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Singapore Quarter 1, 2021

SINGAPORE 30 Apr 2021
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Market commentary

Uneven recovery across property sectors despite improving economy.



Market commentary

Key economic indicators

  • Based on estimates released by the Ministry of Trade and Industry (MTI) on 14 April 2021, Singapore’s economy expanded by 0.2% y-o-y in 1Q 2021, following a -2.4% decline in 4Q 2020 (Table 1). This is the first positive turnaround after three consecutive quarters of decline. The economy expanded by 2.0% q-o-q in 1Q 2021, compared to an expansion by 3.8% q-o-q in 4Q 2020.


Table 1: Singapore’s Gross Domestic Product (GDP)



  • Economic activities were ramped up at the start of the year as the economy entered Phase 3 of recovery from 28th December 2021. After posting a strong 10.3% y-o-y growth, the manufacturing sector expanded by 7.5% y-o-y in 1Q 2021. Clusters such as electronics, precision engineering, chemicals and biomanufacturing performed better than the transport engineering and general manufacturing clusters, which experienced output declines. As the construction sector gradually picked up due to public and private sector demand, the contraction moderated to a decline of 20.2% y-o-y in 1Q 2021, an improvement from the 27.4% contraction in 4Q 2020.
  • The services sector fell by 1.2% y-o-y in 1Q 2021, an improvement from the drop of 4.7% in 4Q 2020. Among the services sectors, wholesale, retail trade and transportation & storage fell by 4.1% y-o-y in 1Q 2021, a slight improvement from the decline of 6.4% y-o-y in 4Q 2020. Accommodation & food services, real estate, administrative & support services and other services dropped by -3.9% y-o-y in 1Q 2021 from -9.9% in 4Q 2021. The bright spot was the information and communications, finance and insurance and professional services sector which grew 3.7% y-o-y in 1Q 2021 y-o-y from 1.4% in 4Q 2021.
  • MAS core inflation rose to 0.7% in February from 0.2% in January 2021, driven by the rise in food inflation and service costs. The labour market conditions improved slightly in February 2021, as Singapore’s overall unemployment rates fell to 3% from 3.2% in January, signifying a renewed confidence by firms to add to headcount. The labour market has turned the corner for now due to the various job support/conversion schemes initiated by the government.
  • The International Monetary Fund (IMF) has upgraded in April this year its 2021 growth outlook for Asia to 7.6% in 2021, up from the 6.9% forecasted as of October 2020. Global economic prospects have also brightened although the rising interest rates in the US could translate into higher borrowing costs.
  • Business and consumer confidence are rising due to the easing of border restrictions and the gradual rollout of the COVID-19 vaccines. Apart from travel dependent industries, we expect most sectors to experience stronger growth in 2021. MAS estimates Singapore’s GDP growth in 2021 to fall within the upper range of their official forecasted growth of 4 to 6%. Cognizant of ongoing global and regional risks, MAS has maintained an accommodative monetary policy, keeping the rate of exchange rate appreciation at 0% per annum.


Table 2: Inflation, unemployment rate and fixed asset investments




Investment sales

Total investment sales nearly doubled from $2.5bn in Q4 2020 to $4.8bn in Q1 2021 (Figure 1). This was likely due to the improved business sentiments arising from Singapore’s Phase 3 reopening on 28 December last year and the commencement of the Ministry of Health’s (MOH) national vaccination programme that was piloted on 27 January this year. The recovery in investment sales is also reflective of the gradual pick-up of the construction sector, which posted a more moderate contraction of 20.2% y-o-y in Q1 2021, compared to the 27.4% contraction in Q4 2020.

Figure 1: Yearly investment sales by quarter



The public investment sales market recorded no activity in this quarter, given that there were no sites awarded under the public land sales programmes. This was in part due to the government’s cautious approach towards releasing sites for tender given the COVID-19 pandemic and the prevailing macroeconomic situation at the end of last year. Furthermore, land parcels released under the 2H2020 GLS programme were granted longer tender periods by URA due to the COVID-19 situation and would only be awarded from Q2 2021 onward.

On the other hand, the private investment sales market witnessed brisk activities and recorded 156% q-o-q growth, from $1.9bn in Q4 2020 to $4.8bn in Q1 2021. This was led by strong performances in the residential and office sectors, which posted total transaction amounts of $1.8bn and $1.6bn respectively, or 39% and 34% of Q1 2021’s total investment sales (Figure 2). For the remaining sectors, industrial transactions made up 19% of total investment sales, followed by retail and shophouse transactions, which represented 5% and 3% of total investment sales respectively. There were no investment sales in the hospitality sector.

