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CBRE GROUP

CBRE Group, Inc. is the world’s largest commercial real estate services and investment firm, with 2017 revenues of $14.2 billion and more than 80,000 employees (excluding affiliate offices). CBRE has been included in the Fortune 500 since 2008, ranking #207 in 2018. 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 $105 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

Singapore has long been the more preferred real estate investment destination in Southeast Asia, given its high transparency, strong legal and regulatory systems and advanced infrastructure. The city state accounted for around 70% of the whole real estate transaction volume in Southeast Asia in 2017 and for over 75% so far in 2018 (Real Capital Analytics). Singapore’s economy appears solid as its GDP growth rate in 2017 rebounded from a dip in 2016 and is forecast to grow further at 4% in 2018. This growth is expected to be maintained from 2019 to 2022, with a predicted 4.4% YoY average GDP growth. As in 2017, its growth has been mainly driven by the manufacturing sector and its domestic exports which surged over 19% YoY in July 2018. Singapore’s services – its biggest sector – however, have endured a lower growth rate. Overall its outlook is unlikely to approach its high long-term average growth rate. According to MSCI, Singapore’s 2017 annual all-property total return of 5.6% has been largely driven by its income return, which stood at 4.8%. Its retail sector with a total return of 8.5% for the same period, outperformed the other property types, with its low yielding industrial sector the underperformer in 2017 delivering a mere 1.4% total return.

DECENT BUT BELOW TREND ECONOMIC GROWTH

Singapore’s GDP growth rate appears to have structurally slowed down since the post-GFC rebound period in 2010, the year in which its GDP growth rate peaked at 15%. Its GDP enjoyed a 10-year (2008-2017) average annual growth rate of 4.4% but it is expected to grow notably below that trend from 2018 onwards. Contagion from a deepening Global Trade War would certainly further dampen this outlook. Singapore’s CPI fell into negative territory in 2015 and 2016 but increased in 2017 at 0.6% YoY and is forecast to pick up further. Consensus Economics (October 2018) forecasts a 1.3% CPI in 2019. The Monetary Authority of Singapore has been tightening policy.

NOVEMBER 2018

21,920.5

-9.1%

Nikkei 225

24,979.7

-10.1%

Hang Seng

2,602.8

-7.7%

Shanghai Composite

112.9

-0.7%

Yen/Dollar

Data points through end of October 2018. Change represents month-over-month change.

GDP AND CPI HISTORICAL AND FORECAST TRENDS

Source: Oxford Economics

PRINCIPAL CONTRIBUTORS:
Shane Taylor
Pat Banyatpiyaphod
Juliet Cha
 
INVESTMENT TRANSACTION VOLUMES WELL DOWN

Real estate investment volumes (not including land sales for development) peaked in 2013 at USD 9.6 billion, while performing strongly in 2017 with volumes at USD 9.1 billion according to Real Capital Analytics. Historically, the real estate investment volumes in Singapore have been largely driven by office transactions and in 2017, the office sector accounted for approximately 50% of total real estate investments in Singapore. This year’s investment volumes, however, have started off very slowly with the retail sector outperforming the office sector, driven primarily by the Capitol Piazza & Capitol Theatre sale in May at USD 520 million. Based on the transaction volumes of 2018 YTD, we are on track to see the lowest level of investment since the GFC in 2009.

SINGAPORE TRANSACTION VOLUMES BY PROPERTY TYPE
Note: Property excludes land sales, development and all other property types not mentioned above.
Source: Real Capital Analytics
OFFICE REVERSIONARY YIELDS TICK UP

Singapore’s office vacancy dropped from 6.6% in Q2 2017 to just under 6% by Q2 2018. This latest vacancy rate is still above the 5-year historic average vacancy rate of 5.4% (Q3 2013 to Q2 2018). Raffles Place at least, should be helped by limited new supply entering the market in the next few years. Prime Rents have increased steadily since Q4 2016 from SGD 10/sqf/month to SGD 11.50/sqf/month, although this is still below the post-GFC peak of SGD 13/sqf/month. Prime yields have compressed from a peak of 6.6% in Q3 2008 to just 3.3% in Q2 2018, although this latest reading is slightly higher than the low of 3.0% in Q2 2017.

PRIME OFFICE RENT LEVELS AND VACANCY RATES
Source: CBRE ERIX
LOGISTICS RENTS AND YIELDS FALLING

The prime, strata-titled logistics real estate rents in Singapore have been gradually falling since Q2 2015 from SGD 1.83/sqf/month to SGD 1.58/sqf/month by Q2 2018. Yields have also been compressing from a high of 3.6% in Q2 2010 to 2.5% in Q2 2018. Over the past few years, the total stock has increased through development from 100 million sqf in Q2 2016 to 114 million sqf in Q2 2018. Manufacturing, external trade and domestic consumption have all been traditional drivers of space demand but the good news for the logistics sector is the fast-expanding e-commerce market: a phenomenon which is also evident in the struggling brick & mortar retail market.

PRIME INDUSTRIAL RENTS AND YIELDS
Sources: CBRE ERIX
RETAIL STILL IN THE DOLDRUMS

Due in no small part to the emergence and rise of e-commerce players in Singapore, recent growth in retail sector rents has been limited. This coincides with strong recent supply – with more to come. Prime rents were flat in Q2 2018 at SGD 65/sqf/month since Q1 2017, down from a peak of SGD 71.45/sqf/month in Q3 2008. However, there are some positive signs as vacancy rates slightly dropped in Q2 2018 to 7.3% compared to 8.1% one year prior. On the bright side, the total return for retail real estate in Singapore has performed the best of the main property types with a 7.7% unlevered, 3-year average annual from 2015 to 2017, compared to office at 5.5%, industrial at 3.2% and hotels at 4.1%.

SHOPPING CENTRE PRIME RENTS AND VACANCY RATES
Sources: 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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