2013-12-30 05:19:26 - Fast Market Research recommends "Singapore Real Estate Report Q1 2014" from Business Monitor International, now available
We believe that the Singaporean commercial real estate sector will continue to show solid growth, boosted by the country's strong fundamentals, including its stable business environment and status as a global financial hub. We highlight growth in tourism as driving the retail real estate sector, as well as the importance of the developed REITs market to the overall commercial real estate sector.
We believe that the real estate cooling measures enacted in 2013, in an effort to keep a lid on rocketing property prices, will not have much of an impact on the sector in the short term. Rather, we believe, it will be interest rates that prove to be the eventual cause of a market correction. We are forecasting interest
rates to begin rising from 2015, but will remain low by historical standards.
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We are forecasting an improvement in GDP growth in 2014, boosting the real estate sector. We expect GDP growth of 3.2% in 2014, and see this remaining roughly stable over our forecast period, which should lend stability to the real estate sector.
We believe that real estate investment trust (REIT) activity will continue to drive the market. REITs are active in all three sub-sectors we cover, retail, office and industrial, as well as residential, hospitality and notably healthcare, showing the developed nature of the market. Singapore-listed REITs are also active elsewhere in Asia, notably China. In early November 2013 38 REITs were listed on the Singapore Stock Exchange, with a further listing due that month.
We give Singapore a score of 65.2 out of 100 in our Real Estate Risk/Reward Ratings for Q114. This score is unchanged from last quarter, a fact that denotes the essential stability in the market. We note that office space in Singapore's central business district is among the most expensive in the world. Given the country's central role in Asian financial markets and stable and predictable business environment, we are not forecasting this to change for the forseeable future Indeed, we are forecasting prime office rents to rise in 2014, along with a reduction in vacancy rates. However, we do note that there is some oversupply in the office market as a whole.
Although we predict flat short-term growth retail rents, over the longer term we are more optimistic, seeing low unemployment, which boosts consumer spending, and tourism as key growth drivers of retail real estate, offsetting the country's small consumer base. There is significant demand for high quality modern etail facilities, but we do highlight that as these facilities come online, rental rates for older, less sought-after developments could suffer.
As with retail, we note high rental rates for industrial real estate in prime locations. We believe this trend will remain in play. In the long term, we note that expansions in Singapore's port facilities will have a positive impact on the industrial real estate market. We also note innovation in the industrial sector, with the first 'green factory' opening in 2013, and the presence of Sabana Shari'ah Compliant IndustrialREIT, the first shari'a-compliant REIT in Singapore.
* In a sign of the country's attraction for international investors, in October 2013 US asset manager BlackRock acquired Singaporean property investor MGPA.
* In the same month it was reported that UK-based real estate consultancy Chesterton Global now has a 70% stake in Chesterton Singapore.
* Three REITs (SPH REIT, OUE Hospitality Trust and Soilbuild REIT) listed on the Singapore Stock Exchange in Q313. Another listing, Viva International Trust, is due in November 2013.
* The Marina Bay Financial Centre is operational, and is nearly 100% occupied.
* The Jem mall, which is managed by LendLease, opened in June 2013. Meanwhile, CapitaMalls' Westgate and Bedok malls are both due to open in late 2013.
* The Singapore Urban Redevelopment Authority released data for Q313. Among other data, a small reduction in retail vacancy rates, from 5.8% to 5.7% at the end of Q313, was reported. There was also a reduction in industry vacancy rates, from 7.6% to 7.5%. However, vacancy rates for office space rose from 8.8% to 9.6%.
BMI Key Forecasts
* We are forecasting an increase in office rents of 5% in the short term, ranging between SGD73 and SGD132 per square metre per month, with yields rising to 6% by 2015 and remaining stable for the rest of our forecast period, to 2017.
* We forecast flat growth in retail real estate in the short term, ranging from SGD212.50 to SGD323.50 per square metre per month. Likewise, yields will remain stable, around 5% over our forecast period to 2017.
* We see industrial rents ranging from SGD21 to SGD42.40 per square metre per month at the top and bottom of the market in the short term. However, we see yields rising to 5% by 2015, and then remaining stable over the rest of the forecast period.
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