Singapore, 16 July 2023 – EDMUND TIE is pleased to share our Q2 2023 DIGEST, which affirmed slowing real estate performance momentum amid headwinds.
INVESTMENT: Lower quantum assets preferred amid investors’ cautious sentiments
Performance
- Private real estate investment sales decreased in Q2 2023 by 34% to S$2.8 billion, from $4.2 billion in Q1 2023.
- Transacted deals during the quarter leaned towards lower quantum of below S$100 million, as investors remained cautious in the uncertain economic climate.
- The collective sale market saw only 1 successful sale (Kew Lodge), as compared to Q1 2023 which saw 5 sites (Bagnall Court, Meyer Park, GS Building, GSM Building and Holland Tower) transacted.
- Transacted deals during the quarter leaned towards lower quantum of below S$100 million, as investors remained cautious in the uncertain economic climate.
- Investment Sales Sectoral Contribution (%)
Source: EDMUND TIE
- The public investment sales market recorded some S$72 million, with the award of the Parry Avenue site for the development of private assisted living. Overall, bidding activity moderated due to recent cooling measures.
Outlook
- On the back of the macro environment and economic climate that will result in investors likely to continue leaning towards lower quantum assets, investment sales are expected to moderate from S$28 billion last year to S$18-20 billion this year .
OFFICE: Moderation in rental growth for prime office spaces, supported by continued tight supply
Performance
- Office rents largely remained flat, except for Marina Centre Grade A rents which saw a 0.5% growth from Q1 2023.
- Overall occupancy rate in the CBD remained at 94.3 percentage points.
- Average office rents and occupancy rates
Outlook
- The office market will continue to be supported, given the limited incoming supply of office developments, albeit prudence among firms taking large spaces due to hybrid work arrangement and cost management.
- EDMUND TIE’s 2023 growth forecast for Premium and Grade A office rents in the CBD is revised from 1-3% to 0.3-0.5%, given the subdued business climate and overall cautious market sentiment.
INDUSTRIAL: Ramp-up in supply to outstrip demand, resulting in moderation in rental growth for 2023
Performance
- Rental growth for multiple-user factories, warehouses and business park spaces softened in Q2 2023, amid a slowdown in the manufacturing industry.
- Average industrial rents
Outlook
- On the back of elevated interest rates and macroeconomic headwinds, industrialists are likely to be more cautious about their expansion plans. Growth sectors, such as advanced manufacturing and cold-chain logistics, will continue to support demand for industrial spaces.
- Rental growth for industrial and logistics spaces is expected to moderate for 2023, as the ramp up in supply is expected to outstrip demand this year.
RETAIL: Prime first-storey retail space in Orchard/Scotts Road expected to lead rental growth for 2023 at between 4% and 5%
Performance
- The retail scene in Singapore is continually revitalised by new-to-market retailers – including the highly anticipated doughnut chain, Mister Donut, and the Chinese coffee chain, Luckin Coffee.
- To offer immersive retail experiences, high-end fashion retailers are also incorporating F&B components, creating café concept store within a store, as evidenced by Coach which launched their first Coach Café at Neil Road in April and Ralph Lauren is set to open Ralph’s coffee at Marina Bay Sands this July. Meanwhile, the trend of setting up pop-up stores remain popular among retailers, as seen by the pop-up of HermesFit gym on Orchard Road and Victoria’s Secret café at Mandarin Gallery.
- Average retail rents
Outlook
- Prime first-storey retail space in Orchard/Scotts Road micro-market is expected to lead rental growth for 2023 at between 4% and 5%, underpinned by the gradual tourism recovery and limited supply pipeline.
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- Retail rents in Other City Areas are expected to increase by 1-2% in 2023, supported by the return of the workforce, while those in the Fringe/Suburban Areas are expected to grow 2-3% for the year.
- Retail rents in Other City Areas are expected to increase by 1-2% in 2023, supported by the return of the workforce, while those in the Fringe/Suburban Areas are expected to grow 2-3% for the year.
RESIDENTIAL: Launches to drive demand for new private homes
Performance
- Total sales transaction volume climbed by 28% qoq in Q2 2023. The increase was led by a 75% jump in transaction volume in the primary market, driven by the 4 new project launches (Blossoms By The Park, Tembusu Grand, The Continuum and The Reserve Residences).
- Sale volume in the secondary market rose by 8% qoq in Q2 2023.
- Sale volume in the secondary market rose by 8% qoq in Q2 2023.
- Given the punitive hike in ABSD for foreign buyers, the homebuying share of foreign demand slipped from 3.7% in May to 2.7% in June. Comparatively, the homebuying share of foreign demand in Q1 2023 was 6.9%.
- Average monthly private home rental transactions in Q2 2023 fell by 3.4% to 6,456 units.
Outlook
- Overall price growth is expected to increase at a more sustainable level of 3-5% in 2023, a moderation from 2022’s growth of 8.6%.
- As developers pick up the pace of launches in the latter part of this year, new home sales are poised to reach 7,000-8,000 units for 2023. This is comparable to 2022’s 7,099 units.
- Secondary sale volume could moderate to 8,000-10,000 units this year, down from 14,791 units in 2022.
- Secondary sale volume could moderate to 8,000-10,000 units this year, down from 14,791 units in 2022.
Click for the full Q2 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