Hello, investors: Forget residential, if you want better ROI turn to commercial property

The growth potential of the commercial and industrial sector is expected to be in the range of 5% to 10% for 2012 - sounds interesting, eh?

According to Shaun Di Gregorio, Chief Executive Officer of the iProperty Group, investors can benefit from commercial and industrial property as it requires a smaller investment commitment compared to a residential property, so offers a better return on investment. Not to mention the market’s expected growth potential of 5-10% for 2012. “In terms of risk precautionary measures, it is always a good idea to invest in smaller units, unless they are investing for their own business usage that needs a larger amount of space,” he added.

The residential property market seems to be softening as of now due to the government’s cooling measures across Asia Pacific and investors being more cautious. That explains why the commercial property market turns out to be a better choice for investors. Di Gregorio noted that the commercial and industrial sector has a steady gain in interest as it is rarely governed by restrictive policies and has seen high yields maintained. “There is a shift in individual investors from residential to commercial in Singapore as they increasingly look at higher yielding sectors,” he added.

But some property analysts warn of a risk of a slowdown in Singapore as commercial rents apparently have moved so quickly and have already reached their peak. Di Gregorio has a different view as he believes that Singapore is likely to have its biggest growth in supply and demand as it is the centre of Asia for most companies. “We therefore foresee a continuing progress in the commercial as well as industrial property here in Singapore for the upcoming year 2012,” he noted.

Despite a seemingly positive outlook for the commercial and industrial property market, Singapore is still facing risks of competition. Di Gregorio noted that Singapore is in direct competition with Asia’s other regional financial hubs of Hong Kong, Shanghai and Tokyo, and globally with established centres such as London and New York, to attract global multinationals. “When MNCs, especially in fields such as finance and banking, decide where to locate their businesses, the type, size and location of the commercial real estate there is a critical consideration,” he said.

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