtcinternationalbusinessparkThe only plus is the increase in interest in business park units, with rents expected to increase by 3 to 5 per cent next year. The International Business Park in Jurong East has seen a rise in average monthly rent of $0.10 psf with 25 leases signed in Q3 alone.

In the industrial sales market however, fewer industrial properties exchanged hands as most companies are holding back their expansion plans in lieu of the economic slowdown. Property analysts are expecting a further 5 per cent dip in industrial rents come end of 2016.

Indian cities top in list of Asia’s property investment hotspots

India may not have previously come up as a potential goldmine for property investors, but real estate in some Indian cities have been creeping up the popularity charts and can now be viewed as some of Asia’s most prime investment real estate.

mumbaipropertyJust like in China, a huge country like India will no doubt have some cities which shine over the others. Mumbai and Bangalore have come up tops in a comparative table of 22 Asian markets. With many multi-national companies setting up regional headquarters or back offices in India, it comes as no surprise that commercial properties are key when it comes to real estate investment in India. The migration of locals from smaller cities and townships into these main cities and business hubs also mean a demand for rental properties are on the rise.

Singapore has fallen from its 11th place to 21st as residential property prices declined for 12 consecutive quarters. Even Tokyo, which topped the list at first place this year, have fallen to 12th place for next year as low interest rates see sellers holding on to their properties despite low vacancy rates. Japan’s declining economy also has a part to play in the market sentiments there.

newyorkapartmentThe mainland Chinese investors are some of the largest players in real estate markets across the globe, but they have begun to turn their attention away from Asia to markets further north such as London and New York. Property prices in China are soaring, and their yearning for foreign footholds and connections have brought them into both established markets in the West and emerging ones in the region.

Commercial property sector facing price and rent squeeze

As the supply of commercial spaces increase, demand has not unfortunately shown a proportionate growth, resulting in a squeeze on prices and rents. Across the board in the third quarter, prices and rental rates have fallen while vacancy rates are on the rise.

tuaswarehouseWhile things in the manufacturing sector has picked up, a bigger turnaround needs to happen before a corresponding uptake in the commercial property industry. The warehouse sector has taken the hardest hit apparently, with a 4.4 per cent fall in rent from Q2. Industrial property prices fell 1.7 per cent, a 7.8 per cent fall in a year-on-year comparison with Q3 of 2015. Rents in the same segment fell 2 per cent in the third quarter. Property experts are expecting similar market reactions for the next few quarters ahead.

kampunbahrushophouseMore rare commercial spaces such as shophouses are however entering the market at more reasonable prices than before. And with selling prices low, investors who might be looking at very long-term prospects of the commercial property market here might be picking off deals. The increase in industrial space – almost 3 million square metres – by end of 2017 will also put further pressure on prices, which could mean a market shift towards the tenants and investors while landlord struggle against the competitive grain.