State property at Changi on offer

Business Times – 12 Aug 2008

The parcel has a land area of 104,044 sq ft and GFA of 54,864 sq ft

HOTEL operators can look forward to another state property to develop – this time at Changi.
The Singapore Land Authority (SLA) yesterday launched the plot – part of a former military camp – for
public tender.

The tenancy, for an initial three years, is renewable up to 2018. The guide rental is $28,500 a month.
The parcel has a land area of 104,044 sq ft and a gross floor area (GFA) of 54,864 sq ft. It comprises
two three-storey buildings and a shed.

‘SLA is offering a number of vacant state properties for adaptive re- use, such as hotels and lifestyle
attractions, in line with the government’s vision for Changi Point as a seaview hotel, resort and
recreational destination,’ said Teo Cher Hian, SLA’s director for land operations (private).

Since last year, SLA has awarded four state properties in the Changi area for adaptive commercial reuse. Two are now restaurants, while the former Changi General Hospital is being turned into a spa resort.

Groundbreaking takes place next month and the resort is expected to be ready by next year.
The Singapore Tourism Board (STB) says leading hoteliers have expressed keen interest in the latest
property.

According to STB, mid- tier and economy hotels enjoyed average room occupancy rates of 85 and 87
per cent respectively in the first half of 2008.

Nicholas Mak, director of research and consultancy at Knight Frank, said the successful tenderer for
the Changi plot will have to come up with a unique concept.

He said the hotel needs to play on Changi’s laid- back character and is likely to be mid-tier.
The first state property to be converted for hotel use, at Chin Swee Road, is a boutique establishment
with 140 rooms. It officially opened in mid-May, with an initial occupancy rate of about 50 per cent.

Challenges for property sector

New engines drive Singapore’s property market but pitfalls remain

THE Singapore property market has weathered the storm from the US sub-prime crisis, soaring oil
prices and overall inflation, pretty well.

Runaway increases in property values in the high-end residential and prime office sectors seen in the
past couple of years, for instance, have started to ease. But they have not dived, and panic has not
set in, at least not so far.

Knight Frank managing director Tan Tiong Cheng says: ‘To some, this is a welcome breather from the
breakneck pace of increases recorded in the last 24 months.’

CB Richard Ellis chairman (Asia) Willy Shee too observes: ‘The overall market has displayed some
resilience. In the office market, there’s still demand for office space with occupiers still looking to precommit office space in yet-to-be completed buildings.’ While the private housing market is not as
buoyant as last year, transaction volumes have picked up in second quarter this year with
encouraging sales from mid and mass-market projects, he adds.

Market watchers feel that in the short-term, property values could head south, driven by near-term
fundamentals. However, the mid-term prospects for Singapore’s real estate sector are generally
considered sound. As a major developer puts it: ‘Population growth, global and regional wealth
creation, sustained government investment in infrastructure, the perennial sharpening of Singapore’s
competitive edge, limited land, security and political stability, internationalisation of the property
market – all these must be good for Singapore real estate prices in the long run.’

The Remaking of Singapore has helped create sound fundamentals for the local property market. The
government’s decision to break from the past and go ahead with developing two integrated resorts
with casinos as well as its efforts to position Singapore as a leading contender in the race among
global cities to attract wealth and talent have boosted the island’s prominence on the radars of
international property investors.

New engines for growing the Singapore economy have also been put in place and this to some extent
may also help shield the island and its property market from the full impact of what’s happening in the
US.

Investments and job creation from the IRs, Sports Hub, expansion plans for rail network and other
infrastructure projects, Singapore’s policy of welcoming foreign talent to its shores, and the strategy of
positioning Singapore as a hub for various industries – financial industry/wealth management, tourism,
education and healthcare – are expected to provide momentum for Singapore’s economy.

‘The IRs, F1, Sports Hub and Youth Olympic Games surprised observers who think that Singapore is
only a clean and safe place to do business but never a place where you can let your hair down,’
observes Knight Frank’s Mr Tan.

‘What do these initiatives mean to savvy investors? They mean that we are perceptive in discerning
changes in the global world, have the will to question old assumptions and have the courage to move
a population to accept initiatives that can be potentially divisive.

‘That the government and its people can move together to tackle challenges ahead demonstrates the
inherent strength of the country as a global city to do business and a place to live,’ Mr Tan added.
DTZ executive director Ong Choon Fah said: ‘Wealth management industry is still a very big thing
here. Wealth from high networths in Asia – China, India – is flowing into Singapore. With IRs and the

F1 race, Singapore is being marketed as a playground for the rich and famous. Family offices and
philanthropy are fast being added to the suite of services offered by private bankers.
‘The removal of estate duty has been a major boost to Singapore’s ambitions to be a wealth
management hub.’

New challenges
But the road ahead for the local property market is paved with challenges. Colliers International
director of research and advisory Tay Huey Ying argues that the ‘mid-term optimism for the Singapore
property market is underpinned by the IRs and the Marina Bay Financial Centre (MBFC). ‘If these
projects do not deliver, confidence may be shaken,’ she warns.

To be considered successful, the IRs will have to be able to continuously attract visitors year after
year and not fizzle out after the initial novelty wears off. Similarly, the MBFC can be truly considered
an achievement for Singapore’s aspirations to be a leading financial centre if the movement of tenants
into MBFC does not create a vacuum in existing office buildings that can’t be filled within a short span
of time; otherwise, it may just show there’s not that much depth in Singapore’s financial industry, Ms
Tay reckons.

