Research

JUl-sep 2008/3rd quarter

real estate
highlights

Highlights
• Singapore’s private residential market continued to show signs of cooling.
Prices and rentals of private residential properties fell in 3Q 2008 after
nearly four years of consecutive quarterly growth. However, average HDB
resale flat prices still grew 4.2% qoq in 3Q 2008.

• Prime retail rentals generally fell for the first time since 3Q 2005, as retailers
are increasingly cautious about committing to lease at high rentals.

• Office rentals showed signs of softening. Rentals of office space islandwide

dropped in 3Q 2008 after growth was noticed to have eased for some areas
in previous quarters.

• The industrial property market moderated in performance during 3Q 2008,

with rents and capital values for most industrial properties remaining similar
to 2Q 2008.
jul-sep 2008/3rd quarter
real estate highlights

Residential
Property Market
Singapore’s private residential market
continued to show signs of cooling as prices
and rentals of private residential properties
fell in 3Q 2008 after nearly four years of
consecutive quarterly growth. However,
average HDB resale flat prices still grew
marginally, this improvement was short
lived. The following month of August 2008
witnessed a trifling 194 units launched in
the private residential market, the smallest
number since monthly data was made
available in June 2007.
In the month of September however, the
total number of new launches increased to
767 units islandwide, up from the meagre
number of homes launched in the preceding

4.2% qoq in 3Q 2008. month. The expansion in September was

due to a sharp decline in August, as some
projects were withheld from launching

Private Residential during the Seventh Lunar Month where

Sector
Muted Launch Market
Singapore’s private residential market
continued to show signs of cooling as
launch market activity waned amid elevated
fears of the possible crumbling of global
financial markets. While the month of July
saw the number of units launched increase
people generally refrain from making
home purchases. Though an improvement
on a monthly basis, the number of units
launched in September was still 42% lower
than the 1,323 units launched in July, the
period when the most number of units was
launched in 2008. Nonetheless, the 767
units launched in September was heartening
as it surpassed the nine-month average of
611 units launched per quarter in 2008.

Chart 1
Private Home Launch and Sales Volume Islandwide
16,000

14,000

12,000

10,000
No. of Units

8,000

6,000

4,000

2,000

0
3Q07 4Q07 1Q08 2Q08 3Q08

New Sales Secondary Sales New Launches

Source: Urban Redevelopment Authority, Knight Frank Research

2
www.knightfrank.com

Monthly statistics indicate that despite
abatement in the total number of new
launches this quarter, the launch market
still experienced encouraging growth. The
number of units released by developers in
3Q 2008 was the highest among the first
three quarters this year, totaling about 2,244
units, reflecting a 24% quarter-on-quarter
(qoq) increase. Mirroring the previous
quarter, most units were launched in the
mid-tier market, while the prime private
residential market comprised 20.6% of all
new launches in 3Q 2008.
With the financial health of global markets
uncertain and overall growth fundamentals
expected to thwart the dynamics of the
residential market, it is anticipated that the
launch market will remain moderate, at least
until there is some stability in the financial
markets.
Languish Sales in
Primary Market
Based on the Urban Redevelopment
Authority (URA)’s monthly statistics, a total
of 1,597 units were sold by developers in 3Q
2008. Although this was the largest number
of new units sold per quarter in 2008 to date,
it was a mere 3.6% more than the number of
private residential units sold in 2Q 2008 and
approximately 70% of the five-year quarterly
average sale figures. The 1,820 private
residential units sold in 2Q 2008 reflected
moderate take-up as well, as the increase
was a surge compared to 1Q 2008’s 1,395
units, which was the second lowest quarterly
figure over the past 12 years. With the take-
up of developer sale mellowing significantly,
this reflects heightened caution from
homebuyers will be acting prudently amid
severe global economic conditions.
Of the three regions, the bulk of new sales
(45.5%) in 3Q 2008 were in the mass market
while the prime Core Central Region (CCR)
saw a further decline in both the number and
proportion of sales. It is expected that while
overall new sale volume has shown signs of
moderation, the coming months would see
figures for 2008 rest at around 60% of the
total new sales in 2007.

Some Possible Major Launches in the Next 6 Months

Projects Tenure District Developer Location Units
Marina Bay Suites 99-year 01 Cheung Kong / Hongkong Land Central Boulevard 221
/ Keppel Land
Residential Development 99-year 04 City Developments Ltd Sentosa Cove 228
Seascape 99-year 04 Ho Bee Group / IOI Land Sentosa Cove 151
The Peak @ Balmeg* FH 05 MCL Land Balmeg Hill 180
Urban Resort* FH 09 Capital Land Residential Limited Cairnhill Road 64
Residential Development FH 09 Heeton Holdings Grange Road 28
Paterson Suites* FH 09 Bukit Sembawang Estates Ltd Paterson Road / Lengkok Angsa 102
The Oliv* FH 10 TG Development Pte Ltd Balmoral Road 23
Madison Residences* FH 10 Keppel Land Bukit Timah Road 56
Verdure FH 10 Bukit Sembawang Estates Ltd Holland Road 75
Latitude* FH 10 CapitaLand Ltd Jalan Mutiara 127
The Trizon FH 10 Singapore Land Ltd Ridgewood Close 247
Nathan Residences* FH 10 Tat Aik Property Pte Ltd Nathan Road 91
VIVA FH 11 Allgreen Properties Ltd Suffolk Road 235
Trilight FH 11 Ho Bee Investment Newton Road 152
L’VIV* FH 11 Wing Tai Asia Newton Road 100
The Arte FH 12 City Developments Ltd Jalan Raja Udang / Jalan Datoh 336
The Mezzo FH 12 Soilbuild Group Balestier Road 82
Silversea* 99-year 15 Far East Organization Amber Road 383
Residential Development 99-year 18 Kheng Leong / UOL Simei St 4 645
The Cascadia FH 21 Allgreen Properties Ltd Bukit Timah Road 536
Residential Development 99-year 22 Frasers Centrepoint Homes Lakeside Drive 712
Note: *Projects on preview

