The following presents the Singapore office market outlook for 2018, based on CBRE's research report, "2018 Asia Pacific: Real Estate Market Outlook Singapore" as well as opinions by Jasmine Vincent (read her profile here).
- 2.6% GDP growth in next 5 years. The Singapore economy is expected to grow at a CAGR of 2.6% in the next 5 years (2018-2023). The services sector will play a key role in the growth and the main drivers are the Industry Transformation Maps (ITMs) and Smart Nation initiatives.
Singapore Office Rental Market
- High demand of office space from technology sector. Technology companies accounted for one-third of the new leasing activities in 2017, with high demand coming from the transport, fintech and online payment sectors. The 2018 growth will continually be supported by newer and smaller players in Singapore technology.
- Vacancy of Grade A office space to fall. Given that available quality office space is concentrated in a small number of buildings and pre-commitment in immediate/future projects is high, vacancy of Grade A core CBD office market is expected to decline.
- Rentals are expected to grow. Given tapering office space supply and strong pre-commitment levels, few options are available and landlords have higher bargaining power. These translate to escalating rentals. The rental recovery phase is expected to persist in the next few years.
Singapore Office Investment Sales Market
- Normalisation of investment sales market and improving returns. 2017 was dominated by mega capital markets deals (above $1 billion) in commercial real estate. In 2018, expect to see an easing back of such large deals, i.e. normalisation of the office investment sales market. However, given that office rentals are on the rise, investors can look forward to better returns on their office asset investments.
- Rising interest rates. A key concern for investors will be increasing costs of borrowing and 2018 federal funds rate is expected at 2.1%. Already, the 3-month Singapore Interbank Offered Rates (SIBOR) and 3-month SWAP Offer Rates (SOR) have risen to 1.5% and 1.1% respectively.
Source: CBRE Research, Singapore
Download the full report HERE.