Singapore Market Outlook 2017

C B RE RE SE ARC H
A S I A PA C I F I C R E A L E S TAT E M A R K E T O U T L O O K
TAB L E OF CONTE NT
PAGE 05 PAGE 6
A marathon, not a sprint
PAGE 10 PAGE 15
Trough in sight Reimagining retail
© 2017 CBRE, Inc. 2017 ASIA PACIFIC REAL ESTATE MARKET OUTLOOK | SINGAPORE CBRE RESEARCH
3
TAB L E OF CONTE NT
PAGE 19 PAGE 24
All about tech & specs Residing on fundamentals
PAGE 28
Looking beyond yields
4
2017 ASIA PACIFIC
REAL ESTATE MARKET OUTLOOK
Singapore
OPPORTUNITIES IN THE NEW NORMAL
Economy: A marathon Office: Trough in sight

not a sprint
With domestic maladies persisting The bottom of the market is on
alongside global uncertainties the horizon. Higher quality CBD
and rising interest rates, slow and buildings will see greatest gains
steady growth could be the new when the market recovery is
normal. underway.
Retail: Reimagining Logistics: All about

retail tech & specs
A tenant’s market has opened The business of logistics is boosted
opportunities for retailers to by technology and specifications.
make an impact with their stores. As consumer preferences and
There is an increasing focus on technology converge, the
using placemaking techniques to dynamics of industrial space is set
draw shoppers. to change.
Residential: Residing Capital Markets:

on fundamentals Looking beyond yields
With demand and prices at It is no longer just about yield
support levels, residential sector play. Investment scope has
remains viable for both investors broadened to consider income
and end-users. growth and alternative sectors.
Source: CBRE Singapore.
CBRE RESEARCH
This report was prepared by the CBRE Singapore Research Team, which forms part of CBRE Research – a network of preeminent researchers who collaborate to provide real estate
market research and econometric forecasting to real estate investors and occupiers around the globe.
© 2017 CBRE, Inc. Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have
not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is
presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.
Agency License No.: L3002163I
E CONOMIC OUTL OOK
A MARATHON, NOT A SPRINT
While Singapore’s GDP growth for the last quarter of 2016 surpassed
expectations, it was still a subdued year by the republic’s standards. Advance
estimates for GDP growth was 1.8%, its weakest performance since 2009. With
current domestic maladies still persisting alongside global uncertainties and rising
interest rates, slow and steady growth could be the new normal.
WHAT I S THE NEW NO RM AL?
7
E CONOMIC OUTL OOK
UNCERTAINTY IN GLOBAL ECONOMIC RISING INTEREST RATES TO HAVE

POLICIES DAM PENING EFFECT
8
E CONOMIC OUTL OOK
ADJUSTING TO THE NEW NORMAL
SEEK NEW G RO WTH M ARKETS
BLUEPRINT FOR THE FUTURE
EM BRACE DI SRUPTI O N, THE NEW WAY

OF LIFE
9
OFFICE SE CTOR
TROUGH IN SIGHT
After a challenging start to 2016, the office market ended the year with vacancy
holding up and rents declining more slowly. With higher leasing volumes of late
and the bulk of new Grade A supply mainly restricted to Marina One, the prospect
for rents to bottom looks possible in 2017. It is likely that the optimum timing for
tenants to try and take advantage of the market pullback is at hand.
DEM AND: DRIVERS IN THE NEAR TERM

UNCERTAIN
11
OFFICE SE CTOR
OCCUPANCY: VACANCY TO RISE IN 2017

AND M ODERATING THEREAFTER
SUPPLY: CONTINUITY THROUGH URBAN

REGENERATION
Chart 1: Grade A CBD Core New Office Supply and Net Absorption
2.0 12.0%
1.5 9.0%
NLA (mil sq. ft.)
Vacancy
1.0 6.0%
0.5 3.0%
0.0 0.0%
2012 2013 2014 2015 2016 2017F 2018F 2019F
Net Supply Net Absorption Vacancy

Source: CBRE Research
12
OFFICE SE CTOR
RENTS: BOTTOM OF THE M ARKET ON

HORIZON
Chart 2: Grade A CBD Core Office Rents
$12.0 20.0%
Rents ($ psf/mth)
$8.0
Y-o-Y Change
10.0%
$4.0
0.0%
$0.0
2012 2013 2014 2015 2016 2017F 2018F 2019F
-10.0%
-$4.0
-$8.0 -20.0%
Rents Y-o-Y
13
OFFICE SE CTOR
CAPITAL VALUES & YIELDS: STABLE OPPORTUNITIES: THE TIM E FOR DEAL -
WI TH PO TENTI AL UPLI FT M AKING IS NOW
Chart 3: Prime Office Capital Value Growth and Yields
10.0% 4.0%
Capital Value Growth (y-o-y)
Prime Office Yield
5.0% 3.5%
0.0% 3.0%
-5.0% 2.5%
-10.0% 2.0%
2012 2013 2014 2015 2016 2017F 2018F 2019F
Capital Value Growth (y-o-y) Prime Office Yield