3
 jul-sep 2008/3rd quarter
real estate highlights
Subdued Secondary
Market
The secondary market continued to
experience deflated demand as resale
activity began to diminish at the onset of
the second half of 2007. Secondary market
transactions have substantially decreased
in the beginning of 2008. While the number
of secondary market transactions started to
fall when financial market woes began as
early as 3Q 2007, it was only at the start of
this year when the sales were registered
less than the five-year quarterly average of
about 3,020 units. This was partly due to
the reduction in collective sales and partly
due to the uncertain market sentiments.
As at 2Q 2008, secondary market sales
stood at about 2,800 units and early
estimates indicate that this figure stood at
approximately 2,400 units for 3Q 2008. Of
note, the Outside Central Region saw the
largest proportion of secondary sales in
the second quarter of the year, reflecting
a better interest for mid- and mass market
homes for well-located and affordably-priced
suburban projects which were launched.
In 2Q 2008, the proportion of resale
transactions islandwide was registered at
Chart 2
Private Home Sales Volume Islandwide
16,000
14,000
12,000
10,000
No. of Units
8,000
6,000
4,000
2,000
0 since 2003. Generally, the bulk of properties
3Q07 4Q07
New Sales
Source: Urban Redevelopment Authority, Knight Frank Research
4
50.8%, a 14.6 percentage point reduction
from 1Q 2008. Though still declining, the dip
in the number of resale transactions was
a smaller -7.4% qoq this quarter and the
highest concentration of such sales was still
in areas Outside of the Central Region.
Speculative property sales, as measured
by the subsale activity persisted to decline
when the proportion of subsales islandwide
was recorded at 11.0% in 2Q 2008 (still 6
percentage points higher than the five-
year quarterly average). As repercussions
from tumultuous global markets remain
ambiguous, it was the mass Outside Central
Region that saw the strongest number of
subsales, when this proportion climbed to
8.1% in 2Q 2008, the highest proportion in
the last five years. It was the sub-markets
that have risen to risky heights, which saw a
smaller proportion of subsales. Specifically,
both the prime Core Central Region and
mid-tier Rest of Central Region experienced
a smaller proportion of subsales in the
last quarter, however, it was the mid-tier
private residential market that was more
pronounced in its decline when it registered
at 10.5% in 2Q 2008. This could be because
those property players who wanted to exit
the market had already done so earlier.
1Q08 2Q08 3Q08
Sub-Sales Resale
Sentiments Fail to
Undermine Foreign
Interest
Preliminary figures indicate that there
may be a slowdown in the percentage of
foreigners that have purchased private
residential properties in Singapore.
The figures for 3Q 2008 hinted that this
proportion has taken a further decline, as
21.6% of all transactions islandwide were
home-purchases by foreigners. This was 0.9
percentage point lesser than the five-year
quarterly average proportion. The onset of
2008 had already seen a dip in the number
of foreign transactions when numbers
fell below the five-year quarterly average
figures. The decline in 2008 was magnified
by the substantial growth in foreign buying
interest from 2005 to 1H 2007.
1H 2008 figures showed that Malaysians
and Indonesians continued to be major
foreign homebuyers in Singapore, making
up 17.6% each of all foreign transactions.
However, the share of foreign home
purchases by Indonesians and Malaysians
have declined and are lower than five-year
quarterly average values. On the other hand,
foreigners that hail from China and India
have shown greater interest in Singapore’s
private residential market in recent times
when they made up 10.5% and 12.8% of
all foreign transactions respectively. The
profile of homebuyers are also increasingly
international, as developers attempt to
market some projects in less traditional
countries, such as Korea.
Although both Indonesians and Malaysians
were the biggest group of foreign buyers,
the types of properties preferred by each
differ. Indonesians have transacted much
pricier homes than buyers from Malaysia
bought by Indonesians fell into the S$1.5
million – S$5 million price range compared
to Malaysians who purchased homes that
were within the S$500,000 – S$1 million
www.knightfrank.com

range. Additionally, Indonesians also Chart 3

formed the group that was most active in Proportion of Foreign Homebuyers
Singapore’s high-end residential market. Islandwide as at 1H 2008
They made the most number of purchases
for homes that cost S$5 million and above.

In terms of location, foreign homebuyers

have their penchant. Foreign homebuyers in
Singapore’s residential property market has,
in the past 13 years favoured purchasing
property in certain districts over others.
Districts 9, 10 and 15, in ascending order,
have traditionally attracted strongest foreign
interest. This remained similar in 1H2008
although there were more foreigners who
purchased homes in districts 10, followed by Australia 4.9%
districts 9 and 15. China 10.5%
Hong Kong 0.8%
Districts 9 and 10 have been the choice India 12.8%
home-buying location for foreigners over the Indonesia 17.6%
Malaysia 17.6%
past 13 years. However, as at the first half of
Taiwan 2.0%
2008, District 15, which generally covers the USA 2.3%
Katong, Joo Chiat and Amber Road planning United Kingdom 8.7%
areas seemed to have grown in favour with Others 22.7%
foreigners. This is due to the increasing Source: Urban Redevelopment Authority,
appeal of the eastern districts, including Knight Frank Research
for some who have been priced out of the
Central Region as prices of homes soared Chart 4
in 2006-2007. Transactions by Foreigners Islandwide
As Singapore rose to become the 13th most 30%
Percentage of Transaction by Foreigners

expensive city in the world for expatriates 25.9% 26.6%

to live based on Mercer’s Worldwide Cost 25% 23.5%
22.4%
of Living Survey 2008, these rising costs of
20% 18.4%
living as well as worrying market sentiments
seemed to have affected foreign demand 15%
for property in Singapore, as suggested
by abatement in both the proportion and 10%
number of foreign transactions based
on preliminary numbers for 3Q 2008. 5%

Nevertheless, while market sentiments have

0%
inevitably impaired demand from foreigners, 2004 2005 2006 2007 1H 2008 (Prelim)
the appeal of a city that is becoming
Source: Urban Redevelopment Authority, Knight Frank Research
increasingly enchanting and cosmopolitan
is likely to continue to entice foreigners.

