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Budget 2020: Industrial property segment gets long-term boost
By Sangeeta Mulchand
SINGAPORE — While nearer-term relief to help industries weather the impact of the COVID-19 outbreak and the downturn was a key Budget 2020 focus, it also contained measures that will provide longer-term boosts, including for industrial properties.
The Research, Innovation and Enterprise 2020 Plan, which outlines the government’s investment into artificial intelligence, industrial robotics, urban sustainability and biomedical sciences should benefit the industrial property sector, said Tricia Song, Head of Research for Singapore, Colliers International.
“The additional S$300 million set aside under the Startup SG Equity should lend more support to deep-tech start-ups, such as those in pharmbio (pharmaceuticals and biotechnology) and medtech, advanced manufacturing, and agri-food tech,” she added.
Desmond Sim, CBRE's Head of Research, Southeast Asia agrees: “From a real estate point of view, these initiatives definitely come at an opportune time to greatly complement industrial master planning at upcoming districts by JTC Corporation, including Punggol Digital District and Sungei Kadut Eco-district.
“With these initiatives providing fiscal support to expand the capabilities of budding start-ups, we expect to start seeing their impact in the next few years following the completion of JTC’s upcoming districts.”
The plan was among several measures that will benefit the property sector. Other measures included property tax rebates aimed at helping businesses pummelled by COVID-19 in the near-term.
The rebates were part of a S$4 billion Stabilisation and Support Package and included a 15 per cent rebate for private commercial properties that qualify, to support food services and retail establishments within those premises.
“The 15 per cent property tax rebate for qualifying commercial properties should alleviate some concerns among retail mall operators arising from the COVID-19 outbreak, such as declining tenant sales and footfall,” said Colliers’ Ms Song.
While some have suggested that the government make reduced rents a qualifying condition for the property tax rebates, there are already indications that many, including retail REITs, will be passing most or all the rebates to their tenants.
CapitaLand, which manages the CapitaLand Mall Trust, confirmed it will pass on the full benefits of the rebate to tenants. CapitaLand Mall Trust’s portfolio comprises 15 malls including Raffles City Singapore, Junction 8, and Clarke Quay.
Tenants in Frasers Centrepoint Trust’s malls might also see some relief.
“From our channel checks, Frasers Centrepoint Trust would likely provide some forms of rent reduction to tenants and are working on the details. Additional measures may also be provided on a targeted approach basis,” OCBC Investment Research said in a report.
Frasers Centrepoint Trust’s portfolio comprises six suburban malls including Causeway Point, Northpoint City North Wing and Changi City Point.
Colliers Research recommends retail landlords to pass on the savings in three ways: as fit-out incentives during the downtime or as direct temporary rent rebates for tenants; through increased spending on mall hygiene and cleanliness; and/or free parking and increased marketing campaigns such as cashback.
Changi Airport, which received a 15 per cent property tax rebate as part of a S$112 million Aviation Sector Assistance Package, has said it will give its retail, food and beverage, and service outlets a 50 per cent rental rebate for six months from Feb 1.
Meanwhile, the delay in GST hike should encourage more domestic spending at least into 2021, and support retail sales, Ms Song said.
For the hospitality industry, one of the worst-hit sectors, the rebates are a much-needed lifeline.
Hotels, serviced apartments and Meetings, Incentives, Conferences and Exhibitions (MICE) venues, which have also been hard hit, have been granted a rebate of 30 per cent for their accommodation and function room components.
“The property tax rebates and temporary bridging loans will no doubt help with fixed costs and working capital of the businesses,” said Govinda Singh, Executive Director of Valuation and Advisory Services, Colliers International.
He expects room occupancies to plunge 10 to 15 percentage points to 65 per cent if the COVID-19 outbreak lasts between three and six months but cautions hoteliers against discounting the Average Daily Rate (ADR) too deeply. “This is unlikely to drive demand given the travel curbs that are currently in place, and it could also take much longer to recover these discounts once offered,” he said.
Similarly, for MICE venues, he noted: “Given the fixed capacity of MICE venues in Singapore – which have already been booked for events in the second half of 2020 – it is not feasible to move all the existing events to the latter part of the year.”
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