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The economic impact of the Brexit vote to Singapore and the Asia Pacific region is expected to be limited, Cushman & Wakefield said in a report.
In Singapore, for instance, the vote will see slower decision making among certain global business sectors as occupiers pause to gain a better understanding of the ramifications for their operations.
“However, it is also anticipated that until there is further clarity surrounding the terms of the potential exit of the UK from the EU – something yet to be enforced – that their occupancy decisions will continue to be based primarily on local market conditions rather than global uncertainty,” it said.
Cushman & Wakefield expects downward pressure on Singapore office rents to persist in the near term as a large supply of office buildings is expected to enter the market over the next six to twelve months.
It noted that companies still on expansion trails like technology and insurance, may take advantage of the current opportunity and move to more efficient buildings as landlords are likely to be more receptive to favourable lease terms and rental incentives.
Singapore may also see fresh inflows of capital, especially as its office market negotiates the current rental down cycle.
“While a recovery in Singapore’s office market is likely to be gradual especially as it works off the large volume of new supply, we can expect Singapore to benefit from its stature as a global financial hub.”
On the Asia Pacific front, Cushman & Wakefield revealed that business and consumer confidence metrics are some of the most important indicators to monitor since they have strong correlations with leasing fundamentals and ultimately signal the future direction of rents and vacancy.
“However, beyond the short-term volatility, we do not expect the secession materially to impact occupier markets in Asia Pacific other than perhaps through some rebalancing of portfolios.”
It noted that the region’s growth and attraction remain conditioned on structural factors like its favourable demographic base, rapid urbanisation as well as a rising consumer class, particularly among emerging countries.
Cushman & Wakefield believes that the downward pressure on interest rates will sustain the appeal of real estate, particularly in markets offering attractive yield spreads.
“Hence, while we anticipate a pause in investment activity in the near term as investors take stock of the situation, we expect continuing favourable financial conditions to boost liquidity and drive property markets in Asia Pacific,” it said.
In fact, Cushman & Wakefield expects the region to gain “from the diversification of funds from the UK, driving heightened investment activity in core safe-haven Asian markets.”
With this, the region is expected “to weather any Brexit-induced volatility as favourable domestic factors take centre stage once again, cementing Asia Pacific as the fastest-growing region in the medium term,” it said.
Nikki De Guzman, Editor at CommercialGuru, edited this story. To contact her about this or other stories email nikki@propertyguru.com.sg
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