5
jul-sep 2008/3rd quarter
real estate highlights
Slump in Prices
Since mid-2007, the rate of private home
price growth has been decelerating. In 3Q
2008, prices fell for the first time after about
four years of expansion, according to official
figures. URA’s flash estimates indicated that
home prices contracted by 1.8% qoq growth
the third quarter. The price decline came not
so much as a surprise as it was expected
that the unyielding subdued transaction
volume would have eventually led to a drop
in prices.
Specifically, all non-landed market
segments, except for the mass-market
segment (Outside Central Region), saw
prices easing in the third quarter. For
the prime market segment (Core Central
Region), the tapering of prices since the
previous quarter saw growth decline by 2%
qoq in 3Q 2008. In addition, there was no
residential unit sold or launched at above
the S$4,000 psf in 3Q 2008, reflecting the
more subdued mood in the high-end luxury
housing segment. Private home prices
in the mid-tier (Rest of Central Region)
recorded a slightly faster fall of 2.1% qoq,
after achieving 0.7% qoq expansion the
preceding quarter. The larger price fall in the
high-end and mid-tier segments are partly
due to the robust price growth that these
two segments had enjoyed in the past three
years, where prices of some properties
reached record highs. By comparison,
average prices in the mass-market private
home segment had a slower start and
increased by a marginal 0.1% in 3Q 2008.
Likewise, the private residential landed
market also saw minimal growth in 2Q 2008.
This was the first time in six quarters when
prices of landed homes were below the
five-year average quarterly growth. Prices of
landed homes grew at only 0.6% qoq, with
median prices of the three sub-categories of
landed homes registering expansion rates
of between 0.5% and 1.0% in 2Q 2008.
Notwithstanding the limited increase, the
landed housing segment is still considered
stable.
6
Softening in Rentals increased in 2007, some tenants were
attracted to the eastern districts, such as
Leasing activity of non-landed homes the East Coast. The current rental decline
remained active in 3Q 2008. Approximately of non-landed private homes in the East is a
9,500 units were leased in 3Q 2008, reflection of tenants who are more cautious
about 19.6% more than 2Q 2008. The first in their accommodation requirements and
nine months of 2008 saw a total of about are resisting significant rental hikes.
22,900 leasing deals concluded while the
Similarly, rents of non-landed private
same corresponding period in 2007 saw a
residential properties in the West dropped
marginally smaller 20,200 leasing deals of
3.3% qoq, the first fall in the past three
non-landed homes.
years. The relatively milder rental decline
However, the leasing activities seemed in the suburban areas is due to the smaller
to have taken place across a backdrop rental increase in 2006 and 2007.
of softening rents. Islandwide rentals for
private residential properties showed the
first decline over four years in 3Q 2008.
According to URA, islandwide rentals fell
0.9% qoq in 3Q 2008, with rentals of private
non-landed properties dropping by 1.1%
qoq. However, rents of private residential
properties are still experiencing double-digit
yoy percentage growth, of 15.1%. Of note,
tenants are increasingly cautious amid
the economic uncertainty and becoming
realistic in their accommodation needs. In
the current market, tenants generally prefer
dwellings which offer attractive rents, at the
expense of homes with luxury features. The
drop in overall rents was also due to cost-
cutting measures by companies, such as by
reducing generous expatriate packages that
include housing allowances.
Based on Knight Frank’s research of
non-landed property, rents of luxury
condominiums eased further by 6.6%
qoq. With the fall, it brings rents of luxury
condominiums to below that of end 2007.
Rents of luxury condos are some 2.6% lower
than that of 4Q 2007.
There was a fall in the rents of non-landed
residential properties in all micro regions,
according to Knight Frank’s research. The
greatest fall in rentals for this quarter was
in the East region, which reflected an 8.7%
qoq decline. This was partly because rents
for homes in the East have been staging
one of the fastest escalations in 2007. As
the number of homes in the prime districts
were collectively sold for redevelopment
 www.knightfrank.com

Public Housing resale HDB flats as a result of increasing

Sector
Unruffled Sentiments
The public housing sector still appears to
hold steady in terms of its performance,
notwithstanding frail financial markets.
The Housing Development Board (HDB)’s
flash estimates for the third quarter of 2008
showed that the market is still experiencing
healthy growth. Average HDB resale home
prices still achieved a relatively impressive
qoq growth of 4.2% in 3Q 2008, which could
be attributed to the healthy demand for
Chart 5
HDB Resale Transaction Volume and Price Index
9,000
8,000
7,000
number of new immigrants in Singapore
and demand from newly- formed families.
In addition, the more cautious mood among
these newly formed families could have
caused some of them to purchase HDB
flats instead of private properties. This latest
flash estimate also indicates that the current
average resale price has exceeded the all-
time high in 4Q 1996 by 0.4%.
The strong home-buying sentiment in the
public residential market is partly due to a
more conservative buyers’ behaviour during
the global economic crisis. Although rare,
there were flats concluded at above the
140
135
130
HDB Resale Price Index
S$700,000 level, particularly in areas such
as Marine Parade, Queenstown and Bukit
Merah. Prices of new and resale flats were
generally positive and reflect optimism going
ahead. Additionally, the 50-storey Pinnacle@
Duxton, due to be completed this year, have
prices starting at S$545,000 and going up
to S$645,800, much higher than the record
held by a S$531,500 five-room unit in Toa
Payoh. (Note that the record excludes flats
under the Design, Build and Sell Scheme).
With this strong demand, the unsold stock
of HDB flats has shrunk. It is believed that
there are presently 1,500 unsold completed
units, around 40% of the previous number
in 2007. The 4.5% qoq increase in resale
applications to 8,112 units in 3Q 2008 also
echoes brimming demand for public flats.
However the amount of the cash-over-
valuation (COV) of the transacted prices
of larger HDB flats has been decreasing
in the past three quarters. In this quarter

the average COV of 5-room flats and

No. of Transactions

6,000
125 Executive flats are S$17,000 and S$18,000
5,000
120 respectively. In 4Q 2007, the average COV
4,000 of 5-room flats and Executive flats were
115
3,000 S$26,000 and S$33,500 respectively.
110
2,000

1,000 105

0 100
3Q07 4Q07 1Q08 2Q08 3Q08

3-room Flat 4-room Flat 5-room Flat Executive Flat HDB Resale Price Index
Source: Housing Development Board, Knight Frank Research

Chart 6
Median Resale Prices of 4-room flat
$350,000 30.0%

$300,000 25.0%

$250,000 20.0%

$150,000 15.0%

$100,000 10.0%

$50,000 5.0%

$0 0.0%
3Q07 4Q07 1Q08 2Q08 3Q08

4-room Flat Valuation Price Change (qoq)

