Saturday, December 3, 2022
Real Estate: A Singapore Story

Real Estate: A Singapore Story



  • With new restrictions in place, Singapore continues to demonstrate excellence in managing the ongoing Covid-19 pandemic
  • As commercial REITs and mall operators grapple with government restrictions, some mall groups appear better placed than others
  • Consumer spending patterns showed how offline retail still dominates and is here to stay
  • A reputation for safety and pro-investment stance has benefited the local residential real estate market, driving a surge in foreign demand for Singapore properties

“I also haven’t come out, why you all panic”

In classic “Singlish”, a meme of Singapore’s Prime Minister started circulating online earlier this month, just hours after the Health Minister announced a new round of safe-distancing measures. Designed to curb a new wave of Covid-19 case spike, the measures to ban on-premise dining followed new clusters linked to the city state’s international airport as well as a public hospital’s food court. By then, the city state’s population had already gotten used to the daily cadence of official Covid-19 case count disclosures. Many felt that the Health Minister’s announcement was just a pre-cursor to a full lockdown or “Circuit Breaker” and had flocked to grocery stores to stock up on essential goods. To some observers, this was a dramatic irony that juxtaposed the government’s targeted approach to pandemic management and clear-cut communication – an approach that had provided the public and business owners with predictability thus far.

Throughout the 1st quarter of 2021, Singapore had kept its borders open to Citizens, Permanent Residents and work pass holders returning from other countries. While general tourism has yet to resume, foreigners with businesses based in Singapore have also been trickling into the city state.

Offline Retail dominates even as eCommerce doubles

While the city state coped with single digit case counts throughout Q1 2021, the mood in Singapore remained largely positive. Retail malls along the key shopping belt of Orchard Road had been flooded with shoppers, all masked up and with shopping bags in hand. “Stuck” in the tiny city state with no international travel in-sight for the foreseeable future, consumer spend naturally shifted towards home improvement and luxury goods. As “work-from-home” had become the norm for most workers, there was nothing stopping shoppers from heading out over the weekends.

Retail footfall had seen a major bounce back since the government eased restrictions in June 2020 and had normalized since. Even as eCommerce players drove adoption throughout 2020 and spoilt consumers with monthly festive promotions, offline retail spend continued to dominate. As of Q1’2021, the city state’s official publications showed that online’s share of consumer spend had doubled but offline retail (ex-auto) accounted for 88% of total retail spend.

Retail continues to be challenged but some mall groups are better placed

Just when retail appear to have normalized, the most recent rounds of restrictions put in place on 16 May 2021 banned dining-in for F&B outlets. This arguably had a huge impact on retail malls who had invested significantly over the past decade implementing various strategy to shift tenant mix towards F&B and services to draw footfall. The silver lining was that consumers could still visit the malls’ F&B outlets for takeout orders and retail shops are allowed to remain open.

Compared to the 2020 Circuit Breaker, the overall impact on mall footfall had been comparatively muted. Last week (ending Sunday 23rd May), aggregate footfall across Singapore mall groups for the 2-5pm core shopping timebelt were 20-30% lower than norm on weekdays and 30-50% lower on weekends; during the 2020 Circuit Breaker Singapore retail malls saw footfall down 10 – 50% on weekdays and 30-80% on weekends. Of note, mall groups such as Frasers, Asia Malls and Mercatus whose asset mixed are skew towards community malls appear to be less impacted.

Residential Real Estate an unexpected beneficiary

Tucked half a mile away from the core Orchard Road shopping belt, an ultra-luxury real estate development had just launched. Residential units for Park Nova, a development by Hong Kong based Shun Tak Holdings have just started going on sale at 2pm on 7th May. By 7pm that same day, five units were sold for well over S$ 100m, at prices as high as S$ 5800 per-square-foot. Priced for the UHNW segment, each of the residential units sold for between S$ 17 – 34m. Sale of such ultra-luxury residential units targeting the UHNW have become increasingly common, as real estate developers ride on the growth of single/multi-family offices in the city state and an estimated 10% growth in UHNW residence in 2020 alone (Knight Frank).

Singapore’s astute crisis management and continued openness to inbound investments has made the local residential real estate sector a silent beneficiary. International search volume for Singapore properties hit a 3-year high in Q4 2020 and saw further growth in Q1 2021 – a 40% YoY growth vs Q1 2020. Approximately half of international search for Singapore properties originated from the US, UK, India, Malaysia and Indonesia.

Implications for real estate players and investors

Singapore is home to one of the most robust REIT markets globally; and a population where private homeownership is seen as aspirational. As the pandemic rattled the world with economic uncertainty, it has equally accentuated the resilience of offline retail and Singapore’s coveted role in Asia as a safe, stable place for business and to call home.

  • The current wave of uncertainty in the retail sector may provide investors with an opportunity to rethink and recalibrate their Retail REIT portfolio
  • For Retail REIT managers, the twin challenges of pandemic uncertainty and a rising rates environment may also warrant a deep assessment of asset and tenant mix going forward
  • As Singapore benefits from a surge in foreign demand for residential properties, this could provide a timely opportunity for international / regional real estate developers looking to establish a foothold in the city state