Property deals slowed down in Q1

Home and retail sales dropped, whilst offices’ capital values and leasing volumes held firm.

Residential, retail, and office properties were negatively impacted in Q1 as the pandemic drags Singapore’s economy further, according to a JLL report.

Prime home sales volume dropped significantly and no collective sales deals were concluded, as developers focussed on clearing inventories rather than acquiring new sites. Its market performance is also anticipated to be hit with greater market uncertainty due to the wider spread of COVID-19 and the expected recession.

In addition, the retail sales index also fell 11.3% YoY in February 2020 on a chain by volume basis. This is the steepest decline since July 1998 as sharp falls in tourist arrivals severely limited both tourist and domestic spending. As a result, rents of prime floor spaces also declined on a QoQ basis in Q1.

Office leasing activities also slowed down, during the same period. However, JLL noted that capital values held relatively firm as investors regard Singapore as a safe haven and remain confident about the long-term prospect of its office property market.

Investment interest in retail assets also remained keen but selective despite landlords focusing on operational challenges and travel restrictions hindering overseas investors.

Overall leasing volume also held up well in the first two months of 2020 with 256 rental records. However, the worsening COVID-19 outbreak in March 2020 dented sentiment and slowed leasing activities. Logistics and warehouse rents could also face downward pressure in 2020, whilst yields could compress in a low-interest rate environment.

Lacklustre demand is still expected to place pressure on rents, but counter-measures taken by the government and landlords could help businesses stay afloat.

Meanwhile, overall CBD rent growth tilted into the negative territory as landlords started to offer more incentives and became realistic in rent expectations to entice tenants.