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Singapore Quarter 1, 2020

SINGAPORE 17 Apr 2020
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Market commentary

Real estate markets grapple with pandemic headwinds as COVID-19 anticipated to persist through 2020.



Market commentary

Key economic indicators

Based on advanced estimates released by the Ministry of Trade and Industry (MTI) on 26 March 2020, the Singapore economy contracted by 2.2 per cent y-o-y in Q1 2020, reversing from the 1.0 per cent growth in Q4 2019 (Tables 1 and 2). All sectors reported a negative performance, with the construction sector reporting the worst decline of 4.3 per cent y-o-y in Q1 2020. The Novel Coronavirus (or COVID-19) pandemic, which emerged in late 2019, has caused global disruptions to the economy that was already weak in 2019. Construction activities were impacted significantly due to supply chain disruptions and delays in the return of foreign workers as a result of the lockdowns and travel restrictions implemented by other countries.



The International Monetary Fund (IMF) reported on 27 March 2020 that the world had clearly entered a recession due to the coronavirus pandemic, which could be worse than the recession that occurred back in 2009. The Organisation for Economic Cooperation and Development (OECD) also stated that the lockdown will directly affect sectors amounting up to one-third of Gross Domestic Product (GDP) in major economies and for each month of containment, there will be a loss of 2 percentage points in annual GDP growth. It is also certain that many economies will fall into a recession.

Singapore’s GDP growth forecast for 2020 was downgraded to “-4.0 per cent to -1.0 per cent”, from the “-0.5 per cent to 1.5 per cent” forecast in February 2020. The wider forecast range is to account for heightened uncertainties in the global economy, given the unprecedented nature of the COVID-19 outbreak, which has escalated since February 2020 with many countries implementing lockdowns and border closures. Such closures will negatively impact economic activities and global supply chains. Singapore itself has also tightened its border controls to reduce the importation of COVID-19 cases.

The closure of all non-essential businesses was also implemented to control the spread of the pandemic (Table 3). The implementation of such policies will have an adverse impact on visitor arrivals, as well as retail and food and beverage (F&B) sales, which in turn may directly affect the retail and hospitality sectors.




The Singapore Government unveiled its S$6.4bn Unity Budget 2020 on 18 February 2020, which included jobs and household support measures, as well as property tax rebates for its tourism-dependent sectors, such as hospitality and retail. A package of S$4bn has been pledged to implement measures aimed at stabilising the economy caused by COVID-19. The Government had to subsequently introduce the Resilience and Solidarity Packages in a bid to lift Singapore’s economic and social resilience.



Investment sales

The gloomy economic outlook, brought about by the widening COVID-19 pandemic and slowing global trade and people mobility, has dampened business sentiments worldwide. As a result, companies have adopted cost-cutting measures to stay afloat, and investors have taken a more cautious stance towards investment decisions. This led to a significant drop in investment sales in Singapore from S$5.0bn in Q4 2019 to S$3.3bn in Q1 2020 (Figure 1).


While the private sector accounted for majority, or 95.3 per cent of total investment sales value in Q4 2019, it only accounted for 52.6 per cent in Q1 2020 and transactions were of much lower price quantum. There were 14 transactions exceeding S$50m in Q4 2019 and this number plunged to only four transactions in Q1 2020. Despite global economic uncertainties, there were still market activities from foreign investors, particularly in the office sector, as they remained confident in Singapore’s solid position as a key business hub in the region.

Under the Government Land Sales (GLS) Programme, investment sales rose from S$233.9m in Q4 2019 to S$1.6bn in Q1 2020, comprising 47.4 per cent of total investment sales value (Table 4). However, responses from developers were relatively muted with less than expected number of bids due to the cautious market outlook.



Sector trends and outlook

Residential collective sales market remained weak with no collective sales concluded in Q1 2020. However, five residential GLS sites were awarded in the first quarter this year, from one in Q4 2019, with a total investment sales value of nearly S$1.4bn. The GLS market continued to be dominated by listed property companies, as four of the sites were awarded to this group of purchasers. While bidding activity was strong for the sites at Irwell Bank Road and Jalan Bunga Rampai with seven and nine bidders respectively (both awarded in January 2020), developers became more cautious in their bidding in subsequent months. Both sites at Canberra Drive only received four and five bids respectively and bids were considered to be lower than market expectations (Figure 2). This is partly attributed to the impact of the COVID-19 outbreak as developers expect weaker market conditions and lower housing demand.

