Singapore’s commercial property market remains resilient despite demand slowdown—RICS report

SINGAPORE: Singapore’s commercial property market remains healthy despite a notable dip in demand, according to the latest Royal Institution of Chartered Surveyors (RICS) Commercial Property Monitor for Q1 2024.

The Commercial Property Sentiment Index recorded a net balance of -16, the lowest reading since Q1 2024 when it stood at -2. While this signals a decline in market confidence, the overall availability of commercial properties remains robust, with 31% of respondents reporting a large supply of properties currently on the market.

Despite the healthy supply, the report highlights a drop in demand for commercial properties, with a net balance of -14 in Q4 2024—down significantly from +6 in Q3. This decline could lead to imbalances between supply and demand, potentially affecting market stability in the coming months.

In contrast, the outlook for new developments showed improvement. The survey’s indicator for the new project starts registered a net balance of 0, marking a significant recovery from the -24 recorded in Q3 2024. Additionally, credit conditions in the region remained stable, with a reading of +33, indicating continued access to financing for investors and developers.

Investment activity in Singapore’s commercial property sector took a sharp downturn in Q4 2024. Investment enquiries fell to -27, down from +30 in Q3. This marks the most negative reading for this indicator since Q2 2021 when it stood at -28.

Looking at rental expectations, short-term projections remained unchanged, with a net balance of -6 for the next three months. However, the outlook for the next twelve months remains positive, with a +22 reading, a slight increase from +21 in Q3 2024.

Among commercial property segments, certain asset classes showed strong capital value growth potential. The most promising sectors over the next twelve months include data centres (+4.3%), aged care facilities (+3.3%), student housing (+2.5%), and hotels (+2.5%). These segments continue to attract investor interest, driven by rising demand for digital infrastructure, healthcare services, and accommodation facilities.

While Singapore’s commercial property market remains resilient, the combination of weakening demand and declining investment sentiment presents potential challenges.

However, continued stability in credit conditions and growing interest in alternative property sectors could provide opportunities for investors navigating the evolving landscape.