Singapore, 14 April 2023 – EDMUND TIE is pleased to share our Q1 2023 real estate performance report, now renamed as DIGEST, which reported a challenging start to the year, but there is sustained real estate momentum.
Residential: Softer public resale market to temper upgrading demand
- Total sale transaction volume, in terms of number of units, climbed by 3.3% qoq in Q1 2023. The increase was led by a 74% jump in transaction volume in the primary market which saw a number of new project launches. Sales volume in the secondary market, on the other hand, fell by 14% qoq in Q1 2023.
- Rental growth is expected to slow down in 2023, amid a ramp-up in completions. Risks are growing for a rental correction in the months ahead.
- Post-budget 2023, some knee-jerk reactions are expected in the high-end property market. Property price growth could moderate to 5-7% for 2023, following 8.6% in 2022.
- On the back of elevated economic uncertainty, borrowing costs and increasing prospects of rental correction, the dynamics in the residential market are more fluid, compared to a year ago. As developers pick up the pace of launches in 2023, primary sales of 8,000-9,000 units could be recorded.
Retail: Slowdown despite strong tourism recovery
- Despite the ongoing tourism recovery in the quarter, retail leasing demand was dampened by economic uncertainties. In Q1 2023, prime first-storey rental rates remained unchanged at S$39.20 psf at Orchard/Scotts Road and Fringe/Suburban Areas, while that in Other City Areas recorded a 0.5% decrease to S$19.10 psf.
- Upper-storey rents across all areas recorded decreases between 0.2% and 0.5%.
- Upper-storey rents across all areas recorded decreases between 0.2% and 0.5%.
- Rental growth of prime first-storey space for Orchard/Scotts Road in 2023 are expected to be between 5% and 7%. For the other retail segments, rental growth of between 0% and 4% in 2023 are forecast.
Industrial: Warehouse demand defies industrial slowdown, while factory rental growth softened
- Average industrial rents (S$ per sq ft per month)
- Industrial rents are expected to be supported by sustained leasing demand for cold chain logistics and life sciences. Industrialists may also opt to lease instead of acquiring their own industrial space, amid rising interest rates which leads to higher capital costs. High-tech spaces with modern specifications in good locations will be in demand from tech and biomedical companies.
- The bulk of supply pressure is concentrated over 2023 (44%) and 2024 (41%). In the near to mid-term, the greatest supply pressure is felt on the single-user factory segment, though it is likely to experience strong take-up by industrialists for their own use.
- Rental growth is expected to be moderated, on the back of supply outstripping demand.
Office: Demand for prime office space persists amid uncertain global economic climate
- Average office rents ( S$ per sq ft per month) and occupancy rates (%)
- In Q1 2023, occupancy rates for Premium office space in Marina Bay and Raffles Place increased by 0.3 percentage points and 0.2 percentage points, respectively. The overall occupancy rate in the CBD remained at 93.9%, while non-CBD area saw a decrease by 0.4 percentage points and decentralised area an increase by 0.2 percentage points, respectively.
- Firms will likely adopt a cautious approach to expansion, given the challenging and uncertain environment. Although leasing demand is expected to remain moderate this year with more firms opting to rightsize their space, rents could marginally rise, on the back of a relatively tight supply beyond 2023.
Investment: Smaller sites and hospitality are the new flavours
- Total investment sales of S$4.0 billion was clocked in Q1 2023, largely contributed by the sale of 50% stake in NEX and the collective sales market that saw 5 sites transacted at a total of S$731 million.
- This still marks a 11% qoq decrease from S$4.6 billion in Q4 2022, given the high base effect from the sale of Jurong Point and Swing By @ Thomson Plaza last quarter.
- Investment sales sectorial contribution (%)
- There has been a clear shift in investors’ appetite from large to smaller sites, which are of commercial or strata in nature. The global recovery of the tourism industry has also put hospitality sites in the spotlight, with the redevelopment of commercial sites marketed for hotels or serviced apartments.
- Amid cautious sentiments among investors, well-priced commercial and residential sites with good attributes and at a reasonable quantum will continue to attract investors looking to expand their real estate portfolio.
- On the back of upcoming government land sales, the residential sector will likely take the major slice of the cake. Looking ahead, total investment sales are expected to moderate from S$28 billion last year to S$20 billion this year.
Click for the full Q1 2023 DIGEST
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For further information, please contact:
Seah Li Ching (Ms)
Corporate Communications
DID: +65 6393 2369
Email: liching.seah@etcsea.com