Figure 2: Tender bids of residential GLS sites (2019 to Q1 2020)



Office investment sales in Q1 2020 was mainly contributed by the S$648m transaction of Cross Street Exchange (formerly known as China Square Central) from the merger of Frasers Commercial Trust (FCOT) and Frasers Logistics & Industrial Trust (FLT), comprising 23.4 per cent of total investment sales (Figure 3). Despite the cautious global economic outlook, there was still interest from foreign investors with their confidence in the long-term outlook of Singapore’s office market as they purchased the units for investment purposes. Excluding the Cross Street Exchange transaction, office investment sales would have fallen by 82.2 per cent from S$762.1m in Q4 2019 to S$136.0m in Q1 2020 from three strata office deals.

Figure 3: Investment sales by asset type


Similarly, Industrial investment sales fell by 45.3 per cent q-o-q to S$1.1bn in Q1 2020 with lower transactions in both the private and public sectors. In the private market, the largest transaction was the S$606m deal of Alexandra Technopark arising from the merger of FCOT and FLT (Table 5). The second largest transaction was the sale of 25.0 per cent stake in Galaxis for S$102.9m by Mitsui & Co to Ascendas REIT. The remaining 75.0 per cent will be held by CapitaLand Limited, the sponsor of Ascendas REIT. According to Ascendas REIT, the business park in Fusionopolis, one-north, is expected to generate a net income yield of around 6.2 and 6.1 per cent pre-transaction and post-transaction costs respectively, with its occupancy of 99.6 per cent.



Conversely, under the JTC Concept and Price Tender (CPT), the tender to develop Biopolis Phase 6, a 60-year leasehold business park site at one-north, was awarded to Ho Bee Land for S$223.6m ($502 psf ppr) (Table 6). This project aims to facilitate the continued growth of the biomedical sciences ecosystem in onenorth. Expected to be completed in 2022, this project will offer nearly 377,000 sq ft of business park space to facilitate the continued growth of biomedical sciences ecosystem in one-north. The development of the site located next to Ho Bee’s The Metropolis, will enhance vibrancy for one-north with the provision of public space with lush landscaping through the integration of green spaces with the rail corridor.


According to the Singapore Commercial Credit Bureau’s Business Optimism Index in March 2020, business sentiment among Singapore firms fell to an all-time low for the second quarter due to concerns over the COVID-19 health risks, slowing demand from Mainland China and disruption of global supply chains. While the Government has introduced supportive measures to help businesses tide over the coronavirus outbreak, firms are expected to tighten their expenditure and adopt a highly cautious stance in consideration of uncertainties ahead. The COVID-19 pandemic has since escalated, with more countries imposing lockdowns and the plummeting of overall consumption with tightened measures to control travel and social activities. Against the backdrop of much weaker economic prospects, overall investment sales of big-ticket properties are anticipated to slow down in 2020, as investors delay investment decisions and adopt a wait-and-see approach or manage risks by investing in smaller lot sizes. Nevertheless, with the strong fundamentals of Singapore, coupled with the low interest rate environment, investors are looking for opportunistic buys as the investment sales market is expected to improve once the COVID-19 situation subsides. Investors with a long-term strategic horizon and interest in Singapore are setting their sights on investment assets that are limited in supply.



Market commentary

Key economic indicators

  • Based on Q1 2020 Urban Redevelopment Authority (URA) flash estimates released on 1 April 2020, private home prices registered a q-o-q decline of 1.2 per cent, the first quarterly decline since Q1 2019 when private home prices decreased by 0.7 per cent q-o-q (Table 7). This was a reversal from the q-o-q growth of 0.5 per cent in Q4 2019.


Table 7: Average URA Residential Price Indices in Q1 2020 (Flash Estimates)



  • Private non-landed property prices fell by 1.0 per cent q-o-q in Q1 2020, extending the marginal dip of 0.3 per cent in Q4 2019. All market segments registered declines in prices, with prices of non-landed properties in the CCR decreasing the most by 1.5 per cent q-o-q. Prices of non-landed properties in the RCR and OCR slipped by 0.5 and 1.0 per cent respectively in Q1 2020.
  • Similarly, URA Landed Property Price Index fell by 1.7 per cent q-o-q in Q1 2020, reversing the 3.6 per cent increase in Q4 2019.
  • Housing loans continued to increase for the second consecutive quarter by 17.2 per cent y-o-y in Q4 2019 (Figure 4) despite the softer residential market with prevailing property cooling measures.


Figure 4: New housing loans limits granted



  • New sales volume continued to dominate the private residential market in Q1 2020, albeit lower sales volume as compared to Q4 2019, as there were fewer launches and concerns over job security given the anticipated recession (Figure 5).