Source: Housing Development Board, Knight Frank Research

7
jul-sep 2008/3rd quarter
real estate highlights

Outlook for Private Table 1

Rentals of Selected Non-Landed Private Residential Units as at 3Q 2008
Residential Property
Locality Monthly Rent (psf)
Sector Districts 9, 10 and 11 (Luxury) S$ 5.00 – S$ 5.50
In recent months, the embattled financial Districts 9, 10 and 11 (Others) S$ 4.30 – S$ 5.10
markets have created a ruckus globally,
East Coast S$ 2.90 – S$ 3.90
leaving the Singapore private residential
West S$ 2.60 – S$ 3.30
market unsettled. The third quarter of this
year has seen prices take a dip and going Upper Bukit Timah S$ 2.20 – S$ 2.60
forward, it is anticipated that the price Thomson, Toa Payoh, Bishan S$ 2.40 – S$ 3.00
decline is likely to persist. Essentially, Yio Chu Kang, Yishun S$ 2.00 – S$ 2.30
whatever price gain achieved in the first half
Source: Knight Frank Research
of this year would be given up in 2H 2008,
resulting in overall price movement of 0%
to a drop of 3% for the whole of 2008. The
mass-market segment’s weak price growth Table 2
of 0.1% in 3Q 2008 could be the prelude Capital Values of Selected Non-Landed Private Residential
to a decline in the following quarter. Prices Units as at 3Q 2008
are expected to continue to fall in 2009 Locality Capital Value (psf)
and this could result in a challenging year
Freehold 99-year Leasehold
for Singapore’s private residential property
market. Districts 9, 10 and 11 (Luxury) S$ 2,220 – S$ 2,260 -
Districts 9, 10 and 11 (Others) S$ 1,750 – S$ 1,810 S$ 1,260 – S$ 1,350
East Coast S$ 1,070 – S$ 1,210 S$ 810 – S$ 1,120
West S$ 790 – S$ 840 S$ 660 – S$ 740
Outlook for Public Upper Bukit Timah S$ 610 – S$ 710 S$ 550 – S$ 790

Housing Sector Thomson, Toa Payoh, Bishan S$ 650 – S$ 770 S$ 610 – S$ 690

While the star seems to be fading for the Yio Chu Kang, Yishun S$ 490 – S$ 610 -
private residential sector, the outlook for the Source: Knight Frank Research
public sector in the short term looks set to
dwarf that of the private market this year.
The strength in the HDB resale flat market is
expected to continue for at least another six
months, which could result in a 12% to 17%
increase in the average HDB resale home
price for the whole of 2008. However the
gradual decline in the amount of cash-over-
valuation of the transacted prices of larger
HDB flats indicates that the period of robust
price expansion may be drawing to a close.

8
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Retail Property
Market
Prime retail rentals generally fell for the first Consumer sentiments were still considered
optimistic for the Great Singapore Sale
time since 3Q 2005 and are expected to have (GSS), which was held from 23 May to 20
July. While figures by Mastercard showed
mild corrections going ahead, as retailers are that local cardholders spending in the GSS

increasingly cautious about committing to went up by close to 25% over last year, this
rise fares poorly against last year’s when

lease at high rentals. spending grew at 45% over the year before.
Visitor expenditure in the GSS grew by 11%
to reach S$349 million.
Bumpy Road Ahead Retailers may also experience a slight fall in
Retail sales index, excluding motor vehicles, visitors’ spending, due to fewer visitor arrivals.
for June decreased 1.3% year-on-year (yoy) For example, an immediate concern is that
after 16 consecutive months of increase. the Singapore Tourism Board (STB) may fall
Consumers were generally more cautious, short of its targeted 10.8 million visitor arrivals
especially in buying bigger-ticket items. set out earlier this year, as visitor arrivals
As such, sales of big-ticket items such as contracted for the third consecutive month.
jewellery and telecommunication apparatus Latest figures indicate that visitor arrivals in
& computers fell by 20.0% and 21.8% yoy in August declined 7.7% yoy, the largest fall
June 2008. The index, however, recovered since the SARs period in 2003.
strongly in July 2008, reflecting a 9.3% yoy
expansion. Stripping price effect, real retail
sales improved 6.4% yoy in July.

Chart 1
Retail Sales Index at Current Price
(Excluding Motor Vehicle)

140 16.0%
Reatail Sales Index (Excluding Motor Vehicle)

130 12.0%
Yoy Change

120 8.0%

110 4.0%

100 0.0%

90 -4.0%
Mar 08 Apr 08 May 08 Jun 08 Jul 08

Reatail Sales Index (Excluding Motor Vehicle) Yoy change in Retail Sales Index

Source: Singapore Department of Statistics

9
jul-sep 2008/3rd quarter
real estate highlights
Healthy Demand and
Limited Supply
Occupancy of retail space in 2Q 2008
remained positive, improving for the fourth
consecutive quarter to reach a high of
93.7%. This was led by retail space in
Orchard Road, which was 96.7% occupied.
Of note, occupancy for retail space in the
Fringe Area, as defined by URA, increased
1.2 %-points to achieve 91.8%. Leasing
activities in 2Q 2008 were still relatively
strong with retailers committed to about
70% of City Square Mall’s tenancy. The first
phase of the retail space in Fusionopolis
(183,000 sq ft) was also more than 50%
taken up with Cold Storage and Fitness First
as two of their largest tenants.
With the absence of any significant new
supply, total existing retail stock (excluding
F&B space) decreased further in 2Q 2008 to
reach 34.5 million sq ft. There will however
be some notable suburban new malls that
will be completed in 2008. These include
the redevelopment of West Coast Plaza
Chart 2
Islandwide Demand and Supply
20
10
0 the city fringe, such as Novena Square, slid
-10
-20
2Q07 3Q07 4Q07
New Demand New Supply
Source: Urban Redevelopment Authority, Knight Frank Research
10
(158,000 sq ft) which is scheduled to be
completed in early October and is likely to
open officially later this year. This was the
former Ginza Plaza which is repositioned
as “An Oasis in the West”. This may attract
residents and students from more than 27
educational institutions within 3km of the
mall and will add variety to the West. Gross
rentals are expected to range between S$8
to S$25 per square foot (psf) for the mall.
The Great Singapore
Grand Prix
Besides enhancing Singapore’s attraction,
retailers were much excited about the
inaugural F1 night race, as it was expected
to radically increase retail sales. There were
however drastic drops in sales taking for
retail shops in Suntec City Mall and Marina
Square, due to massive road closures. This
was akin to the International Monetary Fund
(IMF) 2006 when sales of Suntec City Mall
94.0%
93.0%
92.0%
91.0%
1Q08 2Q08
Occupancy Rate
nosedived due to road closures and visitors
for the F1 race who were too focused in
the race than shopping in the area. This
benefited Orchard Road, the prime shopping
belt, as shoppers find it more convenient to
visit the area. Tangs department store thus
enjoyed an additional 40% sales takings
over the F1 race weekends compared to that
in the first week of September.
Notwithstanding, the F1 race was a major
boost to retailers in shopping areas not
affected by the race. A total of 50,000
tourists turned up for the F1 race and were
estimated to have spent about S$100 million
in Singapore. The F1 race has placed
Singapore in a positive light and this may
be beneficial for STB’s long-term target of
attracting 17 million visitor arrivals by 2015.
Slight Dip in Overall
Prime Retail Rentals
Overall prime retail rentals, for the first time
since 3Q 2005, fell by a marginal 0.7% qoq
to S$30.96 psf pm islandwide. Prime retail
rentals for central Orchard Road, including
Wisma Atria and Centrepoint, remained
stable at S$48.60 per sq ft (psf) per month
(pm) for 3Q 2008. However, malls along the
fringe of Orchard Road registered a slight
fall of 4.1% quarter-on-quarter (qoq) to
S$23.00 psf pm. Similarly, rents of malls in
2.5% qoq.
The decline in prime retail rents is in line
with general expectations as the current
economic situation has forced retailers to re-
evaluate their business plans. Many retailers
are currently reluctant to commit or renew
their leases at high rentals as they anticipate
poorer sales due to lower consumer
confidence.
 www.knightfrank.com

