Industry reports show that commercial real estate investment in Singapore surged by 430% year-on-year to US$2.9 billion in the fourth quarter of 2021, while total commercial real estate investment in Singapore reached US$9 billion in 2021, up 177% year-on-year.
Meanwhile, Asia Pacific Capital's trend report also shows that commercial real estate investment in Asia Pacific will grow by 22% in 2021, much higher than the average growth in the five years prior to the epidemic. However, compared with Singapore, the growth rate in the Asia-Pacific region is somewhat inferior.
Some industry experts say the Asia-Pacific region is returning to its pre-epidemic growth trajectory: "Almost all major markets and sectors have recovered or are above historical levels, suggesting that investors are focusing on future growth prospects in the Asia-Pacific region."
In Asia Pacific, office space is the primary target for commercial real estate, accounting for more than 42% of all commercial real estate investment. This shows how bullish the capital market is on commercial real estate.
Some industry experts point out that:- "Although flexible working will lead to a general reduction in the use of office space by companies, the overall occupancy rate of CBDs in the Asia Pacific region remains stable at over 90%."
As a result, some industry reports argue:- "By reconfiguring office space, employees can achieve higher levels of collaboration with less space. At the same time, companies are increasingly preferring better but less office space until rents rise significantly."
As a result, the data shows that Singapore 4Q 2021 :
For vacancy rates, the overall Singapore office vacancy rate declined by 0.1% and the occupancy rate for Grade 1 office space increased by 0.4%.
On the rental side, office rents in central Singapore rose more significantly by 0.8% YoY compared to the 0.3% YoY increase in office rents outside central Singapore. Tenant demand for quality offices appears to be growing.
Will new investment flow from residential to office?
Looking ahead, office leasing demand and market sentiment in Singapore may improve further as 50% of Singapore employees return to their offices by early 2022.
According to some industry experts:- "Against the backdrop of continued demand but limited supply, further rental increases and tightening vacancy rates are expected for Grade A office space in Singapore's CBD."
Some industry experts are also analyzing the commercial real estate sector in Singapore from another perspective:Â "Some investors may shift their focus from the private residential market to the office sector due to policy adjustments in cooling measures such as the additional buyer's stamp duty announced on December 15, 2021."
For non-Singaporean investors, the "value for money" of commercial property investments such as office space is more interesting - no additional buyer's stamp duty, just 7% buyer's stamp duty (BSD) and GST (3% of the property price Less S$5400), which directly reduces the purchase cost by 23-28% compared to private residential investment.
