Jan 28, 2021
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The first half will likely to be under pressure and the second half witnessing some improvement.

CBRE envisage 2021 as a year of two halves for Singapore’s office market, with the first half likely to be under pressure and the second half witnessing some improvement.

“The underlying strength of the office market is underpinned by healthy fundamentals and the diversified occupier profile seen today,” it said in a report.

Technology, finance and professional services sectors are expected to lead leasing demand for this year, given the high demand for their services.

“The continued demand for office spaces, coupled with limited Grade A supply in the pipeline, will support office rental growth in the second half of 2021. However, it will not be a uniform recovery in rents across all office buildings,” said CBRE.

While remote working is anticipated to affect office demand, the move to de-densify office space based on safe distancing measures may cushion the impact.

Meanwhile, CBRE noted that the logistic sector has remained resilient amid the pandemic, with rents returning to pre-pandemic levels by the end-2020.

“This was contributed mainly by government stockpiling; as well as third-party, e-commerce and food logistics players who saw a surge in consumer demand during the “circuit breaker” period,” it said.

Third-party logistics and e-commerce segments are expected to continue driving demand for this year, while government stockpiling is forecasted to ease off.

With this, prime logistics rents are forecasted to grow 0.7% year-on-year in 2021.

“Stable rental growth is expected thereafter, at a similar pace of growth in both 2022 and 2023.”

Over at the retail segment, CBRE sees average prime retail rents stabilizing this year, following an 8.6% year-on-year drop in 2020.

It expects the sub-urban market to be “the most resilient, while the fringe and CBD locations are likely to see a slight recovery as footfall from the working population improves”.

The rental gap between the suburban market and Orchard Road are forecasted to narrow further as the headwinds in the tourism sector weigh on the retail sector’s near-term outlook.

Overall, CBRE expects the Singapore real estate market to gradually recover in the next 12 months, albeit uneven across sectors.

It described the recovery as slow and uneven, given the volatility of global COVID-19 situation.

Nonetheless, it expects the Monetary Authority of Singapore to keep interest rates low to facilitate the city-state’s economic recovery.

“The extended low interest rate environment will increase the attractiveness of commercial real estate in Singapore, especially those that can provide stable returns,” said Desmond Sim, Head of Research for Southeast Asia at CBRE.

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