SINGAPORE REAL ESTATE MARKET Q2 2020
D I S C L AI M E R S AN D WAI V E R S This presentation has been prepared in good faith based on CBRE’s current views of the commercial real- estate market. Although CBRE believes its views reflect market conditions on the date of this presentation, they are subject to significant uncertainties and contingencies, many of which are beyond CBRE’s control. In addition, many of CBRE’s views are opinion and/or projections based on CBRE’s subjective analyses of current market circumstances. Other firms may have different opinions, projections and analyses, and actual market conditions in the future may cause CBRE’s current views to later be incorrect. CBRE has no obligation to update its views herein if its opinions, projections, analyses or market circumstances later change. Nothing in this presentation should be construed as an indicator of the future performance of CBRE’s securities or of the performance of any other company’s securities. You should not purchase or sell securities – of CBRE or any other company – based on the views herein. CBRE disclaims all liability for securities purchased or sold based on information herein, and by viewing this presentation, you waive all claims against CBRE and the presenter as well as against CBRE’s affiliates, officers, directors, employees, agents, advisers and representatives arising out of the accuracy, completeness, adequacy or your use of the information herein. 2
COVID-19: GOVERNMENT RESPONSES 15% property tax rebate for qualifying commercial properties 18 Feb: 30% property tax rebate for tourism sector Unity 0.5 month rental waiver for commercial tenants offered by government agencies e.g. HDB Budget Deferral of GST increase until 2022 & cash transfers of S$100-300 to support local retail spending ($6.4b) Jobs Support Scheme (JSS) to support offer 8% grant for local employees up to a wage cap of S$3,600 100% property tax rebate for qualifying commercial properties. Offices, business parks and industrial buildings will 26 Mar: get 30% property tax rebate Total: Resilience 2 months rental waiver for commercial tenants offered by government agencies Budget $99.7b Cash transfers of S$300-900 to individuals ($48.4b) (20.0% of GDP) Deferral of corporate income tax for 3 months JSS to co-fund 75% of Singaporean wages for April, up to S$4,600 pm, with 25% co-funding for remainder of 3 6 Apr: quarters. Higher JSS co-funding remains for food services (50%) and hotels/MICE venues (75%) Solidarity Rental waiver for industrial and office tenants of government agencies raised to 1 month from 0.5 month previously Budget $(8.9b) Cash transfers of S$600-1,200 to individuals, up from S$300-900 previously JSS and foreign worker levies extended to another month. Affected firms will also see greater wage support 27 May: Each household to receive $100 in utilities credit Fortitude Budget Cash grants for qualifying SME tenants equivalent to around 0.8 and 0.64 months for retail and office/industrial tenants ($33.0b) respectively Source: MTI | SINGAPORE MARKET OVERVIEW | Q2 2020
COVID- 19 MEASURES COVID-19 (Temporary Measur ures) Act: Temporary relief from inability to perform contractual obligations under certain contracts if that inability is • materially caused by a COVID-19 event (Leases/Licenses, Construction/Supply etc) Temporary changes to bankruptcy and insolvency laws to increase debt thresholds for winding up and • bankruptcy. As stated in the COVID-19 (Temporary Measures) Amendment Act, tenants who are unable to vacate existing • Contractual premises due to COVID-19, must serve a notification for relief on the landlord. Obligations Rental relief framework for SMEs: Offices to receive 30% rebate (approx. 0.36 month’s of rent) on property tax payable (Period of 1 Jan 2020 • – 31 Dec 2020). SME tenants will receive a cash grant of approx. 0.64 month’s of rent which will be disbursed to property • owners from end Jul. Eligible SMEs* may receive 1 month’s waiver of base rental (May 2020) which is borne by the landlord. • SMEs that qualify for landlord relief may take up a prescribed repayment scheme for a specified portion of • rental arrears accumulated from 1 Feb -19 Oct 2020. Property Relief measur ures for landlords & businesses: Landlords can defer both principal and interest repayments up to 31 Dec 2020, if they are required to • provide rental waivers or repayment scheduling to tenants under the COVID-19 (Temporary Measure) Amendment Act. Extension of timeline for S-REITs to distribute at least 90% of their taxable income to qualify for tax • transparency. Source: CBRE Research, MAS, MinLaw, MOF, MTI *Criteria: 1)SMEs are defined as less than S$100 mil turnover in 2019. 2) Reduction of 35% or more from Apr – May 2020, compared to Apr – May 2019 | SINGAPORE MARKET OVERVIEW | Q2 2020 3) Tenancy entered into before 25 Mar 2020
