What’s the impact of the recent resurgence of COVID-19 on Singapore’s real estate investment market been? What challenges are investors and landlords now facing, and where are the opportunities?
As of today, Singapore is the first country in Asia Pacific to achieve “herd immunity” with close to 82% of its 5.7 million people fully vaccinated. Restrictions have been lifted on dining and social gatherings, which is good news to retailers, especially small and medium-sized enterprises (SMEs). However, domestic retailers, F&B operators, and the entertainment businesses will likely to continue to bear the brunt, and as a result, occupancy and rental levels may remain weak for landlords and investors in the near term.
Nevertheless, help is available, as the Singapore government has set aside more than two billion SGD to support workers and businesses affected by pandemic. Most recently, the government has announced a rental support scheme, providing a two-week rental reimbursement to eligible businesses, and private landlords will match the government subsidies by an equal amount. This shall provide some reliefs to the SMEs and help drive the local economic growth.
One of the biggest challenges that international investors are now facing as a result of the COVID-pandemic, is the inability to conduct cross-border site inspections. Singapore has now launched quarantine-free “vaccinated travels”, open to selected countries and regions including Germany and Hong Kong SAR. This shall help to boost Singapore’s economy and the commercial real estate investment market, especially after the list of eligible countries broadens.
In conclusion, Singapore is on track to achieve its targeted GDP growth rate of 6 to 7% this year. Office cap rates for CBD grade A offices are currently at about 3.2% and with recovering rents and strong liquidity in the region, we expect cap rate compression and capital values to increase in over the next few years. In addition, city fringe business parks which are supported by strong tenant pools such as TMT and bio-medical will be highly sought after for their stable income stream. For industrial, given the rise in e-commerce and food deliveries, we see strong demand for logistics properties and food factories. Last but not the least, investors can also keep an eye on short-term repricing opportunities in CBD retail and hotel assets.