Figure 2: Total investment sales by asset type



Table 3: Investment sales summary




Sector trends and outlook

  • There were three significant office transactions in Q1 2021, with the highest amount posted by the divestment of 50% of OUE Bayfront by OUE Commercial REIT to Allianz Real Estate for $633.8mn (Table 4). The other significant transactions were the sale of Certis Cisco Centre at 20 Jalan Afifi for $150mn, and 108 Robinson Road for $142.8mn. These key transactions marked a contrast to Q4 2020, where there were no significant office transactions, and point to a possible return of interest for the office sector given that with effect from 5th April 2021, 75% of staff can return to their workplace at any one time and working from home is no longer the default arrangement.


Table 4: Key* private investment sale transactions in 1Q 2021



  • Industrial investment sales amounted to $897.4mn in Q1 2021, more than doubling the $375.4mn recorded in Q4 2020. There were three significant industrial transactions, namely the sale of 20 – 23 Rochester Park at $144.8mn, followed by BreadTalk Group’s divestment of BreadTalk IHQ at 30 Tai Seng Street for $118mn, and AIMS APAC REIT’s $102mn acquisition of Sime Darby Business Centre at 315 Alexandra Road.
  • For retail investment sales, the sole significant transaction in Q1 2021 was FCT’s divestment of YewTee Point for $220mn to unrelated parties. The shopping mall has around 70 tenants spread over 74,000 sq ft of NLA. This transaction marked FCT’s third retail mall divestment over three consecutive quarters, adding to the REIT’s divestment of Bedok Point and Anchorpoint Shopping Centre in Q3 2020 and Q4 2020 respectively.
  • There were two significant residential transactions in Q1 2021. The first was the $293mn sale of all 20 units of Eden, a freehold luxury condominium by Swire Properties at 2 Draycott Park, to the members of the Tsai family of Want Want China Holdings. The second was the sale of a Good Class Bungalow (GCB) at 30 Nassim Road to a private investor for $128.8mn. Apart from these, the residential sector was abuzz with 10 other transactions greater than $30mn each in Q1 2021, of which 7 were recorded by GCBs.

The stark pick-up in transaction activities in Q1 2021 relative to the previous quarter is indicative of the improving appetite amongst investors. As MOH’s ongoing vaccination drive helps the nation achieve herd immunity against COVID-19 and consequently normalcy in the economy, investment activity could be bolstered for the rest of 2021.



Market commentary

Key economic indicators

  • Urban Redevelopment Authority (URA) private residential property price index rose for the fourth consecutive quarter in Q1 2021, rising by 3.3% q-o-q, after an increase of 2.1% in Q4 2020. Compared to a year ago, prices are 6.6% higher (Table 5).


Table 5: URA Private Residential Price Index



  • Private non-landed property prices rose by 2.5% q-o-q in Q1 2021. All market segments registered growth with prices of non-landed properties in the CCR, RCR and OCR increasing by 0.5%, 6.1% and 1.1% q-o-q respectively.
  • The landed property price index soared 6.7% q-o-q in Q1 2021, reversing the 1.6% decrease in Q4 2020.
  • Housing loans value rose for the sixth consecutive quarter by 17.5% y-o-y in 4Q 2020. However, on a q-o-q basis, housing loans fell by 2.7% in 4Q 2020, compared to 15.1% growth in 3Q 2020 (Figure 3).


Figure 3: New housing loans limits granted



  • Total private home sales volume in 1Q 2021 amounted to 8,100 units, 16.9% higher than the sales volume of 6,929 units in 4Q 2020 (Figure 4). We believe that demand was driven by low interest rates, strong liquidity, improving buyer sentiment and the wealth effect of the rising financial markets.


Figure 4: Private homes sales volume (excluding ECs) and URA All Residential Price Index



  • New sales volumes increased from 2,603 units in 4Q 2020 to 3,493 units in 1Q 2021. New sales in 1Q 2021 were 62.5% higher than that a year ago and 34.2% higher on the quarter (Figure 4). The share of primary sales to total transaction volume rose from 37.6% in 4Q 2020 to 43.1% in 1Q 2021.
  • Secondary sales volumes increased slightly from 4,326 units in 4Q 2020 to 4,607 units in 1Q 2021.
  • In 1Q 2021, there were five new launches, excluding ECs. 2,743 units were launched in 1Q 2021 compared with 2,422 units in 4Q 2020.
  • In the private residential leasing market, total rental volumes increased 6.6% y-o-y but declined by 3.1% q-o-q to 23,123 transactions in 1Q 2021 (Figure 5). The URA Rental Index of Private Sector Residential Properties increased by 2.2% q-o-q in 1Q 2021. The mass rental market is expected to see sustained demand from expatriates relocating from prime properties as well as from foreign workers seeking accommodation due to border restrictions.


