Many IT specialists who had set up home offices are expected to move back to better specified and te...
Many IT specialists who had set up home offices are expected to move back to better specified and technically advanced buildings in Singapore this year, according to a report by DTZ Research. This will boost demand for newer offices on the island.
Total investment sales this year are likely to remain at 1999 levels, demand for office space is forecast to improve, upward adjustments are expected in retail space rentals and capital values, and rents and capital values will firm in the industrial market. In the residential market, more than 20,000 new residential units are expected to come on stream between the second quarter of 2000 and 2002.
Office leasing activity picked up in the first quarter of 2000 with improving economic and business prospects. Average occupancy rates of most micro-markets increased, while island-wide occupancy edged up to 92%. The occupancy rate for the Marina Centre surged by 5% to 93.6% spurred by e-commerce setups. As a result rents across the island rose by 4% during the quarter.
Based on the government's GDP growth forecast for 2000 of between 4.5% and 6.5%, demand for office space is expected to improve to two million sq ft this year. While recent technological changes have led many to set up home offices, they are expected ultimately to move to purpose-built office accommodation for advanced infrastructure support such as broadband fibre optic cables. Hence demand for technologically advanced buildings is likely to continue to improve.
Total investment sales for the first quarter of 2000 amounted to $2.8bn following healthy commitments in both en bloc and land sales. This is 39% of the $7.3bn achieved in 1999. Of the $2.8bn, $1.2 bn (42%) involved private development site deals, $875.53m (31%) went into buildings sold en bloc and $764.98m (27%) involved government land sales.
The sale of private development sites continues to drive the investment sales market. Of the $1.2bn private development site sales in the first quarter of 2000, 96% were residential collective sales. But interest in residential collective sales was more subdued during the same period, when deals worth $1.16bn were closed. This is 32% off the $1.7bn sales peak in the fourth quarter of 1999.
The first quarter of 2000 saw prime retail rentals and capital values edging upwards. Optimism among retailers, tight retail space supply and a significant reduction in the potential supply of space resulted in healthy absorption. A revival in interest in prime retail space along Orchard/Scotts Road was evident.
Although higher, average monthly rentals for the Orchard/Scotts Road area are still competitive, being 40% to 50% off their 1990 peak. Prime first and second storey rentals for retail space in this area are now $30 per sq ft and $19 per sq ft respectively. Retail space capital values for this area are $3,700 per sq ft for prime first storey and $1,700 for prime upper storey, which are 30% to 40% off the 1990 levels.
An estimated 10.2 million sq ft of private industrial space is expected to come on stream in 2000, the majority (43%) of which will be in the west. For 2000 to 2003, supply is estimated at 24.1 million sq ft of private industrial space and 10.4 million sq ft of public industrial space. The outstanding performance of the manufacturing sector is likely to continue to benefit the industrial property market by boosting demand. While this demand may still be insufficient to absorb the potential large supply for the next two years, it may help stabilise the industrial property market and firm up rents and capital values.
Overall take-up for residential apartment/condominium projects declined marginally from 73% in the fourth quarter of 1999 to 70% in the first quarter of 2000. New units launched during the quarter achieved an average sales rate of 56%, although some projects achieved rates of more than 70%. In addition, scarce landed/cluster housing projects were in demand from home buyers for owner occupation.
Some 23,400 new residential units are projected to come on stream between the second quarter of 2000 and 2002. In view of the competitive market, developers are finding creative ways to distinguish their projects, for example by introducing innovative design features and higher IT specifications.
This research was prepared by DTZ Research for DTZ Debenham Tie Leung
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