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MANUFACTURING DRIVES INDUSTRIAL SECTOR REBOUND

• According to the Ministry of Trade and Industry (MTI), Singapore’s economy contracted by 2.4% year-on-year (y-o-y) in Q4 2020, bringing the total change in the overall economic growth in 2020 to a negative 5.4%. In a COVID-19 year, the resilient manufacturing sector played a huge role in cushioning the fallout on the economy, with substantial output expansions in the electronics, biomedical manufacturing and precision engineering clusters.

• Demand for electronics remains high due to the current global chip shortage. And with Singapore as a major manufacturer of semiconductors, chipmakers in the industrial sector may be compelled to expand existing facilities in order to increase output production.

• In March 2021, the Singapore Purchasing Manager’s Index (PMI) reported an expansion of 50.8, the highest since March 2019. The optimism among manufacturers prevailed in January and February where the PMI expanded by 50.7 and 50.5 respectively, indicating that the industrial sector is likely to see continued growth in 2021.

Recommendations and Insights 

We expect office rents and prices to remain under pressure in H1 2021 before bottoming out mid-year, followed by a more stable H2 before rebounding again from 2022 onwards, assuming that Covid is under control within the first half of 2021. We believe that now is a good time for buyers to explore opportunities in the strata-title office sector:

• End-users with long term real estate needs should explore acquisition options, as office prices and rents could rebound quickly in core locations once the market recovers.
• Investors pursuing office sector exposure in Hong Kong, but had previously found it too expensive, should seize this window of opportunity to enter the market.
• Investors looking for offices with smaller lumpsum transaction values should consider areas in Kowloon, which offers more options and attractive pricing.

The COVID-19 pandemic has exerted an unprecedented toll worldwide. In Asia Pacific, measures to flatten the curve have also ushered in the worst economic slump since the Great Depression with major economies experiencing their first contractions in more than a decade. Still, despite a crippling crisis that can take years to play out, the region’s long-term growth fundamentals remain intact.

Driven by demographic tailwinds, urbanization in the Asia Pacific is an epic boom that will drive the growth of its middle-class and with it, a cycle of rising consumption. Real assets are a play into the region’s structural megatrends that will outlive the pandemic. As the challenge increasingly turns from containment to longer-term recovery, infrastructure investments and REITs are a crucial part of this equation, to fast track the region’s recovery from the pandemic and secure its economic future.

The Singapore Business Federation introduced a Code of Conduct for Leasing of Retail Premises in Singapore (“COC“) on 26 March 2021. The COC aims to provide a set of guidelines for landlords and tenants of Qualifying Retail Premises to enable a fair and balanced position in lease negotiation, and to provide such landlords and tenants with a governance framework to ensure compliance with an accessible dispute resolution framework.

The COC is effective from 1 June 2021, and it is anticipated that the Government will work closely with the stakeholders to turn the code into legislation. This Update summarises the key features and principles of the COC.

The Singapore Business Federation introduced a Code of Conduct for Leasing of Retail Premises in Singapore (“COC“) on 26 March 2021. The COC aims to provide a set of guidelines for landlords and tenants of Qualifying Retail Premises to enable a fair and balanced position in lease negotiation, and to provide such landlords and tenants with a governance framework to ensure compliance with an accessible dispute resolution framework.

The COC is effective from 1 June 2021, and it is anticipated that the Government will work closely with the stakeholders to turn the code into legislation. This Update summarises the key features and principles of the COC.

For more information Click HERE

As governments across the world begin to ramp up their vaccination plans, travel will return. We do anticipate some caution in the near term as borders reopen and the mechanism to facilitate mass travel is formalised.

While there will be changes and more emphasis on factors such as hygiene, our inherent wanderlust, relatively cheap cost of travel and pent-up demand will drive our prediction of a V-shaped recovery for the sector over the next three to four years.

In Colliers Hotel Insights | Q1 2021, we look at:

• The outlook for hotels in Asia Pacific in 2021
• Hotel market in Melbourne, Australia
• Hotel market in Singapore
• An update on the casino gaming sector

Logistics warehouses and hi-specs space to be bright spots

Singapore’s industrial property market was relatively resilient in 2020 with the JTC rental and price index declining 1.5% YOY and 2.7% YOY, respectively. Q4 2020 witnessed a recovery, which could continue into 2021, as the economy rebounds. We forecast warehouse rents to rise 1.3% YOY, while factory rents could stay flat on ample supply.

Demand for business park and hi-spec spaces should be supported by the thriving technology sector and biomedical manufacturing. Overall occupancy improved 0.7 ppt in 2020 to 89.9%, driven by warehouses on increased stockpiling and e-commerce activities. We recommend landlords adopt Industry 4.0 and remodel 

Retail property market expected to stabilize and recover gradually after COVID-19

Average Orchard Road and Regional Centre rents declined 2.5% in H2 2020, bringing the full year decline to 7.2% as net absorption hit a record low. We expect demand in 2021 to turn positive as the economy reopens.

Retail transactions fell 29.5% YOY in 2020, while capital values declined 5% given disrupted income. We expect capital values to remain flat in 2021.

Download Colliers’ bi-annual report on the retail sector in Singapore for H2 2020, as we analyse the latest trends and market outlook, with expert recommendations for retailers, landlords and investors.