1.

According to the Colliers International Property market report, the commercial investment sales market gathered momentum in the first part of 2008, chalking up some $3.22 billion worth of transactions in the March quarter. This was an encouraging 42.9% higher than the $2.26 billion recorded in the preceding quarter.

There is some agreement between estate agents that commercial property rents have peaked and occupancy levels are falling. Property firm CB Richard Ellis has indicated grade A rents stagnated in the third quarter at $18.80 per square foot per month, while prime rents were at about $16.10. Grade A refers to premium office space in top-quality buildings in places such as Orchard Road, Raffles Place, Tanjong Pagar and Marina Centre.

3.

This recent tight supply situation is not likely to continue as over the next 3-4 years an estimated 10.3 million sq ft of office space will come onstream in Singapore. According the URA figures, the vacancy rate of office space was 8.2% at the end of Q3 2008, an increase from the 7.8% at the end of Q2 2008. Similarly, the vacancy rate for “Category 1” office space increased to 3.4%, from 2.6% at the end of Q2 2008.

4.

Demand for Singapore CBD office space has been driven by i) banks and financial institutions expanding private wealth management services in Asia ii) low vacancy rates for office space supply in the Singapore commercial property market.

5.

In a recent survey by CB Richard Ellis (CBRE), Singapore ranked 15th in the world for most expensive office rent as of May 2009. The Republic ranked 9th in the 2008 survey and has fallen by 6 positions since. The May 2009 survey ranked Tokyo (Inner Central), London (West End), Moscow and Hong Kong as the top four most expensive markets in the world.

6.

Beyond development of the city centre, recent years have also seen the growth of other commercial hubs. The Tampines Regional Centre, Buona Vista sub-regional centre (known as One-North) and the Novena Fringe Centre are three such centres outside of the city centre being developed. Both Tampines and Novena are now bustling areas within the Singapore commercial property market, with a mix of offices, retail and entertainment facilities. One-North is an established hub for research, and offers a blend of commercial, residential and recreational facilities.

7.

The retail component of the Singapore commercial property market remained stable in the second quarter of this year. According to Urban Redevelopment Authority (URA), the median rental for shop space in the Orchard Area (Orchard), Rest of City Area (RCA) and Outside City Area (OCA) also declined to S$10.99, S$6.83 and S$5.68 psf pm respectively in third Quarter 2008, based on leases that started in the third quarter. The retail market is expected to remain stable, despite competition from additional supply that will come on stream over the next few years. Malls such as ION Orchard, Orchard Central and 313 @ Somerset are slated for completion by 2009.

8.

URA also introduced a new type of zoning - the White Zone - which allows for the development of a variety of different uses like commercial, residential and hotel within the zone. This gives the market greater flexibility and creativity in planning for developments that provide a mix of uses like residential and retail. Today, several successful and innovative developments have been built on white sites. For example, Central at Clarke Quay, built on a white site, is not only a busy shopping centre, but also pioneers the ‘Small Office Home Office’ concept here in Singapore by offering custom-built offices that function as residential units as well.

In summary, the Singapore commercial property market will not avoid the negative effects of global economic downturn. An increase in grade A office supply will likely lead the reduced rental prices. But relatively low vacancy rates and its strengths as a regional business hub will help Singapore maintain competitiveness.

For more information on the Singapore commercial property market, call our Singapore office at (+65) 67350120 or contact us at email@healyconsultants.com