Figure 5: Private homes sales volume (excluding ECs) and URA All Residential Price Index



  • Among the new launches in Q1 2020, the development with the highest take-up rate was The M, despite being launched during the ongoing COVID-19 pandemic and lacklustre residential market. The take-up rates of other launches in Q1 2020 ranged between 0.3 per cent and 19.0 per cent. Most launches were in the CCR, which may be costlier and take-up rates of units may have been more affected by the uncertain global economic outlook and tightened travel restrictions on visitors to Singapore, particularly for prospective foreign homebuyers.
  • Resale volume declined to 1,914 units in Q1 2020 as homeowners exercised caution due to economic uncertainties, as well as a variety of options from the new sales market with various current and upcoming launches.
  • Total private homes sales volume for Q1 2020 amounted 4,170 units, reflecting an 11.4 per cent y-o-y increase but a 14.5 per cent q-o-q decline.
  • In the private residential leasing market, total rental contract volume fell marginally by 0.9 per cent y-o-y to around 20,700 transactions in Q4 2019. In January and February 2020, there were 13,929 rental transactions, a 3.6 per cent y-o-y decline (Figure 6). The URA Rental Index for All Residential Property fell for the first time by 1.0 per cent q-o-q in Q4 2019 after three consecutive quarters of increase in 2019. Nevertheless, the rental index still registered a 1.4 per cent y-o-y increase in Q4 2019 at the back of lower number of completed units and low vacancy rates. In Q1 2020, it is expected that rents will be supported by the demand from expatriates and some locals, although this may be weaker as companies take on cost-cutting measures or curb overseas travel and postings with the ongoing COVID-19 situation.


Figure 6: Number of private home rental transactions (excluding ECs)




  • As the US Fed interest rates fell to near zero with emergency rate cuts to cushion the economic fallout from COVID-19, the Singapore Interbank Offered Rate (SIBOR) has also declined, resulting in banks revising their home loan offerings to attract borrowers. However, as the sentiment remained weak with the cooling measures in place and jobs security in question amid the COVID-19 outbreak, homebuyers are likely to show greater caution in home purchases at least for the first two quarters this year. With the Government’s directive in suspending of activities at workplace premises to further reduce the COVID-19 transmission announced on 3 April 2020, all sales galleries will be likely closed till 1 June 2020. The Monetary Authority of Singapore has also announced on 1 April 2020 that distressed property owners can apply to defer their residential loan payments from 6 April to 31 December 2020.
  • Nevertheless, as the financial markets are likely to exhibit greater volatility amid the unpredictable COVID-19 situation, there could be a growing tendency for non-institutional investors to turn towards real estate, particularly residential properties, which are deemed to be stable and more accessible asset classes.
  • Foreign demand is expected to be affected in the near term as travel restrictions remain in numerous countries. This is particularly for Mainland Chinese buyers, who is the largest group of foreign home purchasers in Singapore. However, should the situation improve, the position of Singapore as a safe investment haven with quality healthcare services is expected to attract foreign homebuyers back to the residential market.



Market commentary

Key indicators

  • It has been an increasingly challenging period for Singapore’s retail sector, having seen tentative signs of recovery in the final quarter of 2019, followed by an unexpected steep downturn due to COVID-19 outbreak. Retail sales was significantly hit as people avoided going to malls and visitor arrivals plummeted due to travel restrictions.
  • Situation on the ground has been extremely difficult. Staff and business owners of several establishments in Chinatown (key tourist attraction) reported that sales had gone down by 80 per cent in February 2020. This was also reflected in Jewel Changi Airport where business has contracted by as much as 70 per cent in the same month.
  • Manpower constraint was also a key issue during this period, as many countries have imposed lockdowns. With effect from 18 March 2020, Malaysia issued a movement control order, which involves closing all non-essential businesses and prohibiting their citizens from leaving or foreigners from entering the country, in hopes of controlling the spread of the disease. As a result of this policy, many Singapore businesses that rely heavily on workers from Malaysia needed to find alternative manpower or provide accommodation for their workers who chose to stay to work in Singapore.
  • Retail sales index (excluding motor vehicles) trended downwards for the fifth consecutive quarter by 1.4 per cent y-o-y in Q4 2019 (Figure 7). On the other hand, the F&B services index has increased for the fifth consecutive quarter by 1.8 per cent y-o-y in Q4 2019 (Figure 8).


Figure 7: Y-o-y change in retail sales index (excluding motor vehicles)


Figure 8: Y-o-y change in food and beverage services index



  • In February 2020, the worst performing sectors were departmental stores, watches and jewellery and food and alcohol (Figure 9). Overall, the total retail sales (excluding motor vehicles) declined by 12.1 per cent y-o-y in February 2020.