COVID- 19 MEASURES Jobs Support Scheme: Under the JSS, the Government will co-fund between 25% to 75% of the first $4,600 of gross monthly wages • paid to each local employee in a ten-month period through cash subsidies Labour Fintech sector: Launched 2 packages to support Singapore-based fintech firms - $6 mil MAS-SFA-AMTD Fintech Solidarity • Grant & $125 mil support package Fintech Small & Medium um Enterprises (SMEs): Launch of MAS SGD facility for ESG loans at an interest rate of 0.1% p.a. to eligible financial institutions to • support lending to SMEs Enhancement of Enterprise Financing Scheme – Trade Loan, SME Working Capital Loan and Temporary Bridging • Loan Programme SMEs Start-up ups: $ 285 mil allocated to catalyse and match private investments • Supplements the initial $300 mil set aside under Startup SG Equity • Start ups Source: CBRE Research, MAS, MinLaw, MOF, MTI | SINGAPORE MARKET OVERVIEW | Q2 2020
IMPACT ON GDP 5-Yr CAGR 5-Yr CAGR 5-Yr CAGR 5-Yr CAGR 20% 2.9% 2.1% 5.4% 6.7% 15% MTI: 2020 10% -7% to -5% 5% 0% -5% -10% 2020F 2021F 2022F 2023F 2024F 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Note: Based on real GDP growth, chained (2015) dollars Source: CBRE Research, Oxford Economics, MTI | SINGAPORE MARKET OVERVIEW | Q2 2020
OFFICE MARKET
THREE KEY TAKEAWAYS FOR THE OFFICE MARKET Strong focus on cost containment Strong focus on cost containment 1 More renewals were observed, with some tenants looking to downsize space requirements More renewals were observed, with some tenants looking to downsize space requirements Office rents corrected for the 2 nd consecutive quarter Office rents corrected for the 2 nd consecutive quarter 2 Grade A Core CBD rents declined 3.0% q-o-q to reach S$11.15 psf/month Grade A Core CBD rents declined 3.0% q-o-q to reach S$11.15 psf/month Supply Outlook Manageable Supply Outlook Manageable 3 Concerns around the pool of secondary space that will add to primary vacancy Concerns around the pool of secondary space that will add to primary vacancy Source: CBRE Research | SINGAPORE MARKET OVERVIEW | Q2 2020
OFFICE MARKET SNAPSHOT AS AT Q2 2020 Existing Stock 61.8 million sq ft private office stock of which 31.2 million sq ft in Core CBD 23% Estimated new supply of 3.9 million sq ft over the next 4 ½ years New Supply 51% (2H 2020 - 2024) Take Up Approximately -293,040 sq ft take up in Q2 2020 26% Grade A 2.9% (2.4%) Core CBD 5.6% (4.6%) Vacancy Fringe CBD 5.6% (5.7%) CBD Core Decentralised 5.4% (4.8%) Fringe CBD Grade A $11.15 psf/mth (-3.0% qoq) Decentralised Grade B (CBD Core) $8.45 psf/mth (-2.3% qoq) Rents Grade B (Islandwide) $7.85 psf/mth (-1.9% qoq) Grade B (Decentralised) $6.45 psf/mth (-2.3% qoq) Source: CBRE Research | SINGAPORE MARKET OVERVIEW | Q2 2020
ISLANDWIDE SUPPLY-DEMAND DYNAMICS NLA (mil sq. ft.) 5.0 8.0% 4.0 6.0% 3.0 2.0 4.0% 1.0 2.0% 0.0 -1.0 0.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Net Supply Net Absorption Vacancy Source: CBRE Research | SINGAPORE MARKET OVERVIEW | Q2 2020
SUBMARKET VACANCIES Source: CBRE Research | SINGAPORE MARKET OVERVIEW | Q2 2020
SUPPLY LOOKS MANAGEABLE 3.5 3.0 Estimated NLA (mil sf) 2.5 10-Yr Avg: 1.77 mil 2.0 1.5 5-Yr Avg: 1.16 mil 1.0 0.5 0.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020F 2021F 2022F 2023F* 2024F Historic New Completions Grade A CBD (Non-Grade A) Rest of Island Strata Titled Pre-commitment levels of Pipeline Supply Area (sq ft) % of Total New Supply (2H 2020 - 2024) 2H 2020 80% 20.4% Grade A 2.54 mil sf 55% 2021 37% 63.2% CBD (non-grade A) 0.81 mil sf 18% 2022 100.0% Rest of Island 1.25* mil sf 27% 2023* 100.0% Strata Titled 0.0 mil sf 0% 2024 100.0% TOTAL 3.94* mil sf 0% 25% 50% 75% 100% Pre-comm/Under Offer Strata-titled For Lease Note: Due to rounding, numbers do not add up precisely to the totals indicated. *Includes the estimated potential office space from SP - Labrador Park which has yet to obtain planning permission from URA. | SINGAPORE MARKET OVERVIEW | Q2 2020 Source: CBRE Research
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