Figure 5: Number of private home rental transactions (excluding ECs)



  • As at 1Q 2021, the residential supply pipeline stood at 50,906 units. Most completions are expected to occur in 2023 and 2024 (Figure 6). Around 4,942 units will be expected to complete from Q2 to Q4 2021. Around 52.1% of the supply pipeline (26,537 units) have been sold, while the remaining 24,369 uncompleted units are still unsold.


Figure 6: Number of private homes in the pipeline (excluding ECs)




Given an improving economic outlook, coupled with dwindling unsold inventory and the expectation of more launches ahead, we expect residential demand and prices to improve for the rest of the year. The buoyant HDB resale market may also prompt flat owners to sell their flats and upgrade to private property. With private residential property prices rising for the fourth consecutive quarter, there are rising concerns that the government may introduce new cooling measures. Market players thus need to ensure that the property market trajectory is in line with economic fundamentals to ensure a sustainable market for all.



Market commentary

Key indicators

  • With the pandemic situation relatively well contained in Singapore, coupled with a stabilisation in the labour market, businesses and consumers have gradually regained a sense of normalcy.
  • Starting from 5th April 2021, the number of employees allowed to go back to work has been raised from 50 per cent to 75 per cent. This could potentially drive more footfall in the central area, as retail operators are largely dependent on the lunchtime working crowds for their business.
  • Traditional brick and mortar stores located in Chinatown ramped up digitalisation with a committee formed by IMDA, ESG and STB. Chope and Qoo10 have been appointed to assist the tenants to drive more sales and footfall into the area, by providing guidance and training on digital marketing.
  • Although the growth of e-commerce is set in motion, there is still a role for physical retail and placemaking activities, as consumers still need avenues for socialisation.
  • A set of guidelines termed the Fair Tenancy Framework Code of Conduct for Leasing of Retail Premises has been developed recently, which is set to come into effect from 1 June 2021. It is a set of guidelines to assist landlords and tenants of qualifying premises (which include, but is not limited to retail, F&B, clinics, and schools) to reach a fair and balanced position in lease negotiations.
  • The 3-month moving average retail sales growth (excluding motor vehicles) improved to -1.6% y-o-y in February 2021 from -5.1% in January 2021 (Figure 7). The Retail Sales Index improved 7.9% in February 2021, which marked the first month of growth since January 2020. This was driven by an improvement in consumer sentiment and greater shopping footfall.


Figure 7: Retail sales growth (Three-year moving average) (excluding motor vehicles)



  • In February 2021, Watches & Jewellery saw the greatest improvement of 37% on a y-o-y basis, followed by Computer & Telecommunications Equipment which grew by 20% y-o-y (Figure 8). However, Food & Alcohol was the worst- performing sector, which declined by 25% y-o-y in February 2021.


Figure 8: Retail sales index (Feb 2021), y-o-y change



  • For the food and beverage services index for February 2021, food caterers reported the greatest decline of 58.9% y-o-y despite it being the month of the Chinese New Year celebrations. However, due to the restrictions of large gatherings, this has resulted in lower demand for event catering. Restaurants expanded 6.1% y-o-y and performed relatively well as consumers took to dining out more frequently (Figure 9).


Figure 9: Food and Beverage index (Feb 2021), y-o-y change



Demand and occupancy

  • Based on EDMUND TIE Research, islandwide net absorption improved to 258,000 sq ft in 4Q 2020 from -538,000 sq ft in 3Q 2020. The occupancy rate increased by 0.8% pts q-o-q to 91.2% in 4Q 2020 from 90.4% in 3Q 2020.
  • More retailers have a preference to open their shops located at the Fringe/Suburban subzone due to the rise in footfall and the continuation of the work-from-home arrangements for some companies.




Figure 10: Retail occupancy rates (4Q 2020)




Based on EDMUND TIE Research’s definition of retail spaces, retail rents were stable in Orchard/Scotts Road and Other City Areas in 1Q 2021 (Table 6). Given the strong retail performance in Fringe/Suburban Areas, as a result of the catchment population and extensive work-from-home arrangements, rents have ticked up accordingly.

Table 6: Average monthly gross rents (S$ per sq ft)



Supply pipeline

Based on EDMUND TIE Research, around 1mn sq ft of NLA is expected to be completed islandwide from 2021 to 2024. The bulk of the supply pipeline is expected to be completed in 2021 (39.0%) and 2023 (39.0%) (Figure 11). The majority (87.0%) of the supply pipeline will emerge from the Fringe/Suburban Areas.

