Singapore Quarter 3, 2024
Momentum building
Rekindling growth
3Q 2024 AT A GLANCE
KEY HIGHLIGHTS
Residential
Residential property price index fell 0.7% q-o-q, attributed by the landed segment which witnessed a 3.4% decline q-o-q. Rental rates found its footing, rising 0.8% after declining for three consecutive quarters.
Investment
Singapore’s investment sales reached S$8.2 billion, fuelled by strong developer activity in Government Land Sales and key acquisitions by REITs. However, some investors continue to adopt a cautious stance in anticipation of the interest rate cuts by the Federal Reserve.
Retail
In 3Q 2024, island-wide occupancy rate increased to 93.5% from 93.4% in 2Q 2024. Rental rates in the Orchard/Scotts Road and Fringe/Suburban areas saw a 0.3% rise q-o-q, while Other City Areas remained stable.
Office
In 3Q 2024, Singapore’s central region office rental index declined marginally by 0.5% q-o-q, while overall occupancy rates dipped slightly to 94.5%. The increase in shadow spaces indicates an ongoing market adjustment on the back of tenants’ shift in preference towards smaller and more efficient office units.
ECONOMY
KEY INDICATORS
GDP Growth
Singapore’s economy grew by 4.1% y-o-y in 3Q 2024, extending the 2.9% growth in 2Q 2024. Monetary Authority of Singapore expects GDP to hit the upper end of the 2% to 3% forecast in 2024.
Inflation
Core inflation recorded a low of 2.5% y-o-y in July 2024 before rising to 2.8% y-o-y in September 2024. The rise in inflation was largely due to retail and other goods. According to MAS and MTI, overall inflation is expected at 2.5% for the whole of 2024.
Non-oil Domestic Exports
Non-Oil Domestic Exports (3MMA y-o-y) witnessed positive growth of 9.7% q-o-q for 3Q 2024. Total export for both electronics and non-electronics sectors grew in 3Q 2024, recording a q-o-q increase of 10.6% and 9.0% respectively.
International Visitor Arrivals
International Visitor Arrivals (IVA) reached 1.29 million in September 2024, down 17.5% from 1.54 million recorded in August 2024. Despite the recent decline, IVA is trending to pre-COVID19 levels of 1.59 million in 2019. Year-todate, IVA totals 12.65 million, moving towards STB’s 2024 forecast of 15 to 16.5 million visitors.
INVESTMENT
Investment market fuelled by strategic acquisitions in 3Q 2024
KEY HIGHLIGHTS
Investment Sales Sectorial Contribution (%)
Investment Sales (S$ billion)
Top 5 Private Investment Sales 2Q 2024 (S$ million)
Market Commentary
- In 3Q 2024, total investment sales in Singapore reached S$8.2 billion, a 30.2% q-o-q increase from S$6.3 billion in 2Q 2024.
- Five Government Land Sales (GLS) sites were awarded within the quarter, notably Canberra Crescent, De Souza Avenue, Margaret Drive, Zion Road (Parcel B) and Jalan Loyang Besar Executive Condominium (EC) totalling S$2.34 billion. The strong developer participation in GLS tenders has led to competitive bidding, supporting the residential sector as the largest contributor to investment sales in 3Q 2024. However, the Jurong Lake District and Media Circle sites received bids that were assessed to be too low, resulting in those two parcels not being awarded.
- In the private sector, significant acquisitions underscore strategic investment trends. CapitaLand acquired a 50% stake in ION Orchard, reinforcing its position in prime retail assets and aligning with the retail sector recovery. Lendlease expanded its portfolio by acquiring several industrial properties, reflecting the rising demand for logistic and warehousing supported by the continued growth in e-commerce.
- Investor interest in land and property acquisition remained robust, fueled by an expected interest rate cut by the Federal Reserve in September. However, some investors adopted a more cautious approach, delaying investment decisions as negative yield spread still persist for some sectors. This mix of optimism and caution illustrates the evolving sentiment in the market, as stakeholders navigate potential changes in economic conditions.
Market Outlook
- The GLS market is expected to maintain steady activity through the rest of the year. In 3Q 2024, the Urban Redevelopment Authority (URA) and Housing Development Board (HDB) released two sites amid ongoing economy recovery, with these sites expected to close and be awarded in the fourth quarter of 2024. However, investors will remain focused on identifying opportunities as a part of their investment strategies.
- Developer’s discerning approach to acquisitions suggests that future growth may be moderate, influenced by ongoing economic and market uncertainties.
RESIDENTIAL
Residential price index declines
KEY HIGHLIGHTS
Residential Supply Pipeline
Property Price Index
Residential Sales and Launch Volume
Market Commentary
- In 3Q 2024, the residential price index fell 0.7% q-o-q, offsetting the 0.9% growth from 2Q 2024. The landed segment saw a decline of 3.4% q-o-q, counteracting the 1.9% q-o-q growth in 2Q 2024. Meanwhile, the non-landed segment rose marginally by 0.1% q-o-q, extending the 0.6% growth from 2Q 2024..
- The marginal increase of 0.1% q-o-q in the non-landed segment was a result of the RCR segment witnessing 0.8% q-o-q growth, albeit the CCR segment declining 1.1% q-o-q. The OCR segment prices plateaued in 3Q 2024.
