Cushman & Wakefield’s Analysis of Q1 2019 URA Statistics

Singapore, 25 April 2019 - 


The office rental index declined by 0.6 per cent after rising for six consecutive quarters, the first quarterly drop since Q2 2017. This was mainly driven by the drop in the rental index in the fringe area, which showed a 1.2 per cent decline over the preceding quarter.

The rental index also weakened in the central area, a 0.4 per cent decline over the preceding quarter, recording the first drop after rising for six consecutive quarters.

Office price index on the other hand inched up faster than the quarter before. This is not surprising as interest in the sector has grown. Investor interest in commercial assets has lifted, brightening propsects of the sector. The office index showed a strong growth of three per cent quarter on quarter, the strongest quarterly growth since 3Q2011.

The divergent performance of the office price and rental indices could be a sign that tenants are showing some resistance to higher rents in view of the uncertainties in the business outlook. Some tenants might also be exploring other more flexible options in the market in the form of a co-working membership. 

Despite the weakening in the office sector, office demand continues to outstrip supply, as 19,000 sq meter (or 204,514 sq ft) of space was taken up during the quarter, in tandem with the removal of 6,000 sq meter (or 64,583 sq ft) of office space from the market. This resulted in an improvement in the vacancy rates from 12.1 per cent in 4Q2018 to 11.8 per cent in 1Q2019.

Office leasing demand continues to be supported by tech and coworking, with WeWork reportedly taking up MYP Centre and Chervron House, totalling 160,000 sq ft.

Upcoming supply includes Woods Square and two CBD locations at 9 Penang Road and Funan which are located in the CBD but these have been taken up substantially; 9 Penang Road is now fully leased by UBS, Funan is almost fully leased by a string of government agencies. Decentralisation activity may accelerate in the coming quarters as a result, lending support to the rental performance in the fringe and suburban locations.

The key medium term risk remains as the Singapore's economy has slowed down markedly since the final quarter of 2018. The impact has been felt most keenly in the manufacturing sector, although the services sector is still holding up well. Nevertheless, rental growth in 2019 can be sustained due to the limited supply and healthy pre-leasing activities in the market.


Overall private residential prices fell 0.7  per cent quarter-on-quarter in 1Q19, the second consecutive quarterly fall since 3Q18. The fall in prices can be attributed mainly to the high end and mid-tier segments which fell three per cent and 0.7 per cent quarter-on-quarter respectively. The mass market segment bucked the trend and rose 0.2 per cent quarter-on-quarter. The introduction of higher ABSD rates has led to buyers becoming more sensitive to price and quantums as buyers, particularly upgraders, have to fork out a higher cash amount upfront. Demand remains healthy, but buyers are trying to dispose their first property before they commit to buying a second property to avoid paying the ABSD.  

Nonetheless, every cloud has a sliver lining. Overall private property rents grew one per cent in 1Q19, reversing 4Q18’s decline. High-end and mass market rents rose 1.6 per cent and 1.7 per cent respectively, while mid-tier rents saw a slight fall of 0.3 per cent. The recovery of rents is underpinned by low completion volumes until 2021. A recovering rental market could help support resale volume as some buyers become more yield-driven as compared to just focusing solely on capital gains.

Completions are expected to peak in 2022, with around 20,116 units entering the market. This could create a potential supply glut, given that it is around 42% then the 10 year average of 14,211 units per annum. However, the glut is expected to be brief and relatively mild as completions are expected to fall back to 8,628 units in 2023. This pales in comparison to the years of 2014 to 2016, where completions were around 19,905 units per year on average.

Unsold inventory rose to 37,799 units in 1Q19, the highest since 2Q12. Though the figure looks daunting, it is expected to go down over time, given consistent buying demand. Developers are adopting a watch and wait attitude, and are in no hurry to acquire land, leading to a drop in enbloc activities. Additionally the supply of land from the enbloc market is expected to dry up by the end of 2019, as current launched enbloc projects face a 1 year timeline to find a buyer after getting 80% owners consent. As such, supply is expected to mainly come from GLS sites which are expected to remain low given current market uncertainties. Over time, this could lead to another dearth of supply, catalysing a future growth in prices.

In sum, the market is still reeling from the aftermath of the new cooling measures but conditions are significantly better compared to the previous downturn. Rents are recovering, and the incoming supply glut doesn’t seem all that bad. Though the economic growth is slowing down, a financial crisis does not seem to be on the cards over the next few years. Singapore property still offer an attractive value proposition given its stable currency clear housing regulations. This is further accentuated by uncertainties in other popular international housing markets such as London, Malaysia and Australia. The fundamentals of the private residential market remain unchanged and pent-up demand will continue to accumulate and will gradually enter the system. Though there might be some price weakness over the short term, we could see prices return to growth by the end of the year, barring an unexpected economic crisis.


Retail price index dropped by 1.9 per cent after rising for two consecutive quarters, erasing all the gains from the recent bottom in 2Q2018. Retail rental index also showed signs of weakness, declining by 0.2 per cent in 1Q2019 after rising 1.2 per cent in the preceding quarter. The decline was also due to the drop in the index in the central area, which showed a 0.5 per cent decline as compared to an increase of 0.6 per cent in the fringe area.

It appears that the retail woes in the market are hardly over. The absorption of the islandwide retail space continues to lag supply. In 1Q2019, the amount of occupied retail space decreased by 14,000 sq metres (or 150,695 sq ft), although more space is also taken off the market with net supply reducing by 2,000 sq metres (or 21,528 sq ft) during the quarter. The American diner chain Chili's closes all branches in Singapore, while Crabtree and Evelyn is also shutting all but one store in a move to go online.

Retailers are still cautious about taking up spaces. It does not help when the government announced in Budget 2019 that the dependency ratio ceiling (DRC) for the services sector will be further tightened. The move might cause some short-term pain and result in retailers holding back expansion plans in light of the anticipated labour crunch.

Nevertheless, retailers are keen to take up space at large-sized malls which are able to offer a variety of retailers and a differentiated consumer experience. This is evidenced by the strong pre-commitment rates at Jewel Changi Airport. it was reported that close to 90 per cent of the retail space at Jewel Changi Airport has been taken up, a 10-storey mixed-use retail and lifestyle complex featuring attractions, F&B and retail offers, and a hotel amongst other airport-related facilities. Around one quarter of the stores are flagship stores that are new to the Singapore market. New brands include Burger & Lobster, Pokemon Centre Singapore, American burger Shake Shack, Xiao Bin Lou and You's Kitchen, Swiss chocolatier Laderach and Norwegian seafood restaurant Pink Fish. The extensive and exciting line-up of retail options presents a positive user experience for both locals and transit passengers and may translate into higher shopping spend. 

The two-tier market continues to hold, with well-located and managed malls drawing the bulk of retail demand. Given a limited supply of prime retail spaces and the two-tier retail market trend, prime rents in Orchard and other city areas tracked by Cushman & Wakefield have edged higher. Orchard and other city areas rents rose 0.1 per cent ($34.91 psf) and 0.3 per cent ($21.64 psf) q-o-q respectively in 1Q2019. Suburban prime rents remain unchanged at $31.69 psf.

For Further Information Contact:

Christine Li
Head of Research, Singapore, SEA

Geraldine Cheong
Associate Director, Communications Singapore, SEA

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