A moderately growing economy, coupled with imbalances in demand and supply across the various sectors, will continue to add pressure on occupancy and rents in the Singapore real estate market in 2016. A weakening occupier market and concerns surrounding rising interest rates will keep investment activity measured. Against this challenging backdrop, however, there remains opportunities for landlords, tenants and investors:
Office: An expected "Flight to value" by occupiers should drive leasing activity, especially in the CBD Core. A shorter, less volatile rent cycle and limited new supply in the CBD Core past 2016, will lend support to a faster market recovery.
Retail: Current conditions provide an opportune time for landlords to realign and/or reposition their tenant mix, and for retailers to evaluate their space options. It is also currently critical for landlords and retailers to maintain an innovative spirit and create value for consumers.
Logistics: Operation efficiency for occupiers could be improved through rightsizing their physical footprint and/or relocating to developments with better specifications. Landlords should seek to enhance the quality of specifications in their portfolio to meet the needs of new growth sectors.
Residential: Prices are falling at a more measured/tapered pace, suggesting that the market may be approaching trough in the next 12 - 18 months. The narrowing premium of prime residential properties vis-à-vis the rest of the market could provide good buying opportunities.
Investment: Investment offerings are still present in the market for investors with a mid to long-term horizon looking to capitalise on current market conditions. Contingent on the effort of buyers and sellers, the bid-ask spread could see futher narrowing in 2016.