Figure 11: Retail development pipeline




Following a series of closures by international brands, Abercrombie & Fitch is the latest international brand that is to exit from Singapore, as it closed its last physical retail outlet in Singapore and shifts to an exclusively online store. Retailers have to adapt to this new reality and the increasing shift towards online marketing platforms for the sale of products.



Office demand and occupancy rates

  • With effect from 5th April 2021, 75% of staff can return to their workplace at any one time and working from home is no longer the default arrangement. Even as more workers gradually return to their office premises, some employees have indicated a preference for work-from-home arrangements, citing productivity gains and reduced commute times. As a result, businesses remain cautious about expanding traditional office spaces as they deliberated on the ideal hybrid working model.
  • Major banks are reviewing their operations and shrinking their physical offices. It was reported that DBS plans to shed 75,000 sq ft at Marina Bay Financial (MBFC) Tower Three, while Standard Chartered is also considering giving up its space in MBFC Tower One. ANZ Singapore is also considering terminating one floor of its current existing space in Ocean Financial Centre in 2021.
  • Co-working operator Just-Co had recently announced in March 2021 that it will be opening another office in Tampines located at Asia Green, after an announcement for an expansion located in One-North (30,000 sq ft). Bridge+ by CapitaLand also opened another co-working office at 79 Robinson Road in January 2021, three years after the debut of its Bridge+ flagship co-working office in Ascent building at Singapore Science Park 1.
  • Based on EDMUND TIE Research statistics, overall net absorption islandwide declined from a robust 390,000 sq ft in 4Q 2020 to 74,000 sq ft in 1Q 2021. The islandwide occupancy rate remained stabilized remaining at 93.3% in 1Q 2021 (Figure 12). The occupancy rate in CBD fell by 0.4% pts q-o-q to 92.7% in 1Q 2021 from 93.1% in 4Q 2020.


Figure 12: Office occupancy rates* and q-o-q % point change (in arrows) in 1Q 2021




Monthly rents in the various subzones of the office sector held steady or declined slightly in 1Q 2021 (Table 7). Within the CBD and Non-CBD, there was a flight to quality by corporates. Due to the tight vacancies, premium grade office rents held steady in the quarter. In addition, with the impending redevelopment of AXA Tower and Fuji Xerox Towers, there is some leasing demand from the displaced tenants seeking to lease alternative office premises. The steepest declines were recorded in Raffles Place Grade A and Shenton Way/Robinson Road/Tanjong Pagar Grade B as vacancies rose. In the Orchard Road and decentralized areas, leasing activity was limited but rents were broadly unchanged.

Table 7: Average monthly gross office rents (S$ per sq ft)



Supply pipeline

Based on EDMUND TIE Research, there are nearly 4.5mn sq ft of new office space that will be completed from 2021 to 2024 (Figure 13). Most of the office developments will be completed in 2021 (28.03% or 1.36mn sq ft) and 2024 (28.05% or 1.4mn sq ft). Close to half (47.2%) of the supply pipeline from 2021 (28% or 1.4mn sq ft) to 2024 will be in the CBD, followed by 32.2% in Decentralised Areas. The larger developments include Central Boulevard towers (1.26mn sq ft) which is slated to be completed in 2023 and an office/ retail development by SP Group (640,000 sq ft) located at Pasir Panjang Road and scheduled to be completed in 2024.

Figure 13: Office development pipeline




On the whole, we expect office rents to bottom out by the end of this year as the employment outlook improves. Even as major banks continue to downsize their office spaces, demand for office spaces continues to be fuelled by technology, fintech and finance companies. Singapore has been a regional base for Western companies and is now becoming a hub for Chinese technology companies. This is supported by the office expansion of Tencent, Alibaba and ByteDance, as they ramp up the hiring process to recruit more talents in Singapore, especially talents who are trained in the technology sector. The recent announcement of Google co-founder Sergey Brin opening a family office in Singapore will buoy investor confidence in Singapore as a financial hub.

We expect more businesses to sign on leases with co-working operators due to the flexibility and shorter-term commitments. As companies endeavour to accommodate their employees’ preferences to work with some form of flexibility, the trend of co-working spaces might be preferred by companies looking for a change from traditional workspaces. Even for traditional offices, we are seeing a gradual transition to integrate more communal spaces for people to connect and engage in meaningful collaborations.



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 2021
Source: Edmund Tie & Company. Reproduced with permission.

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