CBRE expects the government could start easing the residential measures as early as Dec 2015, office rents to soften on the plentiful prime office space in 2016 and the retail space sector to remain weak on structural challenges. This supports our view of favouring the residential over the commercial segment.
We recently hosted Desmond Sim, Head of CBRE Research for Singapore and Southeast Asia, in a luncheon meeting with investors. CBRE is one of the leading property consultants in Singapore.
CBRE thinks the General Election will happen in Sep/Oct 2015, post Singapore's 50th anniversary celebrations in August, and the property measures could be tweaked by Dec 2015. In particular, the Additional Buyers Stamp Duty (ABSD) will likely be "tweaked" in favor of Singaporeans, e.g. Currently Singaporeans will have to pay an ABSD of 7% on their second home and 10% on third home. CBRE also believes that the luxury segment will lead the residential recovery, if a long drawn-out one. Our best idea to leverage on this is CDL, with 68% of its Singapore landbank in the high-end segment.
Marina One asking for "CapitaGreen-level" rents:
CBRE said Marina One, with its upcoming 1.88mn sqft of new office space, is asking for "CapitaGreen-level' rents, which we estimate to be S$9-10psf pm for anchor tenants, though has not announced any signings. CBRE expects the 3.6mn sqft of prime office space that will be completed in 2016 to be manageable if spread over five years, but if concentrated in a single year, would put pressure on rents.
Retail rents are likely to fall with continued challenges from foreign labour curbs (affecting service and F&B tenants), lower tourist arrivals (hurting the prime retail sales), eCommerce and larger supply in non-traditional retail locations. The SGD strength has also made online purchases from Europe more attractive, while regional retail centres such as Bangkok and HCMC have blossomed. Mall operators will likely adapt by having more activity-based tenants such as spas, F&Bs, but which pay lower rents on a psf basis.
Decentralisation and the new Jurong Regional Centre:
We also spoke about the government's push to decentralize, which is aimed to put a lid on CBD rents and prices, according to CBRE. The announcement of the location of the Singapore-Kuala Lumpur High Speed Rail terminus in the Jurong Lake District on 11 May underscores the longer term development potential of this region. Among our coverage, CMT (EW), MINT (EW) and AREIT (OW) have the largest exposure to this region. (This is an Excerpt from Barclays Asia ex-Japan Morning Research Summary)
Source : Barclays Equity Research