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The moderation in tourist arrivals will lead to a decline in shopping spend by Chinese tourists, especially tourist destinations and retail trades that cater to Chinese tourists.
While the disruption caused by the novel coronavirus outbreak to real estate market activity is expected to be short-lived, Cushman & Wakefield believes the impact will be mostly felt by the retail, hospitality and F&B sectors.
In fact, the impact on the hospitality sector is seen to be more immediate.
“With millions in China under an effective lockdown and a ban on Chinese tour groups and travellers who have recently travelled to China, tourist arrivals especially from China are expected to slow in 1H 2020. Given that Chinese tourists make up about 20% of Singapore’s international visitors with about 3.6 million visitors to Singapore in 2019, overall hotel RevPar is expected to see some downward pressure in the first half,” said Christine Li, Head of Research for Singapore and Southeast Asia at Cushman & Wakefield.
The moderation in tourist arrivals will lead to a decline in shopping spend by Chinese tourists, especially tourist destinations and retail trades that cater to Chinese tourists.
In the first half of 2019, Chinese tourists emerged as the top spenders, spending almost $2 billion on accommodation, shopping and F&B, among others. Of this, 51% was spent on shopping alone. Hence, some of the more touristy shopping destinations in Orchard and Marina Bay Sands could be affected should the outbreak and travel ban persist.
However, landlords of major shopping centres are not under pressure to reduce rents particularly if an improvement in overall situation is seen in the next couple of weeks. Moreover, well-managed shopping centres have “enough tenants in waiting to take up any vacancy that becomes available”.
“So long as the virus remains at bay with no community spread, the temporary decline in footfalls at malls should recover over a short period of time,” explained Li.
Meanwhile, the impact on the industrial and office sectors is expected to be limited as they are non-tourism related.
Corporates, however, are expected to delay decision making in Q1 2020 as they focus on tactical issues surrounding their China operations.
“This is expected to impact activity in the first quarter of 2020 against an office leasing market that has already been grappling with a slowdown arising from the US-China trade war,” said Li.
Nonetheless, she believes liquidity remains aplenty for Singapore, with investors continuing to search for yield within the real estate sector.
“Well-managed and well-located office and industrial assets will remain sought after by investors and occupiers who typically take a medium to long term view when they purchase or lease these properties,” she said.
The mid-term outlook for the hospitality sector is favourable, post-Wuhan virus, on the back of low hotel supply pipeline in the next few years as well as healthy visitor arrival estimates.
A slew of new tourist developments and initiatives – such as the Mandai eco-tourism hub, Sentosa redevelopment, Jurong Lake District and the asset enhancement initiative works at the two integrated resorts – are also expected to raise Singapore’s attractiveness as a regional tourist destination within Southeast Asia in the long term.
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Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email victorkang@propertyguru.com.sg
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