Asian Cities Report Singapore Investment Sales - 2H 2018 Savills World Research Singapore
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2H 2018
Savills World Research
Singapore
Asian Cities Report
Singapore Investment Sales 2H 2018
savills.com.hk/research
savills.com.hk/research 01
Asian Cities Report | Singapore Investment Sales
TABLE 1 Investment sales market new launch units. A replay of the
Top government land and private sales, overview 2014-15 situation is likely and, for
In Singapore, real estate investment in 2H/2018, we expect transactions in
Q2/2018 the residential collective sales market
Q2/2018 continued to grow strongly,
Type of
Date of
Successful
Transaction Name of successful recording S$10.53 billion in sales. This to shrink significantly. The S$9.84
Location development tender price
award type tenderer billion achieved in the collective sales
allowed (S$ mil) was 4.7% higher than the S$10.06
Stirling Land Holdings billion recorded in Q1/2018. market for 1H/2018 is unlikely to be
Pte Ltd, Stirling View
Holland Commercial &
Pte Ltd (as Trustee of repeated. While some smaller sites
May 1,213.3 GLS Commons SR Trust) and
Road Residential
Stirling Property Pte Ltd Investment sales from the public may still be sold, the total achieved for
(as Trustee of Commons 2H/2018 may well be just a fraction of
Commercial Trust) sector amounted to S$2.92 billion
UOL Venture in Q2, up 81.6% quarter-on- the 1H number, perhaps even below
Silat
Residential May 1,035.3 GLS
Investments Pte Ltd,
UIC Homes Pte Ltd and quarter (QoQ) from the S$1.61 S$1 billion.
Avenue
Kheng Leong Company billion transacted in Q1. Under the
(Private) Limited
Tulip Collective MCL Land and Yanlord Government Land Sales (GLS) The next hot sector
Residential Apr 906.9
Garden sales Land Group programme, a total of seven sites Given the volume of money in the
Twenty
Anson
Commercial Jun 516.0 Private AWE (including three residential sites, three global system in search of investible
Dunearn Collective industrial sites and one commercial assets, investor attention may turn
Residential Apr 468.0 EL Development
Gardens sales
& residential site) were awarded for towards the industrial and commercial
development in Q2. sectors, where regulations on the
Source: URA, Savills Research & Consultancy
purchase and sale of properties are
By contrast, the volume of not as onerous as those applied to the
transactions in the private sector residential sector. We shall look at one
fell by 10.0% QoQ to S$7.61 billion of the two major real estate sectors
GRAPH 1
in Q2/2018. Investment sales of (industrial and office) that may stand to
Investment sales transaction values, Q1/2012 benefit from the policy measures that
commercial, industrial and mixed-
– Q2/2018 use properties showed substantial stymie transactions in the residential
increases from the prior quarter, sector, namely strata-titled industrial
Public sector Private sector
16 although this was offset by the decline units.
14 in the residential segment as more
smaller-sized collective sale deals Industrial – For individual investors,
12
were completed in Q2. strata-titled industrial space is
10 increasingly looking attractive again.
S$ billion
8 Market intervention on 6 Although there are measures like the
6
July 2018 Seller’s Stamp Duty (SSD), which has
For the first half of 2018, the feverish been in place since 12 January 2013,
4
collective sales market for residential compared to the residential sector’s
2 development alone accounted ABSD, industrial is not a deadweight
0 for 48% of the bulk of investment monetary loss from the start.
sales volume. However, the revised Therefore, in relative terms, investing
Additional Buyer’s Stamp Duty in strata-titled industrial properties
(ABSD) implemented on 6 July 2018 now looks unfettered for potential
Source: Savills Research & Consultancy buyers.
is expected to put a dampener
on the number of collective sales
transactions in the coming six months. However, from the grouses of small
As developers now face a 5% non- and medium-sized enterprises
GRAPH 2 here, some may ask whether
remittable ABSD charge for the land
Investment sales transaction volumes by they purchase, they are unlikely to industrial properties are good for
property type, Q2/2018 take that loss, instead transferring the investment. Their concerns may
charge to vendors through a haircut arise out of the fact that, despite
on their reserve price. This could the improvement in manufacturing
result in a drying up of collective sales performance in recent quarters, rents
Commercial transactions. for factory and warehouse space
S$1.57 bil
14.9% have been languishing. Also, some
With buyers of second properties may wonder how can strata-titled
Industrial now being hit by a punitive extra industrial properties benefit from
Residential S$0.67 bil
S$6.82 bil 6.3% 5% ABSD, developers believe it will the government’s emphasis on new
64.8% be more difficult for them to sell out value-added and productive-growth
Mixed large projects within five years of the markets? How does the shift in focus
S$1.47 bil
14.0% award of the land. The revised 25% towards the Precision Engineering,
ABSD levied on developers who fail Electronics and Energy & Chemicals
to complete sales of new units within ITM sector, which fuels demand for
five years is thus likely to present an high-tech and business park spaces,
obstacle to large collective sales sites positively affect the demand for
Source: Savills Research & Consultancy that could yield well over a thousand traditional B1 and B2 strata space?