In the residential property market, a short-term challenge that could materialise is if substantial
numbers of home buyers who’ve purchased private homes on deferred payment schemes in the past
few years begin to panic and dump their properties as the projects’ completion dates loom closer.
That would be the time when these buyers have to pay the bulk of the purchase price to developers,
and if some of them think they may have difficulty finding home loans, especially if they are still
holding on to several such units, they may panic and dump their properties at lower than current
market prices.

Such a scenario would be a house hunter’s dream, but could destroy wealth for the majority of
Singaporeans who already own their own homes.

‘Instead of subjecting themselves to panic selling, these property owners may wish to bear in mind
Singapore’s mid-term prospects and should try to hold their properties by securing a financing
package or a tenancy for their property,’ Ms Tay suggests.

Escalating construction costs
Escalating construction costs are another big concern going ahead. ‘The high construction costs
could translate into high purchase cost for buyers and investors of private property assets as well as
contribute to inflationary pressure for end-users of public infrastructure,’ says CBRE’s Mr Shee.
‘The high construction costs would also eat into developers’ profit margins and hence reduce the
incentive for developers to undertake new projects or acquire sites from the Government Land Sales
programme,’ he adds.

On the macro political front, Knight Frank’s Mr Tan says an immediate challenge is the confluence of
unstable political situations in three neighbouring countries – Malaysia, Thailand and Indonesia (which
will have a election next year). ‘Put simply, we’re a good property in a bad neighbourhood,’ he said.
CBRE predicts that office rentals are approaching a peak. The average monthly Grade A rental value
rose to $18.80 per square foot in Q2 this year, an increase of 43.5 per cent from the same period last
year. With completions of major office projects from 2010, including MBFC Phase 1 and 50 Collyer
Quay, the property consultancy group predicts the average Grade A office rental will ease to $12-15
psf post-2010.

On a more optimistic note, it highlights that with all the new office developments coming up, a
significant amount of future office stock will constitute world-class modern Grade A buildings. ‘Around
64 per cent of the office completions in the next five years will be Grade A quality,’ Mr Shee says.
For the private residential sector, CBRE has said a correction of residential prices to the tune of 5 to
10 per cent in the second half of this year is likely as the global economy suffers the continued
onslaught from the sub-prime mortgage meltdown and inflation.

Riding the turbulence
Colliers’ Ms Tay highlights the importance of a sound government land supply policy – ‘not just shortterm reactions’ – will help the local property market to ride out the challenges ahead.

‘For individual home buyers and sellers, they should arm themselves with the right information instead
of succumbing to herd instinct or following their emotions,’ she adds.

Knight Frank’s Mr Tan says: ‘Demand for real estate is dependent on economic prospects. With
strong economic fundamentals, I have no doubt that interest in real estate in Singapore by local and
foreign institutional investors will return once the current market turmoil blows over.

In similar vein, CBRE’s Mr Shee says: ‘Fundamentally, the long-term development of the office, retail,
residential and hospitality sectors will not change in spite of the present global financial worries.

‘It was all these government initiatives that attracted a fresh wave of foreign investment into
Singapore in the last 24 months, and it will be these developmental drivers that will continue to attract
investment from various parts of the world to Singapore.’

Growth in office occupancy costs tapers off in Q2

Prime Raffles Place space up only 1.1% quarter on quarter: DTZ report

GROWTH in office occupancy costs in Singapore has started to taper off after the meteoric rise last year, reflecting the increased resistance to higher occupancy costs, according to a new report.

‘Apart from Raffles Place, Shenton Way/ Robinson Road/Cecil Street and decentralised areas, growth in occupancy costs in other areas like Marina Centre and Orchard Road was flat in 2Q 2008,’ said DTZ in its second-quarter office market brief.

Average occupancy cost of prime office space in Raffles Place grew only 1.1 per cent quarter on quarter to $19 per square foot per month (psf pm) in the second quarter of 2008. In the Shenton Way/Robinson Road/Cecil Street area, the average office occupancy cost rose by 2.6 per cent quarter on quarter to $11.80 psf pm, while office buildings in HarbourFront enjoyed a higher growth of 5.3 per cent to $10 psf pm.

By contrast, in the first quarter of 2008, occupancy costs continued to rise amid a dearth of supply. Prime occupancy cost in Raffles Place gained 13.9 per cent quarter on quarter to $18.80 psf pm in the first quarter of 2008, for example.

‘As more new supply come on stream, office occupancy is likely to ease and limit growth in occupancy costs in the CBD for the rest of 2008,’ said DTZ, referring to the Central Business District.

However, the report also said that the cautious business outlook and companies gravitating towards cheaper premises like decentralised office buildings, industrial properties, business parks and disused state properties are putting a downward pressure on office occupancies.

Islandwide, average occupancy eased by 0.2 percentage point quarter on quarter to 96.9 per cent in Q2 2008. As a result of occupiers moving out to cheaper locations after lease expiration, office occupancies in
Raffles Place and Marina Centre dropped by 0.3 percentage point to 97.4 per cent and 1.2 percentage points to 98.6 per cent respectively.

But over in decentralised areas like Novena and HarbourFront, occupancy levels rose by 0.4 percentage point to 99.0 per cent and 1.1 percentage points to 98.7 per cent respectively, supported by lower occupancy costs.

DTZ also released its Q2 2008 office report for Kuala Lumpur yesterday. Gross occupancy costs for prime buildings in the Malaysian city rose 3.9 per cent quarter on quarter to RM6.32 (S$2.65) psf pm in the second quarter of this year, the property firm said.

But despite this, financial institutions with presence in Singapore are considering locating call centres
in Kuala Lumpur because of cost differential and special tax breaks, DTZ said in response to a query
from BT.

