Steadily Healthy Growth in Singapore Retail Rents, with that of Orchard/Scotts Road Witnessing Strongest Quarter-on-Quarter Growth in Q3 2022 at 2.9%
Continuing Geopolitical Tensions and Economic Uncertainties to Cap the Growth of Overall Real Estate Performance
Singapore, 17 October 2022 – Amid economic uncertainties, Singapore’s retail real estate market continues to report positive momentum in Q3 2022, with all three submarkets showing quarter-on-quarter (QoQ) rental growth.
In Q3 2022, average monthly retail rents in Orchard/Scotts Road outperformed other areas, rising by nearly 3% QoQ. This is according to the EDMUND TIE’s Q3 2022 quarterly market performance report, Real Estate Times, Q3 2022 that is released today.
Average monthly retail rents (S$ per sq ft)
Source: EDMUND TIE Research
Mr Lam Chern Woon (蓝振文), Senior Director of Research and Consulting at EDMUND TIE, says, “The retail sector continues to shine, due to increased footfall from tourists on the back of travel restrictions ease, and Singapore is back in action hosting globally recognised events, such as the recent Singapore Grand Prix which saw record breaking attendance.”
According to the Singapore Tourism Board, international visitor arrivals grew for the eighth consecutive month to 752,306 in September, up from 728,744 recorded in August.
Mr Lam continues, “These have translated to the stronger rental performance in the Orchard/Scotts Road submarket, which has witnessed the highest QoQ growth. With continued rejuvenation of older retail assets and introduction of more experiential retail, such as plans for a sports facility in Orchard Road and redeveloping *SCAPE in Orchard and CQ @ Clarke Quay, the outlook for retail rents remains favourable and a continued broad-based recovery is expected. Nonetheless, the economic headwinds, rising interest and inflation rates will likely cap spending as consumers exercise caution.”
Highlights of other real estate sectors:
Investment
- Total investment sales for Q3 2022 fell 37% QoQ to S$5.51 billion.
- The residential sector led the investment sales in the quarter at S$3.43 billion (62%); of which, the bulk of S$1.1 billion was contributed by the sale of the three government land sites at Lentor Central, Lentor Hills Road (Parcel B) and Bukit Batok West Avenue 5. The office sector came in next with a sectoral contribution of S$1.17 billion (21%).
Sectoral contribution to Investment Sales in Q3 2022
Source: EDMUND TIE Research
- Despite continued easing of Covid restrictions and its strong momentum in the first half of 2022, investment transaction volume is likely to slow down going forward, due to market uncertainties which will result in investors adopting a more conservative investment stance.
Office
- The overall occupancy rate for office spaces in the CBD rose by 1.3 percentage points QoQ to 95.1% in Q3 2022.
- Average monthly gross rents (SGD/sq ft)
Source: EDMUND TIE Research
- Leasing demand will likely see strong growth in the coming quarters. Additionally, more office buildings are expected to feature flexibility in space usages, sustainability-centric design, and the incorporation of smart technology to cater to growing demand trends.
- Given the current tight supply, we expect Premium and Grade A office rents to rise by 6% and 9% in 2022, respectively.
Industrial
- In Q3 2022, the sustained export growth and steady manufacturing performance drove multiple-user factory rents to rise by 1.7-2.2% QoQ. Rent of first-storey multiple-user factory stood at S$1.91 per sq ft in the third quarter. Warehouse and logistics spaces witnessed the strongest rental growth of 2.6% QoQ, supported by buoyant demand amid protracted supply chain disruptions.
- While we witnessed balanced demand-supply dynamics for the multiple-user factory space and business park segments, the supply pressure is more pronounced in the warehouse space (at 3 years of annual absorption), which could cap the growth of warehouse rents.
- The upward trend seen in overall industrial rents over the past seven quarters is expected to moderate in the coming months. Despite the softer outlook by e-commerce players, we maintain our forecast that warehouse spaces could witness up to 7-8% rental growth for the year due to protracted supply chain disruptions.
Residential
- Looking ahead, the recent announcement of the upcoming foreign talent schemes such as the Overseas Networks and Expertise (ONE) Pass to draw top talent will pave the way for more inflow of foreigners, which will help to boost homebuying demand and rental.
- Although the overall property market is supported by a tight labour market and strong household balance sheets, the new measures announced in September 2022, amid the rising interest rate environment, would moderate homebuying demand. Primary sales are projected to about 9,000 units for this year, down from 13,000 last year.
- Considering the economic and geopolitical headwinds as well as rising interest rates, property price growth could reach around 9% this year, with a further moderation to 1-3% growth for 2023. However, there will be no strong pressure on developers to reduce prices, especially for projects with limited unsold inventory.
- On the whole, the residential market is now closer to an inflection point, amid slowing economic growth, rising living costs and interest rates. Factors that could cause prices to turn south include an outright recession impacting employment and income, or further cooling measures.
Click for the full Real Estate Times, Q3 2022.
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