The Singapore government just announced that it will be investing more in the Fintech business. According to KPMG’s Pulse of Fintech H1’22 report, Singapore’s fintech funding reached a three-year high for first-half-year (H1) performance, snagging a combined deal value of US$2.14 billion across venture capital (VC), private equity (PE), and mergers & acquisitions (M&A). While that may seem great in attracting more fintech businesses into Singapore to set up their business. I think the dynamic has changed and that commercial real estate in Singapore will never be the same again. Here’s why.
The Rise of the Digital Revolution
With the pandemic lockdown, came the rise of the digital revolution. Businesses have to find ways to make their business work online or risk losing their customers. On average, businesses spend more than 10% of their overall company revenue on advertising and marketing.
Shopify also reported that businesses that are able to make the purchase decision online easier can make significant changes to the purchase decision of the customers. They do that by posting reviews and investing in influencers to share more about the products and services.
Customers are no longer making their purchase decision based first-person. That’s why companies are willing to pay a good amount of money to promote their product by influencer rather than having a salesperson because the amount of reach is a lot more significant.
Why Commercial Real Estate is Dying
This leads to the demand for destruction of the commercial real estate in Singapore. Businesses are starting to catch on that their money is better spent on advertising and marketing to generate revenue. That means that investing in large office spaces typically means burning unnecessary cash flow in the business.
Singapore is one of the most expensive places to rent and buy real estate where rent prices can cost $400 to $1,000 per desk and a typical office rental costs upwards of $2,000 to $20,000 per month.
It’s no wonder even though the Singapore government has incentives for the Fintech industry to set up businesses in Singapore. Many of them are not willing to invest heavily in the office spaces here. Which is a smart choice!
Shoppee recently announce that they have laid off around 7,000 of their employee and is desperately trying to cut cost due to slower economic growth. With some parts of its operation in India and France to be halted.
How much has Singapore Commercial Real Estate Fallen
After the recent Q3 2022 earning results of Singapore REITs, 15 of the largest commercial real estate companies like Keppel DC, Mapletree, and Far East have fallen by more than 10%. And my guess is that it will get worst.
Ever since the pandemic lockdown and its easing of it, REITs in Singapore haven’t seen a recovery. Businesses are now starting to realize how they can lower expenses on their office spaces and invest their revenue elsewhere.