Source: Business Times 5 Aug 08

Home, retail, office rental growth to ease

Business Times – 25 Mar 2008

Housing rentals to rise 5-15% year-on-year in 2008: Knight Frank

PRIVATE housing rents are expected to grow at a slower pace this year than last year, Knight Frank said in a report yesterday.

The property consultancy firm expects a year-on-year rise of 5-15 per cent in 2008 – after a massive 40 per cent year-on-year increase in 2007.

Knight Frank’s estimates are based on the resistance of tenants and companies to even higher rents, and the limited availability of places at foreign schools for children of expatriates.

‘Due to the fact that foreign schools are full and there are long waiting lists faced by children of foreign families who relocated here, housing demand from new foreign family tenants is projected to decrease,’ Knight Frank said.

‘On top of this, foreign tenants as well as corporate HR (departments) have readjusted housing allowances this year, which constricts rental demand according to their budgets.’

Despite this, a demand-supply imbalance could still result in rental rises until a supply of new units is felt significantly from 2009.

About 8,400 new private homes will be completed this year. But the number will expand dramatically in the three years from 2009 to 2011, with an estimated 16,000 to 17,000 units completed each year.

This could put downward pressure on rents, Knight Frank said.

The same holds true for the retail sector. Knight Frank predicts that landlords could face stronger resistance from retailers to rising rents in the later part of 2008 as more space comes on stream.

‘Rents are forecast to maintain at their current level only until early 2008,’ it said. ‘Faced with a larger supply in the pipeline in the second half of 2008, island-wide prime retail rents are projected to appreciate by a relatively modest 5-10 per cent for entire 2008, compared to 22.1 per cent growth in 2007.’

Knight Frank also said growth in office rents and capital values in 2008 and 2009 will likely to be more moderate than in 2007. Office rents are forecast to rise 10-20 per cent year on year, while capital values are expected to increase 10-15 per cent year on year.

Realising the Marina Bay vision

Business Times – 22 Mar 2008

CHING TUAN YEE and BENJAMIN NG reflect on the planning of Singapore’s most ambitious urban project and highlight the exciting developments in store for Singaporeans and visitors alike

THE vision for Marina Bay is that of a high-quality, 24/7 live-work-play environment, one that encapsulates the essence of the global city Singapore is envisaged to be.

Waterfront business districts such as Canary Wharf in London and Pudong in Shanghai have come, in recent years, to signify urban progress and prosperity. They have raised the international profile of their respective cities while spurring growth and investment.

The Singapore example is in Marina Bay. A seamless extension of Singapore’s flourishing central business district spanning 360 hectares of prime land for development, Marina Bay is our city’s most exciting and ambitious urban project that will support our continuing growth as a major business  and financial hub in Asia.

Set by the water’s edge and with our signature city skyline as a backdrop, Marina Bay is envisioned to be a Garden City by the Bay, a 24/7 destination presenting an exciting array of opportunities for people to explore new living and lifestyle options, exchange new ideas and information for business, and be entertained by rich leisure and cultural experiences in a distinctive environment.

The groundwork for the expansion of the existing CBD (Central Business District) and its transformation into a waterfront business district focused around Marina Bay had been laid as early as the late 1960s. Land adjacent to the CBD was reclaimed in phases between 1969 and 1992.

The Master Plan for Marina Bay focuses on encouraging a mix of uses (commercial, residential, hotel and entertainment) to ensure that the area remains vibrant around the clock.

The concept of ‘white’ site zoning also gives developers more flexibility to decide on the mix of uses for each site, including housing, offices, shops, hotels, recreational facilities and public spaces.

To cater for good connectivity and seamless extension, the development parcels at Marina Bay were planned based on a grid urban pattern which extends from the existing road network within the  CBD.

This grid creates a flexible framework with a series of land parcels that can be amalgamated or subdivided to meet different requirements as well as changing demands and allow the phasing of developments.

Creating signature districts

In the planning of Marina Bay, specific attention was paid to creating value. The land parcels are located within a series of distinctive districts, each focusing around attractive public open spaces and tree-lined boulevards which will provide signature address locations for developments.

Along the waterfront and fronting key open spaces, building heights are kept low. This maximises views to and from individual developments further away from the waterfront, enhancing their attractiveness and creating a dynamic ’stepped-up’ skyline profile as well as more pedestrian scaled areas.

The successful development of Marina Bay is supported by state-of-the-art infrastructure. To date, the government has pumped in more than $4.5 billion to facilitate development of the area.

A Common Services Tunnel housing electrical and telecommunication cables and other utility services underground is being built, making repeated road diggings a thing of the past. An extensive road and rail network has also been planned, with three MRT stations to be built in the area as part  of the new Downtown rail line.

A new vehicular and pedestrian bridge will link Bayfront to Marina Centre. The 280m pedestrian linkway – the longest in Singapore – will sport a dynamic double helix structure. Together with a new waterfront promenade, this will create a continuous walking loop connecting up the necklace of attractions and open spaces around the Bay.

Another key infrastructural project is the Marina Barrage. When officially opened in 2009, it will turn the existing water body into Singapore’s first reservoir in the city. This will serve as a new source of fresh water for Singapore and a new lifestyle attraction allowing for a variety of water-based  activities and events to take place. It will also house Singapore’s tallest fountain project.

The softer touch

Having provided for much of the ‘hardware’ for the new business district, it became clear that URA had to go beyond its traditional roles of urban planning and land sales management. To this end, the Marina Bay Development Agency was set up within URA to focus on the ’software’ for developing  the area. Since then, URA has embarked on a full spectrum of marketing, promotion and place management activities to showcase the uniqueness of this new destination.

