The commercial real estate market in Singapore has exhibited mixed performance across various sectors from 2022 to 2024. Warehouse space demand surged due to the e-commerce boom, with a 4.2% increase in total space in 2022 and occupancy rates reaching 91%. This growth continued with a 3.8% rise in 2023, pushing occupancy to 92.5%. Rental rates for warehouse space grew by 5% in 2022, averaging SGD 2.10 (USD 1.55) per square foot per month, and further increased by 4% in 2023 to SGD 2.18 (USD 1.61). For 2024, the trend is expected to persist with a 3.5% increase in space, a 93% occupancy rate, and rental rates averaging SGD 2.26 (USD 1.67) per square foot per month.
Conversely, the retail sector faced challenges. In 2022, demand for retail space declined by 2.1%, leading to an 88% occupancy rate and a 3% drop in rental rates to SGD 9.50 (USD 7.03) per square foot per month. The market showed signs of stabilization in 2023 with a modest 0.5% demand increase and steady occupancy at 89%, though rental rates remained flat. This year, a cautious recovery is projected, with a 1.2% demand increase, 90% occupancy, and a 1.5% rise in rental rates to SGD 9.65 (USD 7.14) per square foot per month.
The office building sector experienced significant shifts due to hybrid work models. In 2022, demand decreased by 3%, occupancy fell to 84%, and rental rates dropped by 4% to SGD 10.80 (USD 7.99) per square foot per month. Recovery began in 2023 with a 1.5% demand increase, improving occupancy to 85.5%, and a 2% rise in rental rates to SGD 11.00 (USD 8.14) per square foot per month. The positive trend is expected to continue in 2024, with a 2.5% demand increase, 87% occupancy, and a 3% increase in rental rates to SGD 11.33 (USD 8.38) per square foot per month.
Development trends highlight the impact of e-commerce and logistics, driving demand for warehouse space. The retail sector is evolving, focusing on experiential retail and mixed-use developments to adapt to new consumer habits. The office sector sees a rise in flexible workspaces, driven by changing work patterns. Sustainability is increasingly important, with new commercial developments incorporating green building standards.
In addition to these trends, the rise in e-commerce has fueled demand for last-mile logistics facilities. Companies are increasingly seeking smaller warehouse spaces closer to urban centers to ensure faster delivery times and meet consumer expectations. This has led to a surge in the construction of urban logistics hubs, which are expected to see an occupancy rate of 95% by the end of 2024.
In the retail sector, mixed-use developments are gaining traction. These projects integrate residential, commercial, and recreational spaces, creating vibrant communities that attract both residents and visitors. This trend is seen in developments like Paya Lebar Quarter and Funan Mall, which combine shopping, dining, office spaces, and residential units, providing a comprehensive lifestyle experience. The focus on experiential retail aims to draw consumers back to physical stores by offering unique, engaging experiences that cannot be replicated online.
The office sector’s shift towards flexible workspaces is driven by the increasing adoption of hybrid work models. Companies are seeking flexible office solutions that can adapt to changing workforce needs, leading to the rise of co-working spaces and serviced offices. This trend is supported by technology advancements that facilitate remote work and virtual collaboration. Buildings equipped with smart technology and amenities that support health and wellness are in high demand, as businesses prioritize employee well-being and productivity.
Sustainability is a key focus across all sectors. Developers are incorporating green building standards such as BREEAM and LEED to create energy-efficient, environmentally friendly buildings. These standards not only reduce operational costs but also attract tenants who prioritize sustainability. Government incentives and regulations are also driving the adoption of green practices in commercial real estate. In Singapore, initiatives like the Green Mark scheme encourage developers to incorporate sustainable features in their projects, enhancing the overall value and appeal of green buildings.
Market performance over the past three years shows resilience in the warehouse sector, a gradual recovery in retail, and a positive outlook for office spaces. Investors can benefit from understanding these trends and focusing on high-demand areas within Singapore’s commercial real estate market. By leveraging the growth in e-commerce, adapting to new retail formats, embracing flexible workspaces, and prioritizing sustainability, investors can capitalize on the evolving dynamics of the Singaporean commercial real estate landscape.
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Millie James is an American real estate investor and Adjunct Professor in Entrepreneurship, Emeritus at Business School.
Disclaimer: The views, suggestions, and opinions expressed here are the sole responsibility of the experts. No journalist was involved in the writing and production of this article.