- The overall price decline in 3Q 2024 can be attributed to buyers seeking out more affordable condominiums and competitively priced new suburban units compared to other markets.
- Transaction volume rose 2.2% in 3Q 2024 to 5,372 units, recording a rise in both primary and secondary sales. Primary sales transactions rose to 1,160 units in 3Q 2024, from 725 units in 2Q 2024. This is in tandem with more new units launched in 3Q 2024 compared to 2Q 2024, 1,284 units and 635 units, respectively. Correspondingly Secondary sales transaction volumes rose marginally 0.5% to 4,212 units in 3Q 2024 from 4,190 units in 2Q 2024.
- Foreign purchases continue to remain low at 43 units sold, or 0.8% of total transactions. Of which, 27 transactions were purchased by US, Swiss or Norwegian nationals, who are eligible for the ABSD remissions under the Free Trade Agreements (FTAs).
- In the rental market, rental rates have broken its three consecutive quarters of decline streak with a 0.8% q-o-q rise in 3Q 2024. The rise in rental prices was supported by the uptick in rental transactions in 3Q 2024. 25,731 rental transactions were recorded in 3Q 2024, up 24.4% from the 20,676 transactions recorded in 2Q 2024.
Market Outlook
- For 4Q 2024, we expect primary sales transactions to rise, attributed to positive take-up rates in several new launch projects at record price levels. These will be reflected in the residential property price index for 4Q 2024.
- Residential rental rates are expected remain stable as landlords and tenants bridge pricing expectations.
RETAIL
Overall retail performance remains steady
KEY HIGHLIGHTS
Retail Prime Rental Rents
Retail Supply Pipeline (NLA)
Market Commentary
- The rise in international visitor arrivals to 4.4 million in the quarter from the 3.9 million recorded in 3Q 2023, reflects a strong recovery in Singapore’s tourism sector. Factors driving this growth include increased global travel confidence, major events, and enhanced airline connectivity.
- In 3Q 2024, occupancy rates island-wide increased to 93.5% from 93.4% in 2Q 2024, particularly in the central area retail spaces. Orchard/Scotts Road occupancy rate experienced a slight q-o-q increase to 93.0% from 92.9% in 2Q 2024, while the Other City Area increased to 92.2% from 91.8%, respectively. Albeit, Fringe/Suburban Area saw a marginal q-o-q decrease of 0.1 percentage points from 94.1% to 94.0%, indicative of healthy demand in the suburban retail sector.
- In 3Q 2024, prime first-storey rental rates along Orchard/Scotts Road rose by 0.3%, reaching S$ 41.10 psf, driven by strong demand despite on-going challenges in the Fringe/Suburban retail markets where rental rates increased to S$34.10 psf. Other City Areas remained stable at S$ 19.35 psf.
- The reopening of Tampines 1 in the Outside Central Region (OCR) captures a significant share of retail space in this quarter. This development is set to influence competitive dynamics and consumer expectations, potentially driving innovation and growth in the sector.
Market Outlook
- Prime retail rents are expected to experience sustained growth, due to limited pipeline of upcoming retail supply, steady domestic demand and a rise in international visitor arrivals. As tourism rebounds, demand for retail and MICE experiences, particularly in prime locations, is expected to strengthen.
OFFICE
Stable growth amid shifting tenant dynamics
KEY HIGHLIGHTS
CBD Premium and Grade A Office Net Absorption
Shadow Space (NLA) and Office Supply Pipeline
Average Office Rents and Occupancy Rates
Market Commentary
- In 3Q 2024, Singapore’s central region rental index remained stable, declining marginally by 0.5% q-o-q. Rental rates underscore resilience amidst new completions and market fluctuations.
- Island-wide occupancy rates dipped slightly to 94.5%, while both CBD and Non-CBD areas saw a marginal increase of 0.1%. In contrast, decentralised areas experienced a 1.3% decline in occupancy, primarily due to the completion of Labrador Tower that added approximately 0.7 million sq ft of office space in the Alexandra area, achieving 70% commitment at Temporary Occupancy Permit (TOP).
- Overall net absorption of office space across Singapore reached 417,000 sq ft in 3Q 2024, with the CBD and non-CBD areas contributing 20,000 sq ft and 17,000 sq ft, respectively. In the decentralised areas, net absorption was recorded at 380,000 sq ft due to the completion of Labrador Towers.
- Shadow spaces increased to 376,000 sq ft, indicative of ongoing adjustments by tenants in upcoming lease renewals.
- A notable shift in tenant preferences has emerged, with a growing demand for smaller, more efficient office units, reflecting a strategic focus on optimising space and managing costs. It has been observed that majority of the new office leases stemmed from lease renewals.
- Noteworthy leasing activity in the quarter included Datadog’s new office in South Beach Towers, Star Alliance’s relocation to One George Street, and IOI Central Boulevard Towers attracting high-profile multinational corporations such as Linklaters, Freshfields, Allied World Assurance, and Edrington.
Market Outlook
- Looking ahead, the recent completion of new developments is expected to create new opportunities for tenant to explore occupancy strategies.
- With only Paya Lebar Green set for completion in 2024, overall supply remains limited. Without any significant demand drivers, rental rates are expected to remain stable throughout the year. We expect downward pressure on rental rates for office spaces in non-central locations with limited accessibility and connectivity.
GENERAL DISCLOSURE
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Source: Edmund Tie & Company. Reproduced with permission.
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