Figure 9: Retail sales index (Feb 2020), y-o-y change



  • The food and beverage index trended downwards by 16.8 per cent y-o-y in February 2020, and restaurants were the hardest hit by the implementation of new social distancing measures (Figure 10).


Figure 10: Food and Beverage index (Feb 2020), y-o-y change



  • The online retail sales proportion increased to 7.4 per cent in February 2020 from 5.5 per cent in January 2020 (Figure 11) as people relied on e-commerce instead of physically going to retail stores to get their shopping done.


Figure 11: Retail sales value and proportion of online retail sales



  • In terms of contribution to retail from tourists, total tourism receipts increased by 3.2 per cent y-o-y to S$7.4bn in Q3 2019. The shopping, accommodation and other tourism receipt components reported a y-o-y increase in Q3 2019 (Figure 12). Visitors from Mainland China, Indonesia and India were the top 3 nationalities that visited Singapore in 2019.


Figure 12: Tourism receipts components in Q3 2019 (y-o-y change)



Private demand, occupancy and supply

  • Based on URA statistics⁴, islandwide net absorption expanded to 1.4m sq ft in 2019, higher than the 543,000 sq ft reported in 2018. From these estimates, island-wide occupancy increased marginally by 0.9 percentage points y-o-y to 91.4 per cent in 2019.
  • Great World City completed a revamp of its shopping mall and F&B offerings has increased from 20 per cent to 30 per cent of its total net lettable space. Some of the new tenants there include House on the Moon (F&B), Meidi-Ya (supermarket), The Source Bulk (F&B) and Ryan’s Kitchen (F&B).


⁴ available at time of this report on 17 April 2020
⁵ Other City Areas refer to Downtown Core and Rest of Central Area
⁶ Fringe/Suburban Areas refer to Fringe Areas and Suburban Areas (Outside Central Region)


Figure 13: Retail occupancy rates (Q4 2019)



Rental rates

Monthly retail rents remained subdued amidst the lower tourist arrivals and spending due to the COVID-19 outbreak. As estimated by the Singapore Tourism Board on 11 February 2020, visitor arrivals may fall by 25 per cent to 30 per cent in 2020.

Many retailers were directly impacted by the contraction in sales as shoppers stayed away from malls in the initial weeks after Singapore’s DORSCON alert level was raised to Orange on 7 February 2020. Travel restrictions were also imposed on mainland Chinese visitors on 1 February 2020 followed by a widened imposition of Stay Home Notices on all inbound residents and visitors from other countries on 23 March 2020.

In terms of rental performance, non-prime retail spaces in the OSR and FSA areas saw weaker performances, where upper-storey monthly rents declined by 0.8 per cent q-o-q in Q1 2020 (Table 8).

Table 8: Average monthly gross rents (S$ per sq ft)



Supply pipeline

The supply pipeline from 2020 to 2023 is projected to be limited, comprising some 645,000 sq ft NLA (Figure 14). The largest development estimated to be completed this year is Northshore Plaza I, a public neighbourhood centre retail development located at Northshore Drive by the Housing & Development Board. Some upcoming retail developments in 2021 include Additions and Alterations to the existing Shaw Plaza (NLA: 65,000 sq ft) and Woods Square (NLA: 39,000 sq ft).

Figure 14: Retail development pipeline, million (m) sq ft




The retail property market is expected to be fraught with difficulties, especially for retailers in tourist-dependent locations, in view of the ongoing COVID-19 pandemic where many countries have been forced into lockdowns to prevent the spread of the infection. As a result, tourism arrivals and overall spending are expected to stay low until the situation stabilises.

Landlords have taken initiatives to provide support such as rental relief, marketing assistance, training programmes and tax rebates to their tenants. For instance, CapitaLand announced that it will be providing rental rebates of 1.5 months for eligible tenants. This comes on top of the half-month rebate it had announced for most of its tenants in February 2020. In addition, it will also suspend the rents of tenants who have been ordered to close as part of the Government measures to curb the spread of COVID-19, such as bars and entertainment venues. Besides CapitaLand, Frasers Property has taken efforts to reduce their atrium rental rates and pass on the full property tax rebate to tenants. Likewise, UOL Group will be passing on savings from the property tax rebate to tenants across its three malls – KINEX, United Square and Velocity@Novena Square. This would be in addition to the Tenant Assistance Package that the Group will be rolling out to its malls. NTUC Enterprise, which runs real estate arm Mercatus Co-operative Limited, reported that it will pass on the additional rebates given during the resilience package directly to tenants. City Developments Limited will provide tenants with rental rebates of 100 per cent in April and 50 per cent in May and moving forward, more support will be provided. Tenants facing severe cash flow issues will also be given more flexibility in rental payments. Suntec City will waive the rents for all mall tenants for a month, including those providing essential services such as supermarkets and pharmacies. It will also pass on the full savings of the property tax rebates to all tenants in May 2020.