To generate more buzz, a calendar of events and activities for public spaces and water bodies has been put in place in partnership with various agencies and the private sector. Signature events, like the Marina Bay Singapore New Year’s Eve Countdown, have become a new urban tradition. Marina Bay has also become the definitive venue for a host of sporting events like the F1 Powerboat Race, the Oakley City Duathlon and the Great Eastern Women’s 10km run.

The shape of things to come

While it will take more than a decade for the entire area at Marina Bay to be fully developed, a host of projects that will offer people from all walks of life exciting and attractive options to live, work and play are already taking shape. These upcoming developments have contributed significantly towards enhancing the area’s reputation as a location that offers something for everyone: a tropical living environment among lush greenery; a bustling global business hub and a lifestyle locale presenting a kaleidoscope of entertainment and leisure choices.

LIVE – by the Bay. Marina Bay has fast become one of the city’s most popular and prestigious residential addresses, with a number of outstanding projects already under construction.

The Sail @ Marina Bay will be the tallest residential development in Singapore at 245 metres when it is completed in 2009. It boasts two towers – one at 70 storeys and the other at 63 storeys.  Meanwhile, the Marina Bay Financial Centre incorporates the 55-storey Marina Bay Residences, comprising 428 luxury apartments, and the Marina Bay Suites, a 66-storey development offering 221 exclusive bayside units.

WORK – by the Bay. With its prime location in the heart of Singapore’s future downtown, Marina Bay continues to be a magnet to global investors and tenants seeking premium office space in a prime location.

The development of Marina Bay will help to further position Singapore as one of Asia’s leading financial centres, doubling the size of the existing financial district. The new growth area set aside for the seamless extension of the existing financial district is more than twice the size of London’s Canary Wharf and will provide some 2.82 million square metres of office space, equivalent to the office space within Hong Kong’s main business district, Central.

Already, a nucleus of office developments is forming with the development of One Raffles Quay, the soon-to-be-completed Marina Bay Financial Centre, and the two recently sold sites at Marina View.

Several global banks and multinational corporations, including UBS, Deutsche Bank, DBS and Standard Chartered, are already located or will be locating in these developments.

PLAY – by the Bay. The ‘fun’ factor at Marina Bay is expected to be raised to a new high when the Marina Bay Sands Integrated Resort opens its doors in 2009. With its impressive design featuring a sky park and three soaring 50-storey hotel blocks with landscaped balconies, the area’s most anticipated project will add a new dimension to our city skyline.

The integrated resort is poised to be a world-class development that will house a casino, two theatres, 110,000 sq metres of meeting and convention facilities, as well as about 2,500 hotel rooms. Other attractions at the integrated resort include restaurants in the form of two floating crystal pavilions and an ArtScience Museum, the rooftop of which becomes an amphitheatre with tiered seating.

Building on Singapore’s green legacy, three world-class waterfront gardens of about 100 hectares have been planned for the area. With the first phase of the project slated for completion in 2010, the Gardens at Marina Bay will be another unique destination attraction for those visiting Singapore and a green sanctuary for people living and working in the city.

Each garden will feature a distinctive design and character. All three gardens will also be interconnected via a series of pedestrian bridges to form a larger loop along the whole waterfront and linked to surrounding developments, open public spaces, transport nodes and attractions.

Focal point for the community

Marina Bay is a prime example of a visionary masterplan that is not only well on its way to becoming a new focal point for the local community, but it has also drawn worldwide attention and interest.

Testament to this is its achievement in attracting close to $16.5 billion worth of private investments to date from international investors and developers from the US, Hong Kong, Australia, Europe as well as the Middle East.

Moving forward, Marina Bay will continue to be the centrepiece of Singapore’s urban transformation, providing the city with the opportunity to attract new investments, visitors and talents.

The URA, as the Development Agency for Marina Bay, is committed to our long-term and strategic plans to meet the area’s future development needs. We will continue to adopt a holistic and integrated approach in designing the area with people in mind, work with partners and communities to implement key infrastructure, and carry out active promotion and place management activities. We will also engage investors to garner more interesting business concepts and ideas. This will take us closer to our vision of making Marina Bay a choice destination for all, one that promises

Singaporeans and visitors alike a brand-new, live-work-play experience.

Ching Tuan Yee is Executive Architect, Urban Planning Section, Urban Redevelopment Authority, while Benjamin Ng is Place Manager, Marina Bay Development Agency, Urban Redevelopment Authority

Space crunch in Orchard pushes docs to Novena

March 12, 2008

The area could turn into medical hub as more private doctors set up clinics there

PRIVATE doctors are flocking to the Novena area as the squeeze on clinic space in the Orchard Road belt tightens.

The migration could turn the area into Singapore’s newest centre for private health services, some believe.

In the space of two years, developer Far East Organization has already sold or leased 92 per cent of the 145 medical suites at its new Novena Medical Centre (NMC).

Private doctors at the centre, which opened last October, are allowed to use some X-ray machines and labs in Tan Tock Seng Hospital (TTSH), which is just across the street.

Developers in the area are also setting space aside for private doctors, as well as accommodation for patients and their families.

The spill-over of demand has prompted Far East to house another 64 clinics in its 28-storey hotel in nearby Sinaran Drive. The group plans to either sell or lease the suites when ready, which is likely to be by 2010.

In Newton Road, SC Global Developments will also save space for medical suites in its upcoming office building, Newton 200.

