Global Investment To Recover By Q3 2024

Savills Research projects that global investment is to recover to long term trend levels by Q3 2024 although China and some European countries are likely to do so in 2025.

The increase in investment activity is forecasted from the findings of a recent Savills Global Research Survey conducted recently.

Based on the survey, investors are expected to be more active in 2024 than this year. 48% of respondents see a moderate rise in investment in the prime office sector while 57% see the same for the industrial sector. 57% also expect a moderate rise in investment in the retail sector with 52% seeing that for the residential sector.

Similarly for rents, 23% expect prime office rents to increase by 2% to 5 % whereas 64% see rents rising up to 5% for the industrial sector. For the retail sector, 41% see a rental rise of up to 2% while 58% see similar increase for the residential sector.

Paul Tostevin, Director, World Research, Savills: “With inflation seen to have peaked and some possible rate cuts starting in the US next year, the IMF has declared a forecast for a soft landing for the economic outlook. This view is supported given the resilience of labour markets, the strength of household and corporate balance sheets, the recovery in real wages, mitigated by higher interest rates, all resulting in sub trend growth (pre-Covid average was around 3%).”

On the APAC front, office outlook is looking positive for green certified buildings given the growing amount of focus on climate change and green/net zero plans. Office utilisation for APAC stands at 86% followed by EMAS (Europe, the Middle East and Africa) at 67% and the Americas at 50% while office vacancy rate is rising in most territories with the exception of Japan and Korea which have greater employee attendance in the office.

On the retail front, rental growth outlook is positive with up to 5% increase in APAC. Brands will be moving into iconic retail locations with online retailers also opening physical stores with some looking at locations in suburbs to serve people that are working from home once or twice a week. The retail mix within the city centres will also become more mixed-use, diverse and accessible for consumers visiting the city seeking novelty, unique experiences and also amenities.

With the Singapore economy potentially seeing a slowdown, more industrialists are likely to be more cautious in their expansion plans. Hence, rents for multiple-user factories will remain unchanged year-on-year (YOY). However, industrial rents are projected to post healthy growth with up to 3 % rise YOY in warehouse and logistics, especially for the new food factories which will be completed in the near term.

Singapore retail recovery is expected to mirror the APAC projection for 2024 with a 3 – 5% rental increase YOY for Prime Orchard Road but the Prime Suburban malls will remain flat with more consumers returning to the office and doing more travelling, and therefore have a lower consumption spend in the residential heartlands.

For the office sector, new supply and the increasing economic malaise that is affecting most countries will cause rental to soften by 2% - 3%. However, landlords will still have strong holding power and their expectation of interest rates rising again will reduce the probability of rents being slashed further.

For the residential sector, following the expected 17,000 private residential units being completed in 2023 and a further 9,875 units in 2024, rents will likely experience a negative bias of up to 5% next year. On the capital value front, the drop of buying volume from foreigners (due to the ADSB hike in April this year) may have impacted the CCR (Core Central Region) properties more but overall, prices island-wide would likely remain flattish for 2024.

While the global real estate industry may suffer from a host of problems, Singapore has that unique selling point that being a safe haven, there will still be a base level of transactions coming from those, especially the ultra-high net worth families, seeking to diversify from riskier assets and countries.

The relatively low base of 2023, and that the trajectory of interest rates is now seen to be peaking, give rise to optimism for more deals through the line in 2024.

Alan Cheong, Executive Director, Research & Consultancy, Savills Singapore: “As the world is embroiled in permacrisis, the general supply-demand balance for real estate here did not enter this fray off kilter, thereby injecting great resilience to both rents and prices."

Refer to the Media Exclusive Slides here.