Chart 3
Prime Retail Rentals in the Orchard Road (Central) Locality
Outlook
16.0% As the financial crisis in the US and Europe
$55
developed into a global recession, consumer
sentiments would continue to be deflated
Prime Retail Rentals (psf pm)

$50
12.0% in the coming year. Singapore, being
heavily exposed to the global economy,
$45
is unlikely to remain unscathed as the
8.0%
confidence of retailers and consumers are
$40
starting to be affected. Despite the negative
4.0% repercussions, Singapore’s strong fiscal
$35 position and low unemployment rate is
expected to tide the country through the
$30 0.0% economic slowdown.
3Q07 4Q07 1Q08 2Q08 3Q08
In the next few quarters, with the economy
Prime Retail Rentals in the Qoq Change in
likely to contract, the retail sector will
Orchard Road (Central) Locality Prime Retail Rental
experience a softening of demand from both
Source: Knight Frank Research local and foreign retailers. Retailers will be
more cautious in expanding their businesses
and retail rents are likely to undergo
Table 2 corrections to reflect the gloomy outlook.
Current Rentals of Prime Shopping Centre Space Retail sales may also suffer as consumers
become more prudent and discerning in
Locality Average Prime Monthly Gross Rental1 (psf)
their expenditure with uncertainties in the
Orchard (Central) S$ 48.60 job market brewing. Islandwide prime retail
Orchard (Fringe) S$ 23.00 rentals however, are still expected to have
Marina Centre, City Hall, Bugis S$ 30.70 grown between 1% to 4% for the entire
City Fringe S$ 23.50 2008. In 2009, if the recession in Singapore
were to worsen, the demand for retail space
Suburban S$ 29.10
would be aversely affected, which in turn
1
Based on pre-defined portfolio of properties; refers to prime shop space of between 400 could result in a projected 8% to 13% yoy
and 800 sf typically located on ground level with good frontage; any yields implied refer
contraction in prime retail rents.
only to such prime space and may not be reflective of the entire shopping centre
Source: Knight Frank Research