14
RE TAIL SE CTOR
REIMAGINING RETAIL
It has been a tenants' market, which opens opportunities for retailers to make an
impact with their stores. Landlords and retailers are increasingly using
placemaking techniques to draw shoppers.
DEM AND: WEAK RETAI L SALES

ENVIRONMENT TO PERSIST
16
RE TAIL SE CTOR
RENTS: UNDER PRESSURE
SUPPLY: LO WER G O I NG FO RWARD
Chart 4: Past and future gross new islandwide supply
3.0
2.5
NLA (mil sq. ft.)
2.0
1.5
1.0
0.5
0.0
2014 2015 2016 2017F 2018F 2019F
New supply Average five-year new supply (2012-2016)
Source: URA, CBRE Research
17
RE TAIL SE CTOR
OPPORTUNITIES: PLACEM AKING AND

EM BRACING TECHNOLOGY
Chart 5: Average islandwide prime rents

$30 12%
$25 10%
Rents ($ psf/mth)
$20 8%
Y-o-Y Change
$15 6%
$10 4%
$5 2%
$0 0%
-$5 -2%
-$10 -4%
2014 2015 2016 2017F 2018F 2019F
Rents Rental Growth (Y-o-Y)
18
L OGISTICS SE CTOR
ALL ABOUT TECH & SPECS
Dynamics of the industrial space are bound to change as consumer preferences

and technology gradually converge. Demand for space will continue to remain soft
despite a recent pickup in leasing enquiries. Interest stems from the following –
advanced manufacturing, e-commerce, third party logistics players – the first
movers into Industry 4.0.
20
L OGISTICS SE CTOR
DEM AND: DRIVEN BY DOM ESTIC SUPPLY: HIGHER VALUE-ADDED

CONSUM PTION LOGISTICS SPACE
Chart 6: Past and future net islandwide supply
8.0
7.0
NLA (mil sq. ft.)
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2014 2015 2016E 2017F 2018F 2019F
New Supply Future Supply Average 10-year New Supply (2006 - 2015)
Source: JTC, CBRE Research
21
L OGISTICS SE CTOR
O CCUPANCY: EXPECTED TO DI P LO WER, RENTS: DO WNWARD CO RRECTI O NS

ESPECIALLY IN OLDER STOCK TO ENSUE
Chart 7: Prime logistics rents
$2.00 10.0%
$1.50 7.5%
Rents ($ psf/mth)
$1.00 5.0%
Y-o-Y Change
$0.50 2.5%
$0.00 0.0%
-$0.50 -2.5%
-$1.00 -5.0%
-$1.50 -7.5%
2014 2015 2016 2017F 2018F 2019F
Rents Rental Growth (Y-o-Y)
22
L OGISTICS SE CTOR
O P P O R T U N I T I E S : O P T I M I S A TI O N O F
PORTFOLIO AND ENHANCEM ENT OF LAST
M ILE EFFICIENCY
CO-LOCATION AND CO -INTEGRATION
23
RE SIDE NTIAL SE CTOR
RESIDING ON FUNDAMENTALS
For three consecutive years (2014 – 2016), housing demand remained in the region
of 13,000 – 15,000 units, down from the previous five-year average demand of
33,000 units. Overall homes prices have softened by 11% after 13 consecutive
quarters of decline. Minus the froth of an over-exuberant market, fundamental
demand now stands at 14,200 units as home prices reach support level.
DEM AND: SETTLING TO A NEW NORM
25
Chart 8: Housing demand settling to a new support level Chart 9: CCR – Transactions above $3 mil
40,000 1,000
35,000
30,000 800 338
25,000
600 237
20,000 211 240
15,000 400 145 135 155 90
10,000
98 122
200 400
5,000 317 296
200 172
0
2012 2013 2014 2015 2016E 2017E 2018E 2019E 0
2012 2013 2014 2015 2016
Core Central Region Rest of Central Region
Outside Central Region > $3 mil to $4 mil > $4 mil to $5 mil more than $5 mil
Source: URA, CBRE Research Source: URA, CBRE Research
SUPPLY: LIM ITED BUT ADEQUATE
PRICE: NEAR THE BOTTOM
26
Chart 10: Movement of the Residential Price Index
180
160
140
120
100
80
60
40
20
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016F
2017F
2018F
2019F
All Residential Price Index CCR Price Index
Source: URA, CBRE Research
Note: The labels show the number of quarterly declines in the Residential Price Index during the downcycles.
OPPORTUNITIES: PRICING & ATTRIBUTES
27
CAP ITAL MARKE TS
LOOKING BEYOND YIELDS
It is no longer about the yield play. Investment scope has broadened to consider
income growth and alternative sectors. Since domestic interest rates picked up, this
translates to higher borrowing costs for investors. The implication of higher interest
rates will spark a trend of investors looking for assets with stronger income growth
over the mid-term.
PRI CE G AP I S NARRO WI NG
29
CAP ITAL MARKE TS
A NEW RECORD LEVEL IN FOREIGN P R O P E R T Y C O M P A NI E S & I N S T I T U T I O N A L

