- Shophouses were a standout investment for the quarter
- Retail successes came from well executed pivots
- Office market also expected to remain strong despite challenges ahead
We previously cast our eyes on French property for Bastille Day, and now, we look to the Little Red Dot, the Lion City, to see what’s happening in its real estate realm as Singapore celebrates NDP 2022.
The following draws information from Savills‘ Asia Pacific Q2 2022 Investment Quarterly, Savills’ Asia Pacific August 2022 Southeast Asia Retail, and Knight Frank’s Singapore Research Office Q2 2022.
Iconic shophouses become investment catnip
One of Singapore’s many icons includes its classical, colourful, and characterful shophouses. This form of retail investment took off, according to the Savills report, with the segment making up the majority of retail sales for Q2 2022.
Overall, retail investment sales were on the down. The Savills report said it declined 78% quarter on quarter to S$375.2 million. The report said that S$237.1 million of that came from shophouses. Savills’ said the segment rose 9.2% QoQ, driven by the fact shophouses were not affected by property cooling measures, as well as being attractive due to scarcity.
For the quarter, a S$44 million sale of three adjoining freehold shop houses on Kreta Ayer Road was the largest shophouse deal, with two other coffee shops in Yishun and Tampines also fetching handsomely.
“The average price per square foot of such coffee shops greatly surpassed that of ground floor retail units of prime strata retail malls on Orchard Road.”
Savills’ Asia Pacific Q2 2022 Investment Quarterly
While shophouses were a popular choice, retailers are still on the prowl for prime places, particularly along Orchard Road.
The Savills report highlighted recent retail activity including the opening of Singapore’s largest Adidas store in Knightsbridge, and Christian Dior’s first standalone beauty services boutique in Asia, Dior Prestige La Suite, which will soon open at ION Orchard.
Singaporean icon, Marina Bay Sands, also made a successful pivot from tourist destination to see retail mall revenues rise by 7.7% year on year, from a low base in 2021. The Savills report noted it focussed on well-heeled locals, introducing premium F&B and lifestyle tenants across the past two years.
Eating out and up
Over the past few quarters, the Australian food and beverage segment has experienced a strong recovery, with the Singaporean market doing very much the same.
While F&B sales had two quarters of decline, the Savills report found that the market turned, and subsequently posted 2.1% year on year growth.
Office market resilient
Briefly, in terms of rent movement, both Grade A and A+ offices in Raffles Place/Marina Bay, Marina, Beach Road/Middle Road, and Shenton Way/Robinson Road/Tanjong Pagar all saw quarterly rent increases of around 1% to 1.1%, according to Knight Frank.
Rent increases were also recorded in other areas.
Those rents are expected to withstand economic headwinds, the report said, “… owing to the tight supply of good-quality spaces at globally competitive rates in Singapore.”
Knight Frank noted that office demand from technology companies remains strong, including from heavyweights Meta (previously known as Facebook) and Amazon. Scaling back was seen from technology companies that had “… more fragile balance sheets.”
That’s it for a brief dip into Singapore’s commercial real estate market on Singapore’s national holiday. Majulah Singapura!
