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Boston, MA -- (SBWIRE) -- 05/22/2014 -- We are most optimistic for retail real estate in the short term, forecasting a 5% increase in rental rates in 2015, driven by strong demand and a growing number of international brands. However, the office sector could see a fall of 3%, although we are optimistic that demand for prime office real estate will remain strong.
Over 2013, Singaporean property developers generally saw declines on the stock market. We believe the declines were caused primarily in the residential market by governmental curbs, as well as a fear of rising interest rates, bearing in mind fears that the US Federal Reserve's would begin tapering off its asset purchases. However, for commercial real estate, we are more confident that the fundamentals that support the property market continue to support moderate rent growth.
Demand remains strong in retail real estate, and although we do see some potential in the short term for declines in office rental rates, in the longer term the sub-sector will remain supported by strong demand from local and international businesses alike. Likewise, we see long-term strength in the industrial real estate market, with growing demand for high quality space.
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Risks to our outlook stem mostly from fears of a faster-than-expected slowdown in China, as Singaporean firms are increasingly linked to that country. However, the real estate sector should as a whole remain buoyed by operators' diverse sectoral and geographic strategies. As well as investing significantly in China, Singaporean real estate firms are investing elsewhere in Asia, in developed markets and also in emerging markets further afield, notably Brazil.
For office real estate, demand is projected to remain strong for grade A property, although in the longer term we note scope for a move outside the traditional central business district to more outlying areas, a trend that will also hold true for the other real estate sub-sectors we cover.
Our optimistic outlook for the retail sector is informed by our forecasts for growing consumer spending and tourism into Singapore, as well as international retail brands' increasing interest in Singapore. Lastly we expect industrial real estate to be affected by increasing demand for high-tech space, at the expense of older, unmodernised, facilities.
Recent And Future Developments
- Ho Bee Land's Metropolis, an office development in Buona Vista, was completed in November 2013. One of the major office developments of 2013, the Metropolis has a gross floor area of 1.2mn square feet (sq ft) and will serve as a business hub outside Singapore's traditional central business
- OUE Commercial REIT launched on the Singapore Stock Exchange in early 2014. It was reportedly targeting a market capitalisation of up to SGD800mn.
- In early 2014, Global Logistics Properties Ltd bought a 34-property portfolio of warehouse and logistics properties.
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