11
jul-sep 2008/3rd quarter
real estate highlights
Office Property
Market
Office rentals showed signs of softening going
into the third quarter of 2008. Rents of office
space generally dropped in 3Q 2008 after
growth was already noticed to have eased
for some areas in previous quarters.
Market Review
With the world economy faltering, there is
a growing worry of beleaguered markets
across the globe that may now be faced
with a spate of new problems. In Singapore,
this has developed into a more softened
economic outlook. Economists at the
Economic Growth Centre have predicted
that it now looks increasingly likely that
Singapore’s economic growth may fall below
4% in 2008, below the Ministry of Trade and
Industry (MTI)’s range of between 4% and
Chart 1
Prices and Rentals
16.0%
14.0%
Price and Rental Changes
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
2Q07
Price Index Change (%qoq)
URA Price Index
Source: Urban Redevelopment Authority, Knight Frank Research
12
5% year-on-year (yoy). If such a scenario
were to come about, this growth for 2008
would have fallen below the 4% mark for the
first time since 2003.
While the effects of the US sub-prime crisis
sent ripples across the globe, its effect
is starting to be felt in Singapore. Local
economists predicted that the more salient
impact would be a less hiring in the job
market, asset prices dropping as well as
corporate bottom lines dwindling.
The unraveling of global events is expected
to plague the Singapore office market with
less than cheery sentiments. In 2Q 2008,
the financial and business services sector
continued to ease with expansion rates at
10.2% quarter-on-quarter (qoq) and 7.5%
qoq respectively. Despite the slowdown,
figures still represented better than average
growth rate numbers, especially for the
business services sector. In terms of five-
year quarterly average growth figures, this
250
Office Price and Rental Index
200
150
100
50
0
3Q07 4Q07 1Q08 2Q08
Rental Index Change (%qoq)
URA Rental Index
www.knightfrank.com
sector performed above the average rate of
4.8%. However, the financial services sector
performed below the quarterly average rate
of 10.8%. Since financial institutions are
one of the main source of demand for office
space, especially in the Central Region, the
turmoil in financial markets would impact the
take-up of new office space in the coming
months.
Notwithstanding, currently Singapore is
expected to be relatively less affected
by the external jolts in the global market
owing to its diversified economy, steady
investment opportunities as well as steady
job creation. According to a recent study by
the World Trade Organisation, Singapore’s
economy was cited as one of the most open
and competitive in the world. In addition, a
survey commissioned by the City of London
ranked Singapore as the third financial
centre in the world (survey). These global
recognitions can help provide opportunities
for the Singapore office market.
Possible Crack in
Growth Momentum
of Demand
Islandwide demand for office space was
relatively strong in the past three years
(2005 – 2007), but new demand started to
slow in the last quarter of 2007 when this
value stood at about 130,000 square feet
(sq ft). Going into 2008, the opening months
saw a slight renewal in new demand figures.
Office Space (‘000 sqm)
However, in 2Q 2008, new demand for office
space islandwide dipped again to register
at approximately 108,000 sq ft, the lowest
quarterly figure since the start of 2004.
Although the growth in demand for office
space islandwide appeared to be strong
in the past three years with an average
absorption of about 500,000 sq ft every
quarter, growth momentum may not
necessarily be so rosy in reality, especially
for offices in the Downtown Core. Although
the prime Downtown Core area makes
up about 40% of the total office stock in
Singapore, it made up 60% of the increase
in demand for office space between 2Q
2004 and end-2007, when rental growth
was accelerating. Nevertheless, since 1Q
2008, there appears to be a crack in the
growth momentum as office demand in the
Downtown Core area started to shrink, while
overall islandwide demand expanded.
The tapering of rentals this quarter as
well as the slowdown in demand in the
Downtown Core does not come as a
surprise. The tenants here are primarily
financial institutions, many of which had
already completed their expansion or
consolidation plans over the last 24 months.
In addition, some are putting any further
expansion plans on hold. As at 2Q 2008, the
new demand for office space in Downtown
Core was about 65,000 sq ft.
On the other hand, new demand for office
space Outside of the Central Region, which
has been lower over the past five years (2Q
2003 – 1Q 2008), saw stronger growth from
the second quarter of 2007. In 1Q 2008, this
value was a high of about 97,000 sq ft, the
largest since 3Q 2002. The steady growth
in demand in these four quarters (2Q 2007
– 1Q 2008) did not continue in 2Q 2008
though, when new demand for office space
Chart 2
New Supply, New Demand and Occupancy Levels Islandwide
(Private and Public Sectors)
100
80
60
40
20
0 90.50%
-20
-40
2Q07 3Q07
New Demand
Source: Urban Redevelopment Authority, Knight Frank Research
in this region was recorded at about 10,800
sq ft.
Islandwide occupancy remained healthy.
At 92.2%, islandwide occupancy levels
dipped by a marginal 0.1 percentage point
in 2Q 2008, based on official figures from
the Urban Redevelopment Authority (URA).
Based on Knight Frank’s basket of office
properties, occupancy of average Grade
A office space also witnessed a decline by
0.2 percentage point to register at 98.8%
in 2Q 2008. The third quarter of 2008 saw
occupancy levels remain at 98.8%, 0.3
percentage point less than a year ago.
Despite shrinking new demand for offices
in the Downtown Core, demand for prime
office space still looks healthy for Marina
Bay towers office space. Although Phase 1
of the Marina Bay Financial Centre is due
for completion only in 2010, Tower One
is already fully let, Tower 2 is 45% pre-
leased and Tower 3 is 55% pre-committed,
suggesting that positive sentiments still
prevail for the prime office property market.
The strong take up for office space in the
Marina Bay towers highlights interest for
new prime office space, and the interest
for offices in Downtown Core should still
be supported by Singapore’s move to
establishing as a leading financial hub.
93.00%
92.50%
Occupancy Rate (%)
92.00%
91.50%
91.00%
90.00%
89.50%
4Q07 1Q08 2Q08
New Supply Occupancy Rate
13
jul-sep 2008/3rd quarter
real estate highlights
Subdued Demand for
Transitional Offices
Scheduled to be completed in about a year,
the transitional office site at Scotts Road/
Anthony Road, which was awarded via
tender earlier in May 2008 with 130,000 sq
ft of office space, is set to house various
businesses under WPP, which is one of the
world’s largest communications services
groups. This development is situated
next to another transitional office site sold
to UOB Kay Hian and also opposite the
pioneer transitional office development,
Scotts Spazio. While response for such
transitional office space is strong, especially
for those in better locations, future demand
for transitional office space remains
questionable, especially considering the
ease in the supply crunch.
Two new commercial sites at Mohamed
Sultan Road and Mountbatten Road, which
have a corresponding site area of 0.6
hectares (ha) and 1.2 ha, were launched
for tender on 19 August 2008 and 23
September 2008 respectively. While the
Table 1
Transitional Office Sites Launched
S/N Location Nearest MRT
Station
1 Site at Scotts Road Newton
2 Site at Tampines Tampines
Ave 5 / Tampines
Concourse
3 Site at Mountbatten Mountbatten
Road
4 Site at Aljunied Road Aljunied
/ Geylang East Ave 1
5 Site A at Scotts Road Newton
/ Anthony Road
6 Site B at Scotts Road Newton
/ Anthony Road
7 Site at Mohamed Clarke Quay
Sultan Road
8 Site at Mountbatten Aljunied
Road
Source: Knight Frank Research
14
development period for such transitional
office sites could take between 1.5 and 2
years, approximate completion, in 2010
would mean that these sites would have
to compete with a large supply of about
4 million sq ft of office space that would
also be completed that year. As such, it is
anticipated that the site at Mohamed Sultan
Road might receive cautious bids or a few
opportunistic bids. Subsequently, if the site
is sold and the development is completed,
it could still attract potential tenants such
as architects, designers and marketing
firms, who do not require office space in the
CBD. The tender closing date for this site is
scheduled to be 14 October 2008.
The more recent site released at
Mountbatten Road paints a bleak picture for
the future of transitional offices. Situated a
distance away from the future Mountbatten
MRT Station, the site was already expected
to fetch bids between 15% and 40% lower
than an earlier site in the vicinity that was
sold in January 2008. The less than optimal
location, coupled with present market
sentiments, do not bode well for demand for
Maximum Date of Award
GFA (square
feet)
168,600 27 August 2007
124,000 19 November
2007
215,300 10 January
2008
203,300 Not Awarded
140,200 25 April 2008
145,900 6 May 2008
99,700 Not Awarded
126,400 Tender stopped.
Moved to
Reserve List
this particular site in the current market.
Other than the Marina Bay Financial Centre,
office space in the CBD that is expected
to enter the market could also pose as
competition to the transitional offices. In
2011, a 38-storey development, known as
One Raffles Place, will provide 350,000 sq
ft of prime office space. This development is
to be built next to the existing OUB Centre
Tower and retail mall. Such new prime office
space could be completed in time for the
expected economic recovery.
Softening of Rentals
Office rentals showed signs of softening
going into the third quarter of 2008. Although
rents were observed to be sliding, lease
renewals was noted to still be healthy.
Across the board, rents of office space
witnessed a drop in 3Q 2008 after growth
was already noticed to have eased for some
areas in previous quarters. Specifically, the
decline in rental growth of Grade A offices
was the steepest in the Suntec/Marina/City
Hall area, where the rate of growth was
registered at -6.2% quarter-on-quarter (qoq).
The slowdown in rentals was followed by the
Shenton Way/Robinson Road/Tanjong Pagar
area, which also saw negative growth of
-2.8% qoq. On the other hand, office rentals
in the Raffles Place area dropped the least
by 1.4% qoq.
Grade B offices in Singapore’s office
property market reflected the general
weakening of rental growth in 3Q 2008.
Grade B offices in Orchard Road saw a
reduction in rental growth by 7.8% qoq,
the greatest fall for all Grade B offices
islandwide. Raffles Place and Shenton Way/
Robinson Road/Tanjong Pagar Grade B
offices, however, were less impacted with
office rentals dipping by 1.8% qoq and 2.0%
qoq respectively.
As a whole, offices in non-CBD locations
also mirrored the general slowdown in rental
growth this quarter. Rentals continued to
weaken for the Beach Road/Middle Road
area when growth lessened by 0.9% qoq
www.knightfrank.com

in the second quarter and 3.4% qoq this Chart 3

quarter. Rents of office spaces in all the Average Office Rentals
suburban areas also fell, ranging from 1% to $20.00
8% qoq. $18.00
After about four years of rental growth, the $16.00
decline in office rentals in the Raffles Place Rental ($psf) $14.00
area can also be partly attributed to an $12.00
increase in potential supply in the area. This $10.00
is due to a significant amount of commercial $8.00
land sold through the Government Land $6.00
Sales Programme. In addition, some $4.00
landlords are becoming more realistic in $2.00
their rental expectations and are more
$0.00
flexible in their rental negotiations. Some 3Q07 4Q07 1Q08 2Q08 3Q08
landlords are also putting more effort to
Raffles Place Grade A Shenton Way/Robinson Road/Tanjong Pagar Grade A
retain tenants to maintain their buildings’
occupancy rates, leading to softening of Orchard Road Grade A Suburban Areas Suntec/Marina/City Hall Grade A
office rents in some cases. Source: Source: Urban Redevelopment Authority, Knight Frank Research