I N V E S T M E N TS INVESTORS CONTINUED TO BOOST
INVESTM ENT SALES
Chart 11: Total Real Estate Investment Turnover in Singapore

Investment Volume (in S$ bn)
40 50%
Percentage of Foreign
40%
30
Investments (%)
30%
20
20%
10
10%
0 0%
2012 2013 2014 2015 2016 2017F
Hotel Industrial
Mixed Office
Other Residential
Retail Percentage of Foreign Investments (RHS)
All transactions are above $10 mil each and exclude IPO transactions.
30
CAP ITAL MARKE TS
LOOKING BEYOND YIELDS OPPORTUNITIES: NEW AND NICHE

SECTORS
Chart 12: Grade A Office Yield Spread (Difference between office yield and 10-year government bond yield)
Investment Volume (in S$ bn)
$35 4.0%
$30 3.5%
$25 3.0%
2.5%
$20
%
2.0%
$15
1.5%
$10 1.0%
$5 0.5%
$0 0.0%
2012 2013 2014 2015 2016
Investment Volume 10Y Government Bond Yield Grade A Office Yield
31
CAP ITAL MARKE TS
BUILT-TO-CORE STRATEGY FO CUS O N I NCO M E G RO WTH
Chart 13: Total acquisitions in Singapore by buyer type
Land
2016
Developed
Land
2015
Developed
Land
2014
Developed
In billions, S$ 0 5 10 15 20
Corporation Institutional Other Other Collective Vehicle
Private Property Company REIT Undisclosed

32
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C B RE RE SE ARC H

A marathon, not a sprint

Trough in sight Reimagining retail

All about tech & specs Residing on fundamentals

Looking beyond yields

Economy: A marathon Office: Trough in sight

Retail: Reimagining Logistics: All about

Residential: Residing Capital Markets:

Source: CBRE Singapore.

A MARATHON, NOT A SPRINT

WHAT I S THE NEW NO RM AL?

UNCERTAINTY IN GLOBAL ECONOMIC RISING INTEREST RATES TO HAVE

ADJUSTING TO THE NEW NORMAL

SEEK NEW G RO WTH M ARKETS

BLUEPRINT FOR THE FUTURE

EM BRACE DI SRUPTI O N, THE NEW WAY

DEM AND: DRIVERS IN THE NEAR TERM

OCCUPANCY: VACANCY TO RISE IN 2017

SUPPLY: CONTINUITY THROUGH URBAN

Net Supply Net Absorption Vacancy

RENTS: BOTTOM OF THE M ARKET ON

Chart 2: Grade A CBD Core Office Rents

Chart 3: Prime Office Capital Value Growth and Yields

Prime Office Yield

Capital Value Growth (y-o-y) Prime Office Yield

DEM AND: WEAK RETAI L SALES

RENTS: UNDER PRESSURE

SUPPLY: LO WER G O I NG FO RWARD

Chart 4: Past and future gross new islandwide supply

OPPORTUNITIES: PLACEM AKING AND

Chart 5: Average islandwide prime rents

ALL ABOUT TECH & SPECS

Dynamics of the industrial space are bound to change as consumer preferences

DEM AND: DRIVEN BY DOM ESTIC SUPPLY: HIGHER VALUE-ADDED

Chart 6: Past and future net islandwide supply

O CCUPANCY: EXPECTED TO DI P LO WER, RENTS: DO WNWARD CO RRECTI O NS

Chart 7: Prime logistics rents

CO-LOCATION AND CO -INTEGRATION

DEM AND: SETTLING TO A NEW NORM

Source: URA, CBRE Research Source: URA, CBRE Research

SUPPLY: LIM ITED BUT ADEQUATE

PRICE: NEAR THE BOTTOM

Chart 10: Movement of the Residential Price Index

OPPORTUNITIES: PRICING & ATTRIBUTES

LOOKING BEYOND YIELDS

A NEW RECORD LEVEL IN FOREIGN P R O P E R T Y C O M P A NI E S & I N S T I T U T I O N A L

Chart 11: Total Real Estate Investment Turnover in Singapore

LOOKING BEYOND YIELDS OPPORTUNITIES: NEW AND NICHE

BUILT-TO-CORE STRATEGY FO CUS O N I NCO M E G RO WTH

Chart 13: Total acquisitions in Singapore by buyer type

Source: CBRE Research

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