Private specialists can also look to the Parkway Group’s new hospital in Irrawaddy Road, which is scheduled to open in July 2011. The group is setting aside 30 per cent of its space for them.

Medical suites in Novena occupy about one-third of the space that clinics in Orchard do. At about 24,154 sq m in total, they cover about the same area as Clarke Quay.

This spate of activity is fuelled by the Government’s plan to attract one million foreign patients a year by 2012.

Mr G.L. Yap, executive director for Far East Organization’s property services, said: ‘The infrastructure has to keep pace with expectations of growth.’

Foreign patients number more than 400,000 a year and come mainly from Indonesia and Malaysia, with increasing numbers from China, the Middle East and developed countries. They come for a range of treatments, including day surgery and routine health checks.

Spending on so-called medical tourism averaged about $1.3 billion in 2006 and is expected to double by 2012, according to Dr Jason Yap, director of health-care services at the Singapore Tourism Board.

The space crunch is already being felt by medical centres at Mount Elizabeth, Gleneagles, Paragon and Camden.

Company officials say that, save for three units, the buildings have been totally sold or leased out. While Paragon declined to say how many units it has, the three other centres have more than 540 suites.

The demand for medical suites has been pushing rents up, said property analysts. In the Mount Elizabeth Medical Centre, a suite was last sold for $5,000 psf, up from $4,017 last March.

Colorectal surgeon Francis Seow-Choen bought a unit at Novena two years ago because of high rents. For the past four years, he has also been renting a unit at the Mount Elizabeth Medical Centre, where rents have risen to about $18 psf, from about $8 psf four years ago.

‘The rents here have risen astronomically,’ said Dr Seow-Choen. ‘Instead of being subjected to market forces, I’ve decided to buy a unit in Novena, which as an area has a lot of potential.’

The Singapore Medical Group moved its Sports Medicine Centre from Paragon to the NMC this year, because of the space crunch and the area’s attraction as a sports and medical hub.

Dr Jimmy Lim, a cardiologist who crossed over from TTSH to set up his own clinic at the NMC, said the new clinic allows his previous patients to visit him.

‘Having a restructured hospital and now a private hospital nearby is basically going to give my  patients a wider choice when they use the in-patient facility,’ he said.

Source: The Straits Times

Ophir-Rochor corridor site to be marketed in France

Business Times – 11 Mar 2008

THE Urban Redevelopment Authority (URA) will market the first site in the new Ophir-Rochor corridor at the ‘Marche International des Professionals de L’Immobilier’ (MIPIM), a premier international property event in Cannes, France.

The site will be launched for sale under the Confirmed List of the Government Land Sales Programme in June.

In a statement yesterday, URA said the 2.74-hectare parcel is at Rochor Road/Ophir Road, adjacent to Parkview Square.

It also said the developer will have to include a minimum amount of office and hotel space to cater to the growth of Singapore’s financial and business services sector and tourism.

Depending on market demand, URA will release more redevelopment sites in the Ophir-Rochor area over the next five to 10 years. URA will be exhibiting plans for development of the Ophir-Rochor corridor at MIPIM Cannes.

A team led by URA, and comprising public sector agencies and private companies, will showcase investment opportunities, including key recent and upcoming developments, at the Singapore Pavilion.

‘With some of the most prominent upcoming developments and strategic sale sites that Singapore has to offer in Marina Bay and Ophir-Rochor, I am confident we will continue to attract international investors,’ said URA’s director of land administration Choy Chan Pong.

Besides plans for the Ophir-Rochor corridor, URA will exhibit plans for the extension of the existing financial district at Marina Bay.

As part of the plan to rejuvenate and grow the existing Central Business District, URA has released more plans for the Ophir-Rochor corridor to complement the Marina Bay area, featuring mixed-use developments with offices, hotels, residential and other complementary facilities in a park-like environment.

It is expected to be developed over the next 10 to 15 years.

PROPERTY: Demand for single office units still going strong in quiet market

Investors turn more cautious, but small firms still interested in strata-titled officesALL has turned quiet on the housing front, but some other segments of the property market appear to have escaped that fate.

Still going strong in particular are sales of single office units in larger commercial buildings. Known as strata-titled offices, these properties recorded active demand in the fourth quarter last year, even as home sales were taking a breather.

A healthy 13 transactions of strata offices occurred between October and December, up from only five in the previous quarter, according to data from CB Richard Ellis (CBRE).

Most of the properties were in the city area – Suntec City, Tong Building in Orchard Road, Springleaf Tower in Anson Road – and changed hands at well above $2,000 per sq ft (psf), CBRE said.

Altogether, $750.8 million worth of strata offices were sold in the fourth quarter, bringing the total for last year to $1.7 billion – more than four times the figure for 2006.

Prices also rose solidly throughout the year. At Suntec City Tower 1, a favourite strata-office location, unit prices climbed about 50 per cent from just above $1,500 psf in January to almost $2,400 psf in December – the highest level in two years.

The steady take-up of single units is due largely to the wider boom in Singapore’s office market. A shortage of offices, even as expanding businesses push up demand for space, has boosted prices and rents across the board, drawing much interest from investors, said CBRE’s executive director of investment properties, Mr Jeremy Lake.

But in recent months, even investor demand for offices has slowed as the United States sub-prime mortgage problems spread and sentiment in the market grew more cautious.

This has hit sales of entire office buildings, but strata offices have been less affected, said Mr Shaun Poh, a senior director of investment advisory services and auctions at DTZ Debenham Tie Leung.

He attributes this to the smaller businesses that are the other main source of demand for single office units. These businesses plan to occupy the space themselves rather than lease it out for rental income.

