Will the real estate sectors' positive momentum in 2021 continue in 2022?

CBRE said growth will moderate in one of the sectors.

All sectors in the real estate market ended 2021 with a positive performance, CBRE’s Q4 Figures report showed.

Office

Based on the report, the office sector had its high absorption of 0.34 mil sq. ft in the last quarter of 2021, which is the highest since the fourth quarter (Q4) of 2019.

The submarket’s Q4 performance was buoyed by the increase in office rents islandwide, with Grade A Core CBD rents growing by 1.4% from the previous quarter to $10.80 psf/month, and Grade B Core CBD rents rising for the first since the end of 2019 by 0.6% to $7.80 psf/month.

CBRE said the rental growth in the office market will continue in the mid-term, of 2022, “supported by the rapid expansion in demand from the technology sector and limited new supply.”

Led by new completions in 2021, business parks likewise improved in terms of full-year net absorption, recording 0.60 mil sq. ft, which is higher than the 2020 record of -0.08 mil sq. ft.

Rents were particularly high in the City Fringe submarket, which rose for the third consecutive quarter by 0.9% quarter-on-quarter (QoQ) to $5.90 psf/month.

“The outlook for the business park market in the mid-term remain largely favourable, though prolonged work-from-home measures and hybrid working arrangements could impact near term leasing momentum,” CBRE said.

Industrial

Leasing activities were likewise upbeat in the industrial market, with rents increasing across warehouse segments (1.8% QoQ), prime logistics (1.4% QoQ), and factory (1.3% QoQ).

On a year-on-year basis, rental growth for warehouses and prime logistics reached 5.1% and 6.5%, respectively.

This growth is expected to moderate in 2022, according to CBRE.

Residential

The residential market also does not fall behind in terms of performance, with 3,013 new private homes (excluding ECs) sold in Q4, bringing the full year 2021 new home sales to 13,022 units, the highest since 2013.

However, CBRE said demand for new homes in the first half of 2021 will likely moderate as buyers “take a pause to re-evaluate their purchasing decisions.”

The analyst expects sales to trend down to 9,000 to 10,000 units in 2022.

Investments

The full-year investment volume for 2021 was double than the 2020's at $27.837b, according to the report.

In particular, investment volume was up in offices, which jumped by 116.2% QoQ to $1.887b.

Office will still lead the growth in investment volumes in the first half do 2022 according to CBRE, alongside the industrial assets.

Retail

Whilst prime retail rents fell by 2.2% in 2021, CBRE said it’s still a “vast improvement” compared to the -8.7% recorded in 2020.

prime retail rents for Orchard Road and Fringer areas have likewise stabilised in Q4 for the first time after seven consecutive quarters of decline, according to CBRE.

The suburban market also improved, with prime rental rents increasing 0.5% QoQ.

CBRE said it expects retail rents to remain stable in the first half of 2021 due to the emergence of the Omicron variant, but will pick up “meaningfully” after the second half of 2022.