This coronavirus pandemic, however, will lead to further increase in demand for healthcare goods and services, food delivery and e-commerce services. Food delivery platforms such as GrabFood and Deliveroo have already reported an increase in demand for orders during this period as people serve their quarantine orders (or stay home notices) or work from home. Selected e-commerce players have also seen increased interest in healthcare products such as surgical face masks and hand sanitisers on their platforms.

Moving forward, in view of the evolving COVID-19 situation and its immediate impact on the retail sector, we expect island-wide retail rentals to decline in 2020.



Office demand and occupancy rates

  • Office demand in Q1 2020 was subdued and the COVID-19 pandemic led many companies to review their operations and expansion plans as business cycles and economic outlook are affected. Since end February as the virus situation deteriorated, more employees worked remotely from home and stayed away from their workplace, leveraging on technology platforms for communication purposes.
  • Based on EDMUND TIE Research estimates, occupancy rates of office developments* island-wide trended upwards by 0.4 percentage points q-o-q to 94.8 per cent in Q1 2020, as leases that were concluded in earlier quarters materialised into physical occupancy in the first quarter. The slight uptick in occupancy is mainly attributed to the three subzones, where occupancy in the Decentralised Areas increased the most, by 0.7 percentage points y-o-y to 94.7 per cent (net absorption was 154,000 sq ft in Q1 2020) (Figure 15).
  • There were several new companies who established their offices in Singapore in Q1 2020, such as the Asian Development Bank (ADB) in Marina Bay Financial Centre Tower 3 (Table 9). The new office aims to enhance cooperation between ADB and Singapore across the region and some of its mandates include tackling climate change, financing and building quality infrastructure, pioneering innovation in development operations and managing urbanisation.
  • In this prevailing cautious market sentiment, the focus of tenants is primarily on ‘’rightsizing’’ their operations, to optimise their space requirements where possible to manage occupancy costs.


Figure 15: Office occupancy rates* and q-o-q percentage point change (in green arrows) in Q1 2020



Table 9: Key tenant movements in Q1 2020



Rental rates

The first quarter of 2020 saw office rents declining in the Marina Bay and Shenton Way/ Robinson Road/Tanjong Pagar locations. For Marina Bay, this was the first decline after nine successive quarters of increase since Q4 2017. The change in average gross monthly rents across all the subzones was around -0.6 per cent to 1.0 per cent on a q-o-q basis in Q1 2020 (Table 10). Quarterly rental increases were seen in selected Grade B buildings in Shenton Way/Robinson Road/Tanjong Pagar. Overall, the average monthly CBD rents in most market segments either remained flat or declined marginally q-o-q in Q1 2020.

Table 10: Average monthly gross office rents (S$ per sq ft)



Supply pipeline

Total supply pipeline from 2020 to 2023 is estimated to be approximately 4.4m sq ft (or 1.1m sq ft per annum), with most of the supply completing in 2022 (Figure 16). The largest upcoming development in the pipeline from 2020 to 2023 is Central Boulevard Towers (by IOI Properties Group), with an estimated office NLA of 1.3m sq ft. The development will also house retail shops and restaurants (13,000 sq ft NLA).

Figure 16: Office development pipeline, million (m) sq ft




With many business premises being closed temporarily due to circuit breaker measures, the COVID-19 pandemic has affected business sentiment and operations with their expansion plans on hold. The full impact of these disruptions on the office sector may only be felt in the next one to three quarters.

As a result of this policy, the nature of working could be different moving forward. As remote working gradually becomes more acceptable, firms may realise that it is possible to sustain a business with a smaller or no office footprint at all. Net absorption of office space may moderate in the near term, though the constantly changing market demands could lead to new possibilities in the design and concept of future office spaces.

Given the material uncertainties in the marketplace due to the deteriorating COVID-19 pandemic, overall office rents are expected to trend lower in 2020; yet the limited supply pipeline in 2021 may help to support occupancy and rents.



This report should not be relied upon as a basis for entering into transactions without seeking specific, qualified, professional advice. Whilst facts have been rigorously checked, Edmund Tie & Company can take no responsibility for any damage or loss suffered as a result of any inadvertent inaccuracy within this report. Information contained herein should not, in whole or part, be published, reproduced or referred to without prior approval. Any such reproduction should be credited to Edmund Tie & Company.

© Edmund Tie & Company April 2020
Source: Edmund Tie & Company. Reproduced with permission.

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