‘Smaller units, of the $1 million to $3 million variety, are more digestible for some buyers,’ he said. ‘They appeal to end-users who are moving from renting to buying now that rents have risen so fast.’

DTZ is marketing a floor of offices at Peninsula Plaza near the City Hall area, consisting of six strata units with a total floor area of about 8,500 sq ft. The units are tenanted at about $4 psf, but rents in the building have moved up to between $7 and $8 psf, said Mr Poh.

The indicative price for the floor is $17.5 million, or about $2,050 psf. At this price, with a projected $7.50 psf rental, the net yield works out to about 4 per cent, he added.

Since the property went on the market earlier this week, DTZ has received ‘more than 10 enquiries’, Mr Poh said.

‘Some are investors looking to buy the whole floor, but we’ve also seen interest from end-users in electronics or shipping firms who are interested in buying just one or two units.’

In general, however, experts feel that strata-office sales might not be as strong in the first quarter of this year as last year.

Colliers International has not yet sold any strata offices at auction this year, after selling one a month between October and December. In December, a 3,003 sq ft unit was sold at United House, for a healthy $2,497 psf.

But Mr Poh said that, while sales might slow, prices are unlikely to fall any time soon.

‘Prices have not gone up, but neither have they come down,’ he said.

‘If they can be maintained in such an environment, and if things get a bit more optimistic, prices could even go up 10 to 20 per cent over the next year.’

Source: The Straits Times 9 Mar 08

PROPERTY: Demand for single office units still going strong in quiet market

Investors turn more cautious, but small firms still interested in strata-titled offices

ALL has turned quiet on the housing front, but some other segments of the property market appear to have escaped that fate.

Still going strong in particular are sales of single office units in larger commercial buildings. Known as strata-titled offices, these properties recorded active demand in the fourth quarter last year, even as home sales were taking a breather.

A healthy 13 transactions of strata offices occurred between October and December, up from only five in the previous quarter, according to data from CB Richard Ellis (CBRE).

Most of the properties were in the city area – Suntec City, Tong Building in Orchard Road, Springleaf Tower in Anson Road – and changed hands at well above $2,000 per sq ft (psf), CBRE said.

Altogether, $750.8 million worth of strata offices were sold in the fourth quarter, bringing the total for last year to $1.7 billion – more than four times the figure for 2006.

Prices also rose solidly throughout the year. At Suntec City Tower 1, a favourite strata-office location, unit prices climbed about 50 per cent from just above $1,500 psf in January to almost $2,400 psf in December – the highest level in two years.

The steady take-up of single units is due largely to the wider boom in Singapore’s office market. A shortage of offices, even as expanding businesses push up demand for space, has boosted prices and rents across the board, drawing much interest from investors, said CBRE’s executive director of investment properties, Mr Jeremy Lake.

But in recent months, even investor demand for offices has slowed as the United States sub-prime mortgage problems spread and sentiment in the market grew more cautious.

This has hit sales of entire office buildings, but strata offices have been less affected, said Mr Shaun Poh, a senior director of investment advisory services and auctions at DTZ Debenham Tie Leung.

He attributes this to the smaller businesses that are the other main source of demand for single office units. These businesses plan to occupy the space themselves rather than lease it out for rental income.

‘Smaller units, of the $1 million to $3 million variety, are more digestible for some buyers,’ he said. ‘They appeal to end-users who are moving from renting to buying now that rents have risen so fast.’

DTZ is marketing a floor of offices at Peninsula Plaza near the City Hall area, consisting of six strata units with a total floor area of about 8,500 sq ft. The units are tenanted at about $4 psf, but rents in the building have moved up to between $7 and $8 psf, said Mr Poh.

The indicative price for the floor is $17.5 million, or about $2,050 psf. At this price, with a projected $7.50 psf rental, the net yield works out to about 4 per cent, he added.

Since the property went on the market earlier this week, DTZ has received ‘more than 10 enquiries’, Mr Poh said.

‘Some are investors looking to buy the whole floor, but we’ve also seen interest from end-users in electronics or shipping firms who are interested in buying just one or two units.’

In general, however, experts feel that strata-office sales might not be as strong in the first quarter of this year as last year.

Colliers International has not yet sold any strata offices at auction this year, after selling one a month between October and December. In December, a 3,003 sq ft unit was sold at United House, for a healthy $2,497 psf.

But Mr Poh said that, while sales might slow, prices are unlikely to fall any time soon.

‘Prices have not gone up, but neither have they come down,’ he said.

‘If they can be maintained in such an environment, and if things get a bit more optimistic, prices could even go up 10 to 20 per cent over the next year.’

Source: The Straits Times 9 Mar 08

For sale: 18th floor of Peninsula Plaza at $17.5m

NOVELTY Department Store Pte Ltd, part of the Novelty Group, has put the entire 18^th floor of Peninsula Plaza up for sale, with a price tag of about $17.5 million or about $2,050 per square foot (psf) of strata area.

Peninsula Plaza is a 999-year leasehold building near Raffles City. DTZ is marketing the property.

The 18th floor comprises six strata units adding up to 8,514 sq ft – all of which are leased. Tenancies for five units are up for renewal/expiry later this year, while the lease on the sixth unit runs out in mid-2009.

The $17.5 million price tag reflects a passing net yield – that is based on existing contracted rents – of about 2 per cent.

However, DTZ notes that current monthly asking rents for offices in the building range from $7 psf to $8 psf.

Assuming an average rental of $7.50 psf, the $2,050 psf asking price reflects a net yield of about 3.5 per cent.

