Commercial property market remains stable amidst strong demand

However, development activity has declined.

Singapore’s commercial property market remains stable, underpinned by strong demand for office space and a steady flow of investment enquiries, according to the Q3 2024 Global Commercial Property Monitor published by the Royal Institution of Chartered Surveyors (RICS).

The report, drawing from RICS professionals in Singapore, reveals a positive outlook bolstered by favourable credit conditions and consistent investor interest, although some sectors face challenges.

Office space demand continues to show strength, with a net balance reading of +25, slightly up from +18 in the previous quarter. Occupier demand for commercial property remains healthy, marked by a net balance of +6, indicating sustained interest in available properties. The supply of commercial properties for rent also remains positive, with a net balance of +14 of respondents observing sufficient availability.

Investment interest is similarly resilient, with a net balance of +30 respondents reporting a rise in enquiries—nearly double the previous quarter’s reading of +17. Credit conditions have also improved, with a net balance of +33, up from +9, indicating favourable financing options for the commercial property sector.

Despite positive indicators, the report notes a decline in development activity. New commercial developments saw a net balance of -24, a sharp decrease from +24 in Q2, reflecting a noticeable slowdown in new projects. Retail property, meanwhile, continues to face inflationary pressures, with retail tenant demand posting a net balance of -9, a slight improvement from -13 in Q1.

“Inflationary pressure continues to impact retail commercial property in Singapore, supporting the Monetary Authority of Singapore’s decision to hold rates steady in Q3,” Donglai Luo, Senior Economist at RICS said.

Outlook for specific property sectors remains optimistic, with data centres and aged care facilities expected to see rental growth over the next year, reporting growth expectations of 3.3% and 2.9%, respectively.

Short-term rent expectations, however, have moderated, with a net balance of -11 respondents expressing caution for the next three months. Long-term prospects appear brighter, as a net balance of +12 respondents remains confident in sector performance over the next twelve months, though this has dropped from the +42 recorded in Q2.