Grade-A office rents in the CBD fall 5.1% q-o-q in 3Q
Rents for factories fall 1.4% q-o-q to $1.75 psf per month in 3Q
The median rent of multiple-user factory spaces in Singapore fell by 1.4% q-o-q and 2.2% y-o-y to $1.75 psf per month in 3Q2020, notes Knight Frank in its report on the industrial market.
In July and August, leasing transactions hit 1,577, amounting to $5.7 million, representing a 34.4% y-o-y decline.
Despite the uncertainties, some foreign companies are still expanding operations in Singapore. Zoom Video Communications opened a new data centre in August, while Hyundai Motors has announced plans to occupy the industrial space previously left vacant by Dyson at Bulim Avenue.
As at end-June 2020, some 53.7 million sq ft of industrial space is slated to come on stream from 3Q2020 to 2024, says Knight Frank. About 26.7% of the upcoming developments taking up the industrial space are projected to be completed in the remaining half of 2020, with the majority comprising factory space.
In the manufacturing sector, Knight Frank is bullish on firms that produce electronics, as well as those that manufacture hygiene or health-related products.
Overall, it does not expect industrial rents and prices to decline by more than 5% for the whole of 2020.
Grade-A office rents in the CBD continued to decline by 5.1% q-o-q to $9.84 psf per month in 3Q2020, says Cushman & Wakefield (C&W) in its report on the office market.
The expansion of Chinese tech firms in Singapore due to geopolitical tensions has driven demand for offices, says C&W. These firms include ByteDance, which is planning to make Singapore its regional hub as it expands into other parts of Asia, and has also applied for a licence to operate a digital bank in Singapore. Tencent has also chosen Singapore as its hub and plans to open a new office in the city-state.
Other bright spots include the upcoming redevelopments of AXA Tower and Fuji Xerox Tower in 2021.
Although office leasing activity has remained sluggish, some vacated spaces have been taken up by occupiers that are seizing the opportunity to lease prime spaces at more attractive rates. QBE Insurance is relocating to Guoco Tower, taking up 31,000 sq ft of space vacated by Grab, which is moving to one-north. Meanwhile, Amazon is leasing 90,000 sq ft across three levels at Asia Square Tower 1 that were previously occupied by Citi.
Despite the positive moves, the office market faces significant challenges as the prevalence of staff working from home is expected to remain widespread in the short to medium term, cautions C&W.
It expects office rentals to fall by 10% in the fullyear 2020, with a further decline in 2021.
Climate risks a key factor in real estate investment decisions
Real estate investors are starting to place more importance on climate risks in investment decisions, highlights a report by the Urban Land Institute (ULI), a global multi-disciplinary real estate organisation, and Heitman, a global real estate investment management firm.
Investors now commonly view local climate risks — such as wildfires, intense storms and sea-level rise — as core factors in investment decision-making. In particular, some investors revealed that they were starting to pull back their investments in some property markets due to a lack of climate resilience, although the exact weighting of climate risks varies from investor to investor.
Climate-aware investors “are looking beyond the individual asset and assessing a city’s preparedness for climate change, but the models and metrics they need are still in their infancy. Benchmarking cities for climate risk and resilience is a challenge and I anticipate significant progress from the industry on obtaining this much-needed data”, comments ULI CEO Ed Walter.
In the report, the investors also raised the need for better data and frameworks to make market-level impact transparent and allow benchmarking between markets.
Some cities threatened by climate change are in the process of moving their populations, notably Cairo and Jakarta.
Climate migration is also an increasingly recognised phenomenon, with examples in the US that include migrations after disasters such as Hurricane Katrina,
Hurricane Maria and the 2020 wildfires.
Climate change is increasing the frequency and intensity of many different weather events that result in catastrophic losses, including extreme precipitation, drought, floods, tsunamis, wildfires, heat waves and landslides, notes the report.
Globally, there were 40 disaster events in 2019 that resulted in at least US$1 billion ($1.36 billion) in near-term direct losses each — part of an upward trend of billion-dollar disasters. Worldwide losses from extreme weather events from 2010 to 2020 totalled over US$3 trillion.
More information on climate risks will also help city governments to create a more robust business case for major resilience measures, alongside more transparent accounting for the actual costs of catastrophic climate events, says the report. The economic benefits of resilient infrastructure projects include job creation and retention, preservation of the tax base and avoided losses, it adds. —