BMI View: The Singaporean commercial real estate continues to boast some of the strongest fundamentals in the Asia Pacific region and we expect this to continue in the long term despite the current slowdown within the real estate sector and the wider economy. The country ' s position as a global financial centre combined with rising income levels and a one of the world ' s busiest ports bolster the overall potential of the sector.
Singapore's reputation as a global financial centre is helping to ensure that the commercial real estate market remains relatively unaffected by the slowdown experienced in the wider economy. Demand remains robust across at the office, retail and industrial segments owing to the country's ability to attract large quantities of foreign direct investment.
The most notable threat to our outlook is external and stems from an accelerated slowdown in China, as many Singaporeans as well as foreign firms hold strong business ties with the country. New government policies now in place to protect the jobs of Singaporean locals have started to show some negative signs in the economy, with fewer jobs being created as well as firms struggling to find suitable employees. This may have a negative impact on Singapore's ability to attract certain investors. Nonetheless, we do not foresee any further threats to Singapore's investor-friendly reputation.
The outlook for the retail segment remains optimistic despite a slight drop in tourist numbers during the second half of 2014. High income levels and growing interest from international retailers help ensure stability in the segment.
The industrial segment will remain stable throughout 2015 and 2016, owing to plentiful supply of space. There is the potential for a slight decrease in rental rates due to oversupply. However, there is growing demand for high-tech space which will lower rental rates for older, traditional units.
For all three sub-sectors we cover we continue to note an emerging trend of movement from the central business districts to the outlying, suburban areas. This trend has been encouraged both by government initiatives and the expensive, unaffordable rents which persist in the established business districts. As such we expect this trend to continue in the medium-to-long term.
Chinese investors injected over USD5.1bn in the first half of 2014 - almost the equivalent to the amount invested for the whole of 2012.
In November 2014, Keppel DC REIT, a trust that will be backed by data center properties, is seeking to raise as much as SGD512mn (US393mn) from its initial Singapore public offering.
The Abu Dhabi Commercial Bank has announced plans to establish a representative office in Singapore before the end 2014.
Singapore-based property company Frasers Centrepoint has entered a transaction for buying Australia-based Australand for about AUD2.6bn (USD2.46bn). Frasers is backed by Thai billionaire, Charoen Sirivadhanabhakdi, who is looking for acquisitions outside Thailand.
BMI Key Forecasts
We are forecasting a rise in office rents of 2-3% in the short term, with yields at 3-5%.
We forecast 5% growth in retail real estate rental rates in the short term. Yields will remain stable, around 4-6%.
Industrial rents are forecast to remain stable over the short term, ranging from USD17 to USD34 per square meter per month. Yields will remain at 3-5%.