CBRE’s Report Suggests Uncertain Economic Outlook Could Lead to Divergent Outcomes in Real Estate Market
According to CBRE’s recently released Singapore Market Outlook 2025 report, the real estate market could face divergent outcomes in the next 12 months due to an uncertain macroeconomic outlook. On one hand, easing inflation and interest rates are expected to provide some relief for the property market. However, concerns about slowing economic growth may negatively impact property demand.
Moray Armstrong, managing director and advisory services at CBRE, points out that several factors may affect the market in the near future, including ongoing geopolitical tensions, a new US administration with a nationalistic economic agenda, and the release of the URA Master Plan 2025 in the middle of the year. Despite these mixed signals, opportunities still exist in the real estate market for those who can capitalize on emerging trends.
Tricia Song, CBRE’s head of research for Singapore and Southeast Asia, shares a similar optimistic view. She notes that the property market continues to be supported by limited new supply and stable demand, making it an attractive option for investors from around the world. Despite the unknowns, she predicts that the Singapore real estate market will maintain its stability and resilience in the long run.
New launches expected to sustain private residential sales momentum
According to URA data, developer sales volume increased threefold to 3,511 units in the last quarter of 2024, rebounding from record lows earlier in the year. Prices also rose by 2.3% quarter-on-quarter, the highest quarterly growth in 2024. While some have speculated that this rebound may trigger new cooling measures, CBRE believes this is unlikely unless prices rise sharply in the coming quarters.
With improved buying sentiment, developers are expected to continue with new launches. It is estimated that between 12,000 to 14,000 new units could be launched this year, almost double the 6,647 units launched in 2024. This could potentially lead to the sale of 7,000 to 8,000 new homes in 2025, an increase from the 6,469 units sold in 2024. CBRE forecasts a price growth of between 3% to 6% this year, on top of the 3.9% growth seen in 2024. Additionally, rental rates are expected to increase between 1% to 3% in 2025.
Limited supply to support prime office and retail rents
The office market in 2024 saw slower growth compared to the previous year, with global economic uncertainties and elevated fit-out costs dampening leasing volumes. Core CBD (Grade A) rents grew by just 0.4% year-on-year, a decrease from the 1.7% rental growth seen in 2023. With a projected slowdown in economic growth in 2025, office leasing activity is expected to remain subdued as uncertainties moderate expansionary demand.
However, a limited pipeline of new Core CBD (Grade A) offices in the next three years is expected to keep vacancy rates low. Only 0.58 million sq ft of new office space is expected to be completed annually between 2025 and 2027, less than half of the 10-year average of 1.28 million sq ft. This, coupled with a continued preference for quality office spaces by occupiers, is projected to support a 2% rental growth in Core CBD (Grade A) in 2025, in line with GDP projections.
Limited supply is also expected to support rents in the retail property market, with only 0.5 million sq ft of new retail space expected to be completed in 2025, a 40.4% decrease from the previous year. CBRE notes that the leasing sentiment for retail properties remains positive, driven by inbound tourism and a strong pipeline of entertainment events. As such, the firm forecasts a 2% to 3% growth in average retail prime rents in 2025, bringing it back to pre-pandemic levels.
Prime logistics rents expected to remain flat, investment sales momentum to continue
CBRE reports that expansion demand for industrial properties in 2024 was subdued due to cost pressures and supply chain disruptions caused by the Red Sea crisis. As a result, rents for prime logistics properties saw a modest increase of 1.1% to $1.87 psf per month in 2024. In 2025, a large supply of almost 5 million sq ft of warehouse space is expected to be completed. However, at least 60% of this space has already been pre-committed, alleviating downward pressure on occupancy rates. Therefore, CBRE predicts that prime logistics rents will remain relatively flat in 2025.
On the other hand, CBRE expects real estate investment volumes in Singapore to continue growing in 2025, though at a slower pace. In 2024, investment volumes saw a 28% year-on-year increase to $28.62 billion, recovering from a 30.3% decline in the previous year. This increase is attributed to interest rate cuts, which boosted investor sentiment and appetite. The firm believes this trend will continue in 2025, with the majority of investors surveyed in the Asia Pacific Investor Intentions Survey expecting to maintain or increase their investments in Singapore.
However, given the uncertain economic and geopolitical climate, investors may be more selective in the near future, focusing on sectors or strategies with more promising outlooks. CBRE predicts a 10% year-on-year growth in investment volumes in 2025, barring any major economic shocks. The survey also found that the industrial and logistics sector remains the most preferred among investors, followed by residential and office properties.