‘The potential buyer may also further capitalise on this investment opportunity and subsequently offer to resell the six strata units individually to take advantage of rising capital values of smaller strata office space,’ said DTZ senior director (investment advisory services and auction) Shaun Poh.

The property provides an opportunity to invest in ‘good quality and well maintained office space’, he said. ‘Strong demand and rising rental rates for office space in the Central business

District are expected to continue, providing income growth from the asset.’

DTZ is marketing the property through an expression of interest exercise that closes on April 1.

In December, a first-storey freehold office unit at United House, behind Le Meridien Singapore Hotel at Orchard Road, fetched $2,497 psf of strata area at an auction.

Far East Organization is said to have sold an entire office floor last year at The Central, a 99-year leasehold development above Clarke Quay MRT Station, for $3,050 psf.

Novelty Group is involved in the property and department store businesses. Its upcoming residential developments include i Residences, a freehold development with 70 apartments in the Irrawaddy Road area, and the 35-unit Evania at Upper Paya Lebar Road.

Source: Business Times 5 Mar 08

DC rate hike lower than expected

Average industrial rates up 16.8%, muted increases for most other uses

THE government yesterday announced modest, lower-than-expected increases in development charge (DC) rates for most use groups, except industrial.

‘Limited transactions in the past six months, amidst cautionary sentiment set about the US sub-prime debacle, were probably an important factor for the moderate gains this round,’ said Jones Lang LaSalle regional director and head of investments Lui Seng Fatt.

Knight Frank director Nicholas Mak said: ‘The government may feel that there has been no significant appreciation in land prices in the last few months.

‘And DC rates for most use groups – such as commercial, non-landed residential and hotel/hospital – were already at a higher base because of substantial hikes in the last revision.

‘Industrial DC rates, on the other hand, had seen only a marginal rise the previous round and hence saw the sharpest increase this time.’

DC rates, which are payable for enhancing the use of some sites or putting bigger developments on them, are revised twice yearly, on March 1 and Sept 1, and are listed according to use groups and 118 locations across Singapore.

From today, the average DC rate for commercial use has gone up 1.5 per cent – after the 42 per cent increase in the last round on Sept 1, 2007. The average rate for non-landed residential use has been raised 2.6 per cent, again much smaller than the 58 per cent hike previously, while the average rate for landed residential use has been left unchanged.

For hotel and hospital use, the latest DC rates are up 3.3 per cent on average, compared with a 23 per cent hike previously.

Industrial DC rates have jumped 16.8 per cent on average, against a 2 per cent rise previously.

JLL’s Mr Lui said that the big hike in industrial DC rates is in tandem with growing demand for backoffice space as more firms relocate out of the CBD due to high rents.

For industrial DC rates, the biggest hike of 33.3 per cent was in the Jurong/Lim Chu Kang/Kranji location, which analysts attributed to JTC Corp’s sale of two industrial sites at Jalan Tepong and Pioneer Road/Tuas Avenue 11 at about double the land values implied by the previous September 2007 industrial DC rate for the area.

Similarly, the sale of an industrial plot at Commonwealth Drive/Lane at about four times the September 2007 DC rate-implied land value was probably behind a 32 per cent hike yesterday in the industrial DC rate for the area.

Industrial DC rates were raised by 22.2 per cent each in the Kallang  Way /MacPherson /Aljunied, and Braddell/ Potong Pasir/ Woodleigh areas, based on JLL’s analysis. The rate for West Coast Road/ Jurong East was upped 20.7 per cent.

Increases of 20 per cent were seen in locations such as Havelock Road, Telok Blangah, Tiong Bahru, Bukit Merah, Redhill, Alexandra and Henderson.

Commercial DC rates stayed put in Raffles Place, Marina Bay, Cecil Street and Robinson Road. Instead, the hikes were mostly outside the central business district, ‘reflecting the trend of office demand being pushed out of the CBD’, Savills Singapore director Ku Swee Yong said.

The biggest increases, of 25 and 23.3 per cent, were in the Toa Payoh/Potong Pasir and Paya Lebar/Eunos areas respectively.

The sale price of a 99-year commercial plot next to the HDB Hub in Toa Payoh in October and rising rents at SingPost Centre in Paya Lebar were likely reasons for the increases.

The Marine Parade and Tampines locations each saw a 19 per cent appreciation in commercial DC rates, apparently supported by the sale price of an office unit at Parkway Parade, and rental evidence at Tampines Mall and buildings in the Tampines Finance Park.

For non-landed residential DC rates, the biggest gain of 28.6 per cent was in Ang Mo Kio/Yio Chu Kang as well as an adjoining sector that covers Upper Thomson and Sembawang Hills. Far East Organization’s $601 psf per plot ratio top bid for a condo site next to Ang Mo Kio Hub in September last year – a record for 99-year suburban condo land – was the likely reason for the rate hikes.

The Telok Blangah and Tiong Bahru/Ayer Rajah locations each saw hikes of 22.2 per cent in non-landed residential DC rate.

CB Richard Ellis executive director Li Hiaw Ho said that the increases were probably supported by the $639 psf ppr fetched for a 99-year condo site on Alexandra Road last year. Mr Li also pointed to the sale of a freehold site on Margate Road as the likely reason for a 21.4 per cent rate hike in the Mountbatten/Meyer/Broadrick area.

For hotel use, gains of around 9-10 per cent were seen in DC rates for the traditional hotel belts in the Orchard Road, Marina Centre and Singapore River locations, as well as places like Marina Bay, Bayfront and Fullerton Road.