Table 2
Outlook Average Effective Monthly Rentals in 3Q 2008

In the short term, the volatility in financial Location Average Effective Monthly Gross Rental (psf)
markets are expected to lead to many firms CBD (Grade A)
either postponing their expansion plans or
Raffles Place S$ 17.10 – S$ 18.20
consolidating their space usage. Possible
Marina Centre / City Hall S$ 14.40 – S$ 15.90
financial mergers and acquisitions as a
result of the financial turmoil could also Shenton Way / Robinson Road S$ 11.30 – S$ 12.30
contribute to the consolidation of office Orchard Road S$ 13.30 – S$ 14.30
space usage and the reduction in demand Non-CBD
for office space. Following which, we could
Beach Road / Middle Road S$ 9.70 – S$ 10.60
also start to see the restructuring and freeing
Suburban (North) S$ 8.40 – S$ 9.30
up of additional space and the offer of
‘sublease space’ due to the potential cash Suburban (East) S$ 6.60 – S$ 7.40
flow problems faced by some companies. Suburban (West) S$ 7.00 – S$ 7.80
This may lead to an increase in available Source: Knight Frank Research
office space in the market. As a result, it is
anticipated that average office rentals would
persist to wane by 14% to 19% in the next
twelve months.

15
jul-sep 2008/3rd quarter
real estate highlights
Industrial
Property Market
The industrial property market moderated in
performance during 3Q 2008, with rents and
capital values for most industrial properties
remaining similar to 2Q 2008. However,
this could be the turning point for industrial
properties, following which rents and prices
are expected to decline.
Performance of
Manufacturing Sector
The manufacturing sector in Singapore
further contracted in 3Q 2008. This was
reflected in total manufacturing output, which
fell a drastic 21.9% year-on-year (yoy) in
July 2008 and declined 12.2% yoy in August.
In the previous quarter, the manufacturing
output contracted by 4.7% yoy in May
and 13.0% yoy in June. If the decline
persists, this may reflect a lowered global
demand for numerous industrial outputs.
This will be discouraging for the industrial
property market, which was enjoying a
notable recovery in 2007. Hence, there are
possibilities that industrialists will re-look at
spatial requirements, including consolidating
manufacturing functions and relocating to
cost-competitive countries.
The contractions in manufacturing output
were driven by a decline in biomedical
production, which shrank 67.3% in July and
continued to fall 33.8% in August 2008.
The drastic fall in July was due to a 69.7%
contraction in the pharmaceuticals segment.
The fall in biomedical output was part of the
volatility of the biomedical industry, where
manufacturing facilities were periodically
16
shutdown for maintenance as production
switches from one to another. While this
could be due to the volatility of the biomedical
industry, there seemed to be prolonged
weakening in biomedical output. In particular,
pharmaceutical production has been weak
for an extended period, bringing biomedical
output to contract for almost five consecutive
months and total less than 13.8% yoy for the
first eight months. The prolonged decline in
biomedical output may pose some challenges
for Singapore’s competitiveness, as the
sector has been identified as a bedrock for
Singapore to move up the value-chain in
industrial production.
Similarly, the chemicals cluster fell 6.0% yoy
and electronics cluster contracted 7.1% yoy
in August. Considering the first eight months,
consumer electronics grew only 2.6% yoy,
due in part to the closure or relocation of
mobile device production.
Of note, the Purchasing Manager Index
(PMI), which gives an outlook about
forthcoming factory output, fell from 50.6
in August to 49.5 in September. A reading
above 50 would be an expansion and this
indicates a contraction in upcoming factory
output. The 1.1-points fall was also the
first contraction in three months and the
largest monthly decline since January 2008,
attributable to both a weakened local and
overseas demand. Meanwhile, new orders
index dropped to 49.8 in August 2008 while
exports orders index increased to 48.9.
Notwithstanding, at below 50 points, the
exports orders index was considered a
contraction.
These were in sync with worldwide falls in
manufacturing and exports, especially the
G-3 economies comprising United States,
Europe and Japan. For example, the United
States’ manufacturing index dropped to 43.5
 www.knightfrank.com

for September, the lowest since October

2001, while Bank of Japan surveyed
amid rising inflation in emerging economies.
Moreover, as the economy is expected to
Demand and Supply
manufacturers who expressed sentiments worsen and consumers will be increasingly Islandwide occupancy of factory space
to be lowest compared to the past five years. cautious, manufacturers will have limited increased 0.7 percentage-point in 2Q 2008,
opportunities to pass these increased to 93.1%. This was the highest occupancy
Besides a global drop in demand for
business costs to buyers, leading to a lower of industrial space since 1998. Together
manufacturing outputs, the manufacturing
profit margin. Nonetheless, the effect can with limited factory space completed in 2Q
sector has to grapple with the effect
still be partially mitigated by an appreciation 2008, total new demand for factory space
of higher production costs. The higher
of the Singapore currency and at best, remained healthy in 2Q 2008, at 2.69 million
production costs were exacerbated by
a gradual recovery of the US currency. sq ft. While this was lower by 13% qoq, the
increasing import costs for raw materials
industrial property market is growing as
there was no contraction in demand and this
Chart 1 new demand far exceeded the new supply of
Industrial Production Index 818,060 sq ft in 2Q 2008.
120 12.0%
Total new demand for warehouse space
8.0% increased from 1.04 million sq ft in 1Q 2008
to 1.16 million sq ft in 2Q 2008. The 1.16
Industrial Production Index

