Commercial Property Investments – COVID 19 Insights

While it might be a disastrous phenomenon for some, the COVID-19 pandemic proves to be an opportunity for certain individuals. The COVID-19 pandemic is expected to persist for the next few months or even through the year into 2021, threatening to push Singapore into its first recession in a while. Many Investors, big or small alike, are lying in wait and anticipating the opportunity to strike as the property prices and Singapore Interbank Offered Rate (SIBOR) decrease. Some might even be considering commercial property investment.

The decline in overall real estate investment of S$3 billion in the first quarter of 2020, which is one-third of the S$4.5 billion during the fourth quarter of 2019, evidence indicates that this might continue to be the case until the COVID-19 situation is resolved. This will sequentially result in the fall of property prices, which can already be seen in the decrease of both commercial and private property prices for the first quarter of 2020 based on real estate statistics provided by the Urban Redevelopment Authority (URA). 

Commercial Property

Businesses have been caught off guard by the COVID-19 pandemic as the government implemented Phase One of the Circuit Breaker initiative. This was followed up with a series of phases to contain the Coronavirus. 

As businesses ceased operations in batches, most of the retail and office spaces were deemed redundant, and the decrease in revenue will provoke the inability to afford high rental rates. While the Solidarity Budget Scheme was announced by the government to provide support for local companies to tide through this tough period via rental waivers, the decrease in revenue might inevitably put many businesses out of commission. This entails a decrease in the demand required for office and retail spaces. With a decrease in demand, the prices of commercial properties such as office and retail spaces are predicted to dwindle, while the prices of warehouse spaces remain.  

Office Space

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According to statistics from URA, the prices of office space has decreased by 4% in the first quarter of 2020, while rental prices dropped by 0.8%. While these price changes do not reflect the full impact of the COVID-19 outbreak, it is a good indicator of the upcoming downturn in office space value. Other factors such as the pandemic induced work from home (WFH) scheme will also disrupt the value of office spaces. 

As Singapore gradually enters recession due to the blow from the COVID-19 pandemic, which resulted in job losses and wages cut, it is unavoidable that companies will go out of business. With the exit of businesses in the economy, many office spaces will be left empty, which will result in a fluctuation in price.

The pandemic outbreak has caused controversies with regard to the pros and cons of telecommuting. As businesses converted to working from home, many of them have experienced the benefits of doing so and there has been an increasing number of companies that are planning to adopt a long term WFH culture. The enhanced Work-Life Grant (WLG) issued by Workforce Singapore will promote telecommuting to a greater extent. With this in mind, it is imminent that the office space market will experience a plunge in demand as companies convert fully digital or engage in shared office schemes to minimise costs. As a matter of course, the value of office spaces will dip, and it might not be a wise choice to invest in office spaces during this period of uncertainty. 

That being said, the decrease in the office space acquisition and rental prices of Singapore might, to a certain extent, attract foreign companies to move over and establish their Southeast Asia base with Singapore’s high level of digital adoption in mind. However, it remains obscure as to whether this will play a big part in countering the diminishing value of our office spaces. Nevertheless, it might provide investors who are looking to engage in commercial property investment the chances to maximise their profit, provided that they possess the relevant clientele network.  

Retail Space

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According to statistics reported by URA, the prices of retail spaces have decreased by 3.1% in the first quarter of 2020, while rental prices dropped by 2.3%. While these changes in price do not indicate the significance that the pandemic has to the retail space market, it is a good gauge of the upcoming decline in retail space value. Factors such as the WFH scheme will also alter the retail space market value. 

The COVID-19 situation has heavily impacted the retail industry as retail shops were obliged to close their business operations temporarily and F&B outlets were only allowed to accept takeaways or deliveries. Despite the recent lift on Circuit Breaker Phase Two and the affirmation that dining outside will be allowed with a cap of 5 individuals per group, the impact of the pandemic on retail sales remains ambiguous. 

Singaporeans have gotten used to food delivery systems and online shopping due to the WFH scheme introduced by the government earlier in April. While the lift on Circuit Breaker might trigger an outburst of Singaporeans dining outside, it will prove to be difficult for the retail industry to return to how it was before Circuit Breaker. As Singaporeans remain skeptical and cautious about the virus, it might take a while before the retail industry returns to its former glory. Grants such as the Multichannel E-commerce Platform (MEP) program that is initiated by Enterprise Singapore (ESG) which promotes and supports local businesses to cruise the trending online shopping wave further curtails the potential of the retail space market value of Singapore. 

As of date, although updated news about the latest retail space market trend is scarce, investors who are looking into commercial property investment and hoping for a windfall gain by hopping onto the declivity in the retail space market must reconsider their options. It is recommended to conduct proper research and predictions moving forward. 


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Warehouse spaces, on the other hand, can be a good commercial real estate investment to look into. According to statistics provided by Colliers International, warehouse space was the only commercial property statement that experienced a hike in terms of rental index. The surge of 0.2% in rental rate might be induced by a spike in the demand for e-commerce and delivery services, which stimulated the need for warehouse spaces to store goods. 

As mentioned earlier, with the introduction of grants such as the MEP program initiated by ESG, the online marketplaces and e-commerce industry will see a boost in revenue, increasing the demand for storage spaces. With businesses moving online, investments in warehouse space is a market to focus on in the few years to come. The increased demand for e-commerce and delivery services will also promote the rise of new logistic providers, and these companies will also require warehouses to operate as their sorting hubs. Coupled with the deflating SIBOR, it is a good time for individuals who are planning to conduct commercial property investment to start considering the potentials of warehouse space. 

Contrary to warehouse space, factories on the other hand are not performing well in the first quarter of 2020. Single-user factory space has seen a decline of 0.2% in rental index while multiple-user factory space is worse off with a 0.4% decrease in rental index. This is likely caused by the exit of Multinational Corporations (MNCs) out of Singapore. Also, there are only a small number of local businesses that are utilising factories for large scale manufacturing purposes. Moreover, it is unlikely for the government to implement new policies that might increase the demand for factory space. Hence, without the proper network, it is not advisable for investors who are looking into commercial property investment to include factory space into the equation anytime soon.


With the COVID-19 pandemic situation in place, commercial property investment, with the exception of warehouse space, will not be a viable option for investments. For real estate investors who are planning to take advantage of the deflating SIBOR and real estate prices, private properties should be the go-to option. If you are interested to find out more about the relationship between SIBOR and the private property market, do take a look at our previous article (Link to the “COVID 19 – A BUY TIME FOR PROPERTIES?”)

If you have any additional queries or need professional advice in helping you make your decision, feel free to contact us to discuss your needs.

References: Urban Redevelopment Authority, Colliers International, Ming Tian Di

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