Singapore 1Q 2024

Cautious optimism as market prepares for growth

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INVESTMENT

Performance

  • Investment sales transaction in 1Q 2024 recorded a lower total quantum of S$4.2 billion. Government Land Sales (GLS), as a share of total investment sales, fell from 52.3% to 32.1% or in absolute terms, from S$2.9 billion to S$1.3 billion. This decline was due to smaller-size transactions and the rejection of the sole bid for Marina Gardens Crescent GLS site.
  • In the private sector, S$2.8 billion was recorded for 1Q 2024, with a shift from office to retail and hospitality sectors. This shift may be due to investors changing their focus towards alternate asset classes amid the current higher interest rate environment.

Outlook

  • For the rest of 2024, we expect the investment sales market to continue be bolstered by GLS sales and higher yield asset classes from the retail or hospitality sectors. Investment sales volume and transaction quantum could pick up, given that economic activities are showing signs of recovery and interest rates cuts are on the horizon.

OFFICE

Performance

  • Singapore’s office leasing market in 1Q 2024 exhibited resilience in the Central Business District (CBD). Shadow spaces declined from approximately 332,000 sq ft in 4Q 2023 to approximately 245,000 sq ft in 1Q 2024. The amount of shadow space is expected to continue decreasing, given that many of such leases are due to expire by 2024/2025. In addition, office rents in the first quarter across all micro-markets remained unchanged QoQ, due to numerous lease renewals and corporates right-sizing their office spaces.

Outlook

  • The upcoming Labrador Towers and Paya Lebar Green are poised to alleviate the office space supply, adding approximately 913,000 sq ft of office space by 4Q 2024. This could lead to a slight decline in occupancy rates islandwide for 2024, potentially applying pressure on rental rates. However, there may be increased leasing activity as corporations gravitate towards green and Grade A office spaces.

INDUSTRIAL

Performance

  • In 1Q 2024, islandwide occupancy rates dipped to 88.7%, with business parks experiencing its 8th consecutive quarter of decline to 78%. Overall rental indices climbed 1.7% QoQ in 1Q 2024, albeit with a 0.2% decline in price index for all industrial spaces.

Outlook

  • The surge in artificial intelligence interest is expected to bolster semiconductor demand, supporting stable factory prices and rental rates for 2024. However, the Business Park sector may see higher vacancy rates with an expected GFA completion of approximately 3.7 million sq ft in 2H 2024, notably the Punggol Digital District, which could attract tech tenants and potentially support suburban business park rental rates.

RETAIL

Performance

  • Retail rents modestly grew in 1Q 2024. Prime first-storey rates rose 0.7% QoQ to S$40.85 psf in Orchard/Scotts Road and S$34.00 psf in Fringe/Suburban Areas. In the Other City Area micro-market, rates increased 0.3% QoQ to S$19.35 psf.

Outlook

  • Rental growth across all micro-markets is anticipated for the rest of 2024 due to high occupancy rates and limited supply in the pipeline for the next three years.

RESIDENTIAL

Performance

  • The overall property price index saw 1.4% QoQ growth in 1Q 2024, a moderation from the 2.8% growth in 4Q 2023. Transaction volume dipped slightly to 4,145 units in 1Q 2024, down from 4,295 units in 4Q 2023, representing a 3.5% decline. Foreign investment remained subdued, with foreign buyers constituting only 1.0% of total residential units in 1Q 2024.

Outlook

  • The property market is poised for moderate growth, supported by sustained demand for new launches and anticipated supply expansions. However, challenges loom in the rental sector due to an influx of completed projects, potentially tempering rental growth throughout the year.

 

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