110 4.0% million sq ft of total new demand was more

Yoy Change
0.0% than 947,200 sq ft of new warehouse supply.
100 This led to a 0.4 percentage-point increase
-4.0% in occupancy, to 92% in 2Q 2008. With
-8.0% Singapore striving to develop into a global
90 logistics hub, the prospects for warehouses
-12.0% remain bright in the long term. In addition,
-16.0%
the current office space crunch and
80
3Q07 4Q07 1Q08 2Q08 3Q08 expensive office rentals have caused the
users of prime offices to rationalize space
Industrial Production Index Yoy Change in Index
for storing files, records and archives, and
Source: Singapore Department of Statistics increasingly, warehouses are needed for
storage of such materials.
Chart 2
Demand and Supply of Factory Space The new take-up of industrial space is partly
(Private and Public Sector) influenced by the completion of new supple.
As there was no new completion of business
4,200 95.0%
park space in the second quarter of the year,
3,700 the new demand for such space fell from
94.0% 484,400 sq ft in 1Q 2008 to 183,000 sq ft in
Floor Space (‘000 sq ft)

3,200
2Q 2008. However, the overall occupancy
Occupancy Rate

93.0% increased by 1.7 percentage-points qoq to

2,700
89.7%. Although the office space crunch
2,200 92.0% is easing, the rental gap between office
1,700 and business parks space is still significant
91.0% enough to attract users to business parks.
1,200 As a result, the occupancy of business parks
700 90.0% is likely to continue to increase in the short
2Q07 3Q07 4Q07 1Q08 2Q08
term.

New Demand New Supply Occupancy Rate

Source: Urban Redevelopment Authority, Knight Frank Research

17
jul-sep 2008/3rd quarter
real estate highlights
Government Land
Sales Programme
Only one industrial site was sold through the
Government Land Sales Programme in 3Q
2008. The first was a 60-year leasehold site
at Woodland Avenue 4, which was awarded
to Soilbuild for S$13.61 million, or S$30.11
psf per plot ratio (ppr). This site could yield
a total of 180,833 sq ft of industrial space.
This marks the tenth industrial site acquired
by Soilbuild since the company move into
industrial property development in 2005, of
which six, including this site, are currently
in the development stage. Scheduled to
complete constructions by 2010, the factory
caters to Small-Medium-Enterprises (SMEs)
engaging in clean/light industry, general
industry and warehousing.
Industrial REIT
Acquisitions
Similarly, the industrial investment market
was quiet, with only two industrial buildings
bought by REITs. The first was Natural
Cool Building, acquired by Cambridge
Industrial Trust (CIT), for S$55.2 million,
averaging $260 psf. First REIT, on the
other hand, purchased a warehouse in Tua
View Lane, which is under development.
The warehouse was sold for S$42 million,
averaging S$180 psf. In the months ahead,
the number of industrial buildings that will
be purchased by REITs is likely to remain
subdued as S-REITs are looking across
the border in India, Malaysia and Vietnam
for diversification and buildings with higher
yields
18
Industrial Rents and
Capital Values
The industrial property market remained
stable amid industrialists who are
increasingly cautious during the economic
uncertainty. Rents of conventional industrial
space was generally unchanged in 3Q 2008,
with only conventional industrial space in
Kaki Bukit sliding by 2% qoq to average
$1.47 psf per month.
Rents of conventional industrial space in
the rest of the micro-regions, such as at
Macpherson/ Paya Lebar, Admiralty and
Ang Mo Kio were flat. This was the first
quarter that conventional industrial space
showed an almost flat growth in rentals, after
consecutive quarterly increases for the past
two years.
Similarly, the capital values of conventional
industrial space were flat in 3Q 2008. Capital
values in the Admiralty area ranged from
S$125 psf to S$285 psf and capital values
Table 1
Rentals and Capital Values of Sample Factory/Warehouse (Upper Floors)
and Business Park Space in 3Q 2008
Locality
Conventional Industrial Space
MacPherson / Paya Lebar
Kaki Bukit
Admiralty
High-tech Factory Space
Islandwide
Business Park Space
Islandwide
Source: Knight Frank Research
in Kaki Bukit vicinity ranged from $130 psf to
$350 psf.
For high-tech industrial space, rents
declined very marginally, by four cents to
average $4.10 psf per month. This was due
to a slight dip in the rents of older high-tech
industrial space, such as New Tech Park,
while rents for the rest remained at 2Q
2008’s level. With the completion of newer
higher-specifications buildings, pioneer high-
tech industrial buildings may be gradually
phased out as high-tech space.
Conversely, rents of business park space
were stable in 3Q 2008, backed by demand
from some office space users. Many
businesses have found business parks as
an attractive alternative to house approved
back-end operations. This brings monthly
rents of business park buildings, such
as The Synergy, The Strategy and The
Signature in International Business Park,
to average $4.54 psf per month.
Average Monthly Average Capital
Gross Rental (psf) Value (psf)
S$ 1.85 – S$ 2.20 S$ 195 – S$ 340
S$ 1.35 – S$ 1.60 S$ 130 – S$ 350
(60-year leasehold)
S$ 1.10 – S$ 1.35 S$ 120 – S$ 280
(60-year leasehold)
S$ 3.90 – S$ 4.30 N.A.
S$ 4.25 – S$ 4.85 N.A.
www.knightfrank.com
Chart 3
Factory Space Rentals
$1.60
$1.50
$1.40
Rentals psf
$1.30
$1.20
$1.10
$1.00
3Q07 4Q07
Rentals (psf)
Source: Knight Frank Research
Outlook
After enjoying about four years of gradual
price and rental increases, the growth in
the industrial property market is starting to
display strains of slowing down.
The slowdown in the manufacturing sector
would be one of the strongest factors
causing the fall in demand for industrial
space. The manufacturers in Singapore
may become increasingly pessimistic about
business outlook, as operating costs rise
and global demand for products such as
consumer electronics and semi-conductor
products continue to contract. Output
from the two key manufacturing clusters,
biomedical and semiconductor industries
are also anticipated to slow, limiting the
demand for such industrial space. Industrial
landlords, including managers of REIT
industrial buildings, are expected to be
12.0%
10.0%
8.0%
Qoq Change
6.0%
4.0%
2.0%
-0.0%
-2.0%
1Q08 2Q08 3Q08
Qoq Change in Rentals
more sensitive in lease renewals and rental
negotiations to ensure occupancy and lease
sustainability.
The fourth quarter could be the turning point
where average prices and rents of industrial
space could start to decline. But for the
whole of 2008, rents and prices of industrial
properties are still projected to increase by
about 5% to 9%, while rents and prices of
industrial properties may fall by 7%-12% and
10%-15% respectively in 2009. However,
the individual performance of different types
of industrial space may be mixed. The
rents and prices of conventional factory
space may suffer a higher rate of decline,
whereas rents of modern industrial space
and business parks would experience a
smaller fall. In the coming months, industrial
landlords could be more flexible in order
to maintain the occupancy levels of their
industrial portfolio.
19
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