022H 2018
Well, if one were to focus purely on formation of F&B businesses and the GRAPH 3
the up and downstream linkages corresponding allocation of increased
Large food companies and their adoption of
to the newfangled 4.0 industries, space, both from existing and new
then there isn’t that much benefit. malls, will have a positive correlative CKs
However, there is one sub-segment effect on the demand for CKs.
of the industrial space market that
is thriving and is still related to the Rents and prices 24%
government’s productivity push. That These depend on location and the Yes, CK is a standalone
is space related to the food industries, tenure of the property. Rents in
Yes, CK is at the outlet
particularly Central Kitchens. established food zones, like those in
No, food is prepared at
the MacPherson and Pandan Loop 4% the outlet
What is a Central Kitchen? areas, range from S$2.70 to S$3.50 2%
No, food is prepared at
another location
A Central Kitchen (CK) is a focal point per sq ft while those in the North
where food is prepared and semi or (Woodlands, Senoko) are in the S$2.50 68%
fully cooked before delivery to outlets plus range. Price wise, freehold CKs
of a dedicated Food & Beverage located in the central part of Singapore
(F&B) entity or a multitude of F&B e.g. MacPherson area can see prices
customers. The CK is located either above S$1,250 per sq ft while those
in an outlet of an F&B establishment in Mandai, being on 30-year leases,
Source: Singapore Productivity Centre
or in an industrial property. The focus range from S$370 per sq ft to close
here is on CKs located in industrial to S$500 per sq ft. For new food
properties, which we believe is the factories sited on 60-year leases, we
next hot industrial sub-sector. expect prices to be around S$950 per
GRAPH 4
sq ft if located in the established food
Have CKs been widely adopted? In a zones in Jurong e.g. Pandan Loop. Cumulative net F&B and manufacturing
survey conducted by the Singapore Graph 5 shows the major food-zone business formed since Jan 2013
Productivity Centre of 50 large food clusters in Singapore.
Food & Beverage service activities Manufacturing
services companies here, the majority 14,000
(68%) responded that their CKs are Conclusion
12,000
already standalone facilities (please In summary, quite a few factors are
refer to Graph 3). In other words, driving the demand for CKs. These 10,000
the market for CKs is already an are: 8,000
Number
established feature.
1. The overall labour crunch that F&B 6,000
With retail rents stuck in high gear establishments face. 4,000
and a crunch on foreign labour hires
2,000
still in force, F&B establishments have 2. Tightly-controlled food zones with
been and will continue to optimize proliferation constrained by planning 0
2013 Jul
2014 Jul
2015 Jul
2016 Jul
2017 Jul
2013 Mar
2013 May
2014 Mar
2014 May
2015 Mar
2015 May
2016 Mar
2016 May
2017 Mar
2017 May
2018 Mar
2018 May
2013 Nov
2014 Nov
2015 Nov
2016 Nov
2017 Nov
2013 Jan
2013 Sep
2014 Jan
2014 Sep
2015 Jan
2015 Sep
2016 Jan
2016 Sep
2017 Jan
2017 Sep
2018 Jan
their space requirements in malls. This controls.
translates to greater demand for CKs.
3. High rents at malls forcing F&B
Also, with the growth of F&B setups operators to minimize food preparation Source: Singapore Department of Statistics, Savills Research & Consultancy
in recent years, retail mall landlords, areas.
realizing the challenging times faced
by traditional retailers, are undergoing 4. Parallel increase of space
further Asset Enhancement Initiatives dedicated to F&B outlets in retail GRAPH 5
(AEI) for their existing malls to improve malls. Major industrial use type clusters and food
mechanical systems and floor layouts zones in Singapore
to accommodate higher F&B content. 5. Economies of scale for small F&B
establishments who can farm out
The statistics on the cumulative net certain food preparation functions to a
business formation numbers for F&B general CK.
outlets show strong growth since 2013.
On a year-on-year (YoY) basis, in June 6. Sharp rise in F&B net new
2018, the number of F&B businesses business formations.
formed since (stressed) 2013 had
increased 25%. Graph 4 shows very 7. Government push for greater
clearly that since January 2013, the productivity in the F&B trade.
F&B sector witnessed much stronger
growth in net new business formation
than the manufacturing sector.
Although many F&B outlets lack the
scale to set up a CK, the increasing Source: Savills Research & Consultancy
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