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OUR COMPANY AFFILIATES

CBRE GROUP

CBRE Group, Inc. is the world’s largest commercial real estate services and investment firm, with 2018 revenues of $21.3 billion and more than 90,000 employees (excluding affiliate offices). CBRE has been included in the Fortune 500 since 2008, ranking #146 in 2019. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services.

INVESTMENT SERVICES

CBRE Global Investors, combined with CBRE Clarion Securities and CBRE Caledon, is one of the world’s leading real asset investment managers with $107 billion in assets under management.

Built up over more than 40 years, our unparalleled platform is focused on real assets, giving our institutional clients access to real estate and infrastructure in the Americas, Europe and Asia Pacific. Our clients benefit from a complete range of investment solutions including equity and debt, direct and indirect, and listed and unlisted strategies.

Trammell Crow Company, founded in Dallas, Texas in 1948, is one of the nation’s oldest and most prolific developers of, and investors in, commercial real estate.The CBRE Global Investors and Trammell Crow Company platforms make up the Real Estate Investments division of CBRE Group.

The Real Estate Investments division is led by
Danny Queenan, Global CEO, Real Estate Investments.

BLOGS

Regularly released content on the state of the real estate and infrastructure industry are produced by our subject matter experts and shared on their blogs. A selection of them can be found below.

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ASIA PACIFIC WATCH

As a fairly small and open economy, Singapore’s economic prospects have for many years been very much shaped by external forces and particularly its strategic location at the center of a rapidly-growing region. Over the past three decades, the economy has benefitted from the rapid growth of global trade relative to global GDP, and other globalization forces such as the cross-border flows of capital, ideas and people. Singapore has restructured its economy from basic manufacturing to higher value added segments including pharmaceuticals, high tech and services. Its expansion as a host of growing numbers of international tourists and the integration of the Chinese economy into the world’s trading system have been additional boosts to growth in the 21st century. This has ensured that Singapore has enjoyed a healthy GDP growth rate since 1980, and its economy rebounded rapidly from the GFC of 2009, expanding by 15.2% in 2010, making it the second fastest growing country in the world that year. Domestic policy has played an important role in “reinventing” itself through the years since independence in 1965. Its massive provision of public housing, world class education and health systems all adding to its development and helping it to become one of the world’s wealthiest nations. Yet it remains vulnerable to external shocks such as the Global Trade War. We hope that its solid fiscal and balance of payments positions may provide buffers against capital flow volatility.

STRUCTURAL GROWTH SLOWDOWN IN SINGAPORE

Singapore’s GDP growth is forecast to continue its structural deceleration over the coming five years and to expand an average of 2.5% p.a. for the coming five years: well down from the 4.6% p.a. for the past ten-year period. The Consensus Economics mean forecast is for 2.1% growth this year and 2.3% in 2020 (June 2019 survey). Its unemployment rate of just 3.8% is expected to decrease gradually by 2023 to 3.2%. Base case is for CPI to average 1.6% for the five-year outlook, which is higher than in recent years but slightly lower than the ten-year historic average of 1.7%. Long term government bond yields are forecast to rise over the coming five years from 2.0% at the end of 2018 to 3.4% by 2023.

JULY 2019

21,275.92

3.3%

Nikkei 225

28,542.62

6.1%

Hang Seng

2,978.88

2.8%

Shanghai Composite

108.47

0.1%

Yen/Dollar

Data points through end of June 2019. Change represents month-over-month change.

GDP AND CPI HISTORICAL AND FORECAST TRENDS

Sources: Oxford Economics, CBRE Global Investors

PRINCIPAL CONTRIBUTORS:
 
Shane Taylor
Juliet Cha
INVESTMENT TRANSACTION VOLUMES SOLID

Real estate investment volumes peaked in 2013 at USD 9.3 billion and have been in a range of USD $6-8 Billion annually over the last five years according to Real Capital Analytics. Historically, real estate investment volumes in Singapore have been largely driven by office transactions. However, cooling measures in the office sector spurred investors to look for opportunities in various other sectors. 2018 was the biggest year on record for the industrial transaction volume. A handful of investments including ESR-REIT’s merger with Vita Industrial Trust boosted the industrial sector to the highest level at USD 1.92 billion since the peak in 2013. Investment activity for the year 2019 is off to a strong start with an increase in transaction volumes in the office, retail and industrial markets.

SINGAPORE TRANSACTION VOLUMES
BY PROPERTY TYPE
Note: Transactions include properties and portfolios of USD 10 million and greater.
Development sites are excluded.
Source: Real Capital Analytics.
OFFICE SECTOR TRENDS IMPROVING

Singapore’s office vacancy rate is currently just above 5% and falling. Net absorption totaled 1.58 million sq ft in 2018: slightly more than net supply of 1.51 million sq ft. Expansions by co-working operators and tech firms continued to boost office demand. CBRE forecasts around 5.39 million sq ft will be delivered between 2019 and 2022. This annual average of 1.33 mill sq ft is approximately 30% lower than the ten-year historical average supply of 1.9 million sq ft. Office vacancy should thus continue to fall. Rents are projected to maintain an upward trajectory albeit at a more measured pace compared to the early part of the rental recovery cycle since 2017. Over the next five years (2019-2023), we forecast Raffles Place office rent growth to average 4.6% per year.

PRIME OFFICE RENTS AND VACANCY RATES
Source: CBRE ERIX
MANUFACTURERS, E-COMMERCE DRIVING INDUSTRIAL

The logistics market appears to have reached a stabilization phase where most of the supply pressure has been alleviated. With the rise in e-commerce and expectations of faster delivery times, there is a strong focus on shortening last mile delivery times. Furthermore, there is an increasing need to consolidate retail and warehouse space to keep costs competitive for retailers and consumers. The bulk of leasing activity in the industrial sector in 2018 was driven by the semi-conductor firms, electronics sectors and 3PL logistics providers. There is also continuous leasing demand from high value-adding manufacturers. Rents have been stabilizing in that segment since Q4 2017 at around SGD 1.58/sqft/month (CBRE). Singapore’s industrial property delivered a 5.3% total return (unlevered) in 2018 according to MSCI.

PRIME WAREHOUSE RENTS AND YIELDS
Source: CBRE ERIX
RETAIL SECTOR REMAINS CHALLENGING

Retail sales growth was positive in 2018, thanks to improving consumer confidence, strong tourist arrivals and a healthy labour market. Rental declines of recent years have eased and the market is stabilizing after a prolonged period of rental correction. As consumers’ preferences become more sophisticated, it is critical for both landlords and retailers to work together and adapt to meet this demand. Prime rents remained stable at SGD 65/sqft/month in Q1 2019 (CBRE) and the supply pipeline is expected to tighten in coming years. Rental growth will likely be driven by prime malls with secondary locations to struggle. In the mid to long term, a strong rental rebound is unlikely as uncertainty remains for retailers given labor shortages and a competitive e-commerce scene.

SHOPPING CENTRE PRIME RENTS
AND VACANCY RATES
Source: CBRE ERIX
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This information is for our clients and investors only. Please note that the content of this report is for informational purposes only and should not be viewed as investment advice or an offer or solicitation. Any opinions are solely those of the Strategy and Research Team of CBRE Global Investors and are subject to change without notice, and may not be consistent with market trends or future events. This research is based on current public information that we consider reliable, but we do not represent it as accurate, updated or complete, and it should not be relied on as such.

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