‘The tourism boom is expected to continue as the Singapore government drives towards the 17 million visitors goal by 2015.

Orchard Road remains Singapore’s main shopping belt, while upcoming developments in the Marina area such as the Marina Bay Sands integrated resort and the F1 race will further generate demand for hotels in the area,’ Mr Lui said.

The DC use group for hotels also includes hospitals and interestingly, the government did not raise the DC rate for the Irrawaddy Road location where a hospital site last month fetched a record price of $1,600 psf ppr from Parkway group.

A spokeswoman for the Chief Valuer said: ‘Parkway’s record bid was an isolated case. In general, there’s no compelling evidence that market values for hotel/hospital use in the area have moved up so much.’

Source: Business Times 1 Mar 08

DC rate hike lower than expected

Average industrial rates up 16.8%, muted increases for most other uses

THE government yesterday announced modest, lower-than-expected increases in development charge (DC) rates for most use groups, except industrial.

‘Limited transactions in the past six months, amidst cautionary sentiment set about the US sub-prime debacle, were probably an important factor for the moderate gains this round,’ said Jones Lang LaSalle regional director and head of investments Lui Seng Fatt.

Knight Frank director Nicholas Mak said: ‘The government may feel that there has been no significant appreciation in land prices in the last few months.

‘And DC rates for most use groups – such as commercial, non-landed residential and hotel/hospital – were already at a higher base because of substantial hikes in the last revision.

‘Industrial DC rates, on the other hand, had seen only a marginal rise the previous round and hence saw the sharpest increase this time.’

DC rates, which are payable for enhancing the use of some sites or putting bigger developments on them, are revised twice yearly, on March 1 and Sept 1, and are listed according to use groups and 118 locations across Singapore.

From today, the average DC rate for commercial use has gone up 1.5 per cent – after the 42 per cent increase in the last round on Sept 1, 2007. The average rate for non-landed residential use has been raised 2.6 per cent, again much smaller than the 58 per cent hike previously, while the average rate for landed residential use has been left unchanged.

For hotel and hospital use, the latest DC rates are up 3.3 per cent on average, compared with a 23 per cent hike previously.

Industrial DC rates have jumped 16.8 per cent on average, against a 2 per cent rise previously.

JLL’s Mr Lui said that the big hike in industrial DC rates is in tandem with growing demand for backoffice space as more firms relocate out of the CBD due to high rents.

For industrial DC rates, the biggest hike of 33.3 per cent was in the Jurong/Lim Chu Kang/Kranji location, which analysts attributed to JTC Corp’s sale of two industrial sites at Jalan Tepong and Pioneer Road/Tuas Avenue 11 at about double the land values implied by the previous September 2007 industrial DC rate for the area.

Similarly, the sale of an industrial plot at Commonwealth Drive/Lane at about four times the September 2007 DC rate-implied land value was probably behind a 32 per cent hike yesterday in the industrial DC rate for the area.

Industrial DC rates were raised by 22.2 per cent each in the Kallang  Way /MacPherson /Aljunied, and Braddell/ Potong Pasir/ Woodleigh areas, based on JLL’s analysis. The rate for West Coast Road/ Jurong East was upped 20.7 per cent.

Increases of 20 per cent were seen in locations such as Havelock Road, Telok Blangah, Tiong Bahru, Bukit Merah, Redhill, Alexandra and Henderson.

Commercial DC rates stayed put in Raffles Place, Marina Bay, Cecil Street and Robinson Road. Instead, the hikes were mostly outside the central business district, ‘reflecting the trend of office demand being pushed out of the CBD’, Savills Singapore director Ku Swee Yong said.

The biggest increases, of 25 and 23.3 per cent, were in the Toa Payoh/Potong Pasir and Paya Lebar/Eunos areas respectively.

The sale price of a 99-year commercial plot next to the HDB Hub in Toa Payoh in October and rising rents at SingPost Centre in Paya Lebar were likely reasons for the increases.

The Marine Parade and Tampines locations each saw a 19 per cent appreciation in commercial DC rates, apparently supported by the sale price of an office unit at Parkway Parade, and rental evidence at Tampines Mall and buildings in the Tampines Finance Park.

For non-landed residential DC rates, the biggest gain of 28.6 per cent was in Ang Mo Kio/Yio Chu Kang as well as an adjoining sector that covers Upper Thomson and Sembawang Hills. Far East Organization’s $601 psf per plot ratio top bid for a condo site next to Ang Mo Kio Hub in September last year – a record for 99-year suburban condo land – was the likely reason for the rate hikes.

The Telok Blangah and Tiong Bahru/Ayer Rajah locations each saw hikes of 22.2 per cent in non-landed residential DC rate.

CB Richard Ellis executive director Li Hiaw Ho said that the increases were probably supported by the $639 psf ppr fetched for a 99-year condo site on Alexandra Road last year. Mr Li also pointed to the sale of a freehold site on Margate Road as the likely reason for a 21.4 per cent rate hike in the Mountbatten/Meyer/Broadrick area.

For hotel use, gains of around 9-10 per cent were seen in DC rates for the traditional hotel belts in the Orchard Road, Marina Centre and Singapore River locations, as well as places like Marina Bay, Bayfront and Fullerton Road.

‘The tourism boom is expected to continue as the Singapore government drives towards the 17 million visitors goal by 2015.

Orchard Road remains Singapore’s main shopping belt, while upcoming developments in the Marina area such as the Marina Bay Sands integrated resort and the F1 race will further generate demand for hotels in the area,’ Mr Lui said.

The DC use group for hotels also includes hