SINGAPORE, 13 January 2022 –Singapore’s economy grew by 5.9% yoy in 4Q 2021, a moderation from the 7.1% in 3Q 2021. However, full yoy growth stood at 7.2% in 2021, the highest since 2010. The road ahead is expected to remain uneven for various sectors of the economy. As Singapore reconnects increasingly with the world and with the easing of borders, new areas of growth can be expected in terms of ramping up digitalisation and moving towards a greener economy. However, time is required to meet the manpower shortages in various industries, particularly the construction sector.
Investment
Total investment sales for 4Q 2021 dipped slightly from 3Q 2021 to $6.9bn amid investors’ cautious sentiments. Investment sales in the quarter were led by the residential sector, which contributed $3.3bn (48%), followed by the office sector contributing $2.8bn (41%).
EDMUND TIE’s Head of Research and Consulting, Mr Lam Chern Woon said, “Similar to previous quarters, demand for Good Class Bungalows (GCB) has remained strong. However, transaction sale volume may ease due to limited available listings.”
“Given the fresh cooling measures, developers are likely to adopt a more cautious approach towards their land bids, although the collective sale market remains an important avenue for replenishing their land banks given the tight unsold inventory” he added.
“However, amid the tight unsold inventory of private housing units may continue to lead developers towards the collective sale market to stock up their land banks,” he added.
Amid the uncertainty brought about by the emergence of the Omicron variant and current restrictive safe management measures, investor sentiment in the retail market remains cautious. Prime retail assets are also tightly held, limiting transaction activity.
With the gradual resumption of the workforce back to the office, starting with 50 per cent from 1 January 2022, demand for high quality and green workspaces will rise to suit occupiers’ evolving requirements. The office market rental recovery has supported investment activity, which is expected to continue in 2022 amid tight supply and companies’ realignment of workplace space strategies.
Industrial assets are anticipated to remain attractive to investors due to the sector’s resilient performance and its growing importance accentuated by the pandemic. Amid rising environmental concerns, more investors will place their environmental, social and governance (ESG) agenda at the forefront of decision-making efforts.
Office
Based on EDMUND TIE Research statistics, overall net absorption islandwide improved from a negative 43,200 sq ft in 3Q 2021 to 597,000 sq ft in 4Q 2021. Prime office spaces in the central region experienced a positive uptick in leasing demand in the fourth quarter as companies prepared to work from the office in the new year. The occupancy rate for office spaces in the CBD rose by 0.7% to 93.0% in 4Q 2021. Amid flight to quality, Premium and Grade A CBD rents fell marginally by 0.1% in 2021 although overall CBD rents fell by 3.6%. CBD occupancy rate fell marginally by 0.1% last year; the market was weighed down in the first half of the year before sentiment stabilised.
Mr Lam commented, “In 2H 2021, technology companies and the financial sector, in particular the wealth management sector and family offices, continued to expand their office footprint and drive leasing demand. Additionally, Singapore continues to be a safe haven for global investors and international firms, with companies setting up offices locally in anticipation of a reopening of the workplace.”
For 2022, flexibility is expected to be the key theme for the office sector – flexibility for employees working in the office and companies adopting a hybrid work approach in the long haul, as well as flexibility for tenants as they prefer more flexible lease options. Some companies may gravitate towards incorporating co-working spaces for the employees as an added amenity.
We expect positive net absorption for 2022, with rental growth of likely 3% to 5% for good quality office spaces as demand continues to strengthen. We expect companies to acknowledge the importance of well-designed quality workspaces in facilitating business networking, employee collaboration and fostering company culture. With the redevelopment of older office stock and a tight supply pipeline in the year, vacancy is expected to fall, and office rents are expected to rise, led by the prime segment.
Industrial
The manufacturing sector has now recorded the 18th month of expansion in December 2021, despite slowing growth amid concerns over the Omicron variant of Covid-19 and disruptions to supply chains. Overall industrial net absorption decreased from 3.9mn sq ft in 2Q 2021 to 2.4mn sq ft in 3Q 2021 amid uncertainties surrounding global trade markets and concerns about pandemic-related cost escalation for fuel, materials and labour.
