Singapore Real Estate: Another IRO on the way?
Following consolidation during the post-pandemic recovery, commercial properties in Singapore are now on an upward trend, despite prevailing macroeconomic challenges.
Singapore, a buzzing metropolis, has long been an attractive destination for real estate investment owing to its high population density, robust economy, political stability, the rule of law, and favorable tax environment.
Its reputation as a world-class regional, financial, and commercial hub is based on its well-rounded performance across various categories. The city-state holds the third position globally for forex turnover by country (according to BIS) and ranks fourth in ultra-high-net-worth individuals (according to Henley). It also ranks third for financial secrecy (according to the Tax Justice Network) and tenth for FinTech (according to Findexable).
Additionally, Singapore boasts a highly competitive corporate tax rate of 17% and even has the largest REIT market outside of Japan.
The aforementioned factors have enabled Singapore to offer global corporations a business-friendly and cost-competitive environment with excellent infrastructure and a highly skilled and diverse workforce.
However, Singapore is more than a thriving hub for business, it is a top tourist destination and ideal for ex-pats to settle, offering top-notch amenities and a welcoming and diverse environment.
The country's real estate market caters to a diverse range of buyers and investors, from first-time homebuyers to high-net-worth individuals and institutional investors. The market offers various property types, from public housing flats to upscale condominiums and landed properties.
Following consolidation during the post-pandemic recovery, commercial properties in Singapore are now on an upward trend, despite prevailing macroeconomic challenges. These properties have witnessed growth in rental income and overall value. Per reports, central commercial properties look to lead the recovery for this real estate segment.
The largest commercial deal in 2022 was for Ming Arcade, which was sold via collective sale for S$172 million to Royal Group (Asok Kumar Hiranandani, Chairman).
“This works out to a $3,125 per sq ft per plot ratio (psf ppr), a new benchmark price exceeding the previous record of $2,910 psf ppr when a unit of Hong Kong-listed Shun Tak Holdings paid $375.5 million for freehold Park House in Orchard Boulevard in 2018.”
It is important to note Additional Buyer's Stamp Duty (30% of the purchase price for residential properties) is not levied on the purchase of commercial and industrial properties, making them an attractive investment for domestic as well as foreign investors seeking to invest in Singapore's property market. ABSD (Additional Buyer's Stamp Duty) was introduced as a cooling measure to regulate the residential property market by curbing demand and controlling property prices, especially foreign demand.
Singapore is gaining recognition as a "geopolitical safe haven," expanding its financial services sector, drawing in private family offices, and capitalizing on the migration of skilled professionals from Hong Kong. Furthermore, as growth and development accelerate, the demand for commercial and industrial space is likely to follow, driving up prices and leading to potential capital appreciation. Per reports, the expansion of activities involving information communication technology (ICT), automation, computation, 3D printing (additive manufacturing), sensing, and networking, coupled with the growth in electronics, semiconductors, robotics, pharmaceuticals, medical products, fast-moving consumer goods (FMCG) and aerospace engineering is expected to heighten demand for high spec industrial spaces.
Additionally, demand for logistics and warehouse space is likely to continue, especially for certain industries like advanced manufacturing, food, and novel food consumer services and supply chain.
“The average island-wide logistics/warehouse rent rose for the seventh consecutive quarter, driven by the space crunch and steady demand, especially for quality premises. This, in turn, underpinned capital value growth.
Demand for quality logistics/warehouse space is likely to outstrip supply and support rent growth in 2023, albeit at a slower pace, as occupier resistance towards further rent hikes is anticipated given the downcast macroeconomic outlook.
While logistics/warehouse assets are expected to remain a sought-after asset class among investors in 2023, the rising interest rate is expected to moderate the pace of capital value growth.”
The retail sector is also on its road to recovery with an increase in retail sales, higher traffic to malls, as well as better tourism. And while it may take time for the numbers to revert to pre-pandemic levels, retail sales are likely to improve owing to high inflation.
Interested in Singapore’s commercial property market? Check out CitaDAO.
A platform that empowers individuals by giving them access to the commercial property market.
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Fun fact - CitaDAO’s first successful IRO was conducted in Singapore, wherein we tokenized Midview City, an industrial property, to raise US$617,647.
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References: JLL
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Contributors: EverythingBlockchain (Article), Cheetah (Editor), Sujith (Leader) (Ecosystem Updates, Great Reads, Infographic), AB Colors (Meme)