Singapore’s real estate market embarking on an exciting new growth chapter: JLL

SINGAPORE, 26 January 2022 – Singapore’s real estate market is set to propel forward and maintain its competitiveness as a global hub for innovation, technology and sustainability over the next five years, according to JLL’s latest Emerging Anew report.

“Over the next five years, Singapore is expected to enter a new growth phase, where economic expansion is expected to average around 3% per annum, while wage growth could more than double,” says Ms Tay Huey Ying, Head of Research & Consultancy, JLL Singapore. “Against this backdrop, we have identified some key demand drivers that will propel Singapore’s property market forward.”

1. Decentralised and decarbonised offices

“In the coming years, we expect growing awareness and enhanced regulations to spur more developers to divest, retrofit or redevelop their older buildings to improve energy efficiency. With regulators offering attractive incentives to decarbonise, a critical mass of occupiers and developers are changing their requirements and reviewing their investment strategies respectively,” says Ms Tay.

With the government prioritising investment in the development of new offices at Jurong Lake District for the next two decades, JLL predicts that the up-and-coming decentralised district is expected to attract innovative, technology-driven and sustainability-focused occupiers as they come together to create a greener and more sustainable ecosystem.

2. Structural change in CBD office rents

The report also points out that CBD office stock will be limited as there are no new government land sales expected in the district for the next decade, while landlords are being incentivised to redevelop existing CBD office buildings into mixed-use projects with more residential components.

Ms Tay adds: “This may cause CBD Grade A office rents to be under immense upward pressure tapering only when new supply outside of the CBD, such as the Jurong Lake District, comes on stream. Considering the government’s decentralisation plans, intervention to ease CBD rent growth is likely low, and this could result in CBD Grade A rents hitting hit new highs.” 

3. Retail assets to benefit from higher wage inflation

Wages in Singapore are projected to rise two to three times faster in the coming five years, compared to the last five years, boosting the purchasing power of domestic consumers. Coupled with rising consumer demand underpinned by Singapore’s sustained economic growth in an endemic COVID‑19 norm leads JLL to believe that retail sales will increase in the medium-term.

Alongside a tight supply pipeline of quality retail space and rising occupancy rates in many retail malls in good locations, JLL forecasts that rents of prime floor space in retail assets could rise by an above-trend annual average of about 3% between 2022 and 2026.

4. Private residential prices to appreciate alongside economic and wage growth

The island city’s economic growth and rising incomes are likely to sustain demand for private homes in the medium-term. Home prices could appreciate about 3% per annum on average, without additional intervention, says JLL’s report.

5. Innovation and life sciences to drive values for industrial assets

Since the onset of COVID-19, last-mile logistics players and industrialists are also investing in automation and technology to cope with the business growth.

Ms Regina Lim, Head of Capital Markets Research, JLL Asia Pacific, says: “As industrial property owners, investors and occupiers continue to capitalise on the growth of the life sciences and logistics industries, we expect Singapore’s industrial property stock to be refreshed as ageing and functionally obsolescent properties make way for new high-specification industrial developments. This will help to ensure that the real estate requirements of these growth industries are being met going forward.”

6. Outstanding REIT hub to attract new listings with strong international sponsors

According to JLL’s report, Singapore’s REIT market has matured into a global REIT hub, with 85% of SREITs owning assets outside Singapore. There are now 42 S-REITs and property trusts listed totalling over USD 80 billion under its belt.

Ms Lim adds: “Singapore REITs have invested a total of USD 11.6 billion in assets outside Singapore last year, and we expect this outbound investment volume to exceed USD 12 billion this year. In 2021, new REITs with reputable sponsors from U.S. and Japan were listed in Singapore, adding to the vibrant REIT market.”

“Based on these demand drivers, we have reason to believe that Singapore’s real estate market is well-supported by strong fundamentals and favourable business conditions. This will ensure that the property sector sees a stable upward trajectory in the coming years,” concludes Ms Lim.

Please download JLL’s Emerging Anew: A 5-year Singapore Property Market Outlook here.