Islandwide, the occupancy rate for warehouse increased 0.4% qoq to 90.1% in 3Q 2021, whilst that of the multiple-user factory increased 0.1% qoq to 89.8% in 3Q 2021. The rest of the occupancy rates for other industrial segments decreased, with business parks declining the most at 0.5% qoq to 84.3% in 3Q 2021.
Mr Lam commented, “Looking ahead, while the prospects for the industrial sector remain robust and intact, especially for high-specification logistics and factory spaces, the significant supply pipeline and other ongoing economic and business risks will cap the strength of the recovery. As major global economies prepare to embark on policy normalization, coupled with slowing China’s growth and global supply chain bottlenecks, trade momentum could slow in the coming months.”
“Businesses are thus expected to be cautious with their space requirements. However, we see firm expansion from firms in certain clusters such as pharmaceuticals, electronics, precision engineering and logistics,” he added.
Despite rising global Covid-19 vaccination rates, the rapid spread of omicron infections may prove to be a wildcard going forward. Global growth is expected to soften this year. On balance, the positive fundamentals for the industrial sector is tempered by some downside risks.
Retail
Based on EDMUND TIE Research, islandwide net absorption has improved from 151,000 sq ft in 2Q 2021 to 355,000 sq ft in 3Q 2021. The occupancy rate improved marginally by 0.4% to 91.9% in 3Q 2021.The 3-month moving average of yoy change in retail sales (excluding motor vehicles) improved from 7.5% in August 2021 to 8.0% in November 2021.
Mr Lam commented, “We expect suburban malls to continue their outperforming pace in 2022. With their tenant mix refreshed over the years, the malls are better able to cater to the needs of the residential catchment, catering to the daily needs, which further encourage them to patronise the malls. As Covid gains acceptance as endemic within the community, retail sentiment will further improve, and we expect stabilisation in the retail sector in 2022.”
Digitalisation, adoption of an omni channel approach and experimental retail are key trends going into 2022 for the retail sector. Retailers will continue to reinvent themselves and build their online presence, allowing their online and physical storefronts to complement each other. Malls will also continue to enhance their tenant mix, including securing unique and well-known international brands to entice more customers and increase footfall and spending in the malls.
Residential
According to URA’s flash estimate for 4Q 2021, the Property Price Index (PPI) for private residential properties rose for the seventh consecutive quarter by 5% qoq. Prices for the landed properties grew by 3.7%, while the non-landed prices by 5.4%.
New and secondary transaction volumes dipped 15% and 4.7% qoq respectively in 4Q 2021. Across the market segments, new sales volumes within the OCR witnessed decline of 50% qoq due to a sharp decline in launched units, while new sales volume in the CCR and RCR recorded qoq growth of 35% and 37% respectively. On the other hand, secondary sales volume recorded a more uniform decline of about 16 – 20% qoq across all segments in 4Q 2021.
Despite the drop in sale volume, prices continued to climb. The price increase was observed across all segments in 4Q 2021, with RCR registering the highest quarterly price growth of 7.3%, while CCR and OCR saw an increase of 2.5% and 5.4% respectively. The RCR price growth was attributable to the robust sale of CanningHill Piers at an average price of $2,937 psf.
Mr Lam commented, “With the latest cooling measures to promote housing affordability and curb market exuberance, price growth is expected to moderate for 2022. However, we do not expect strong pressures on developers to reduce prices, especially for projects with limited unsold inventory.”
“Demand will continue to be largely supported by local first-time home buyers and HDB upgraders, who are least impacted by the cooling measures. Stable economic prospects and an improving job market in 2022 will further support the demand for private homes. The nation is also better prepared to face new Covid challenges, given the high vaccination rates and subsequent booster programme,” he added.
ENDS
For further information, please contact:
Chan Yee Yin (Ms)
Head, Corporate Communications
O: + 65 6393 2369
Email: Yeeyin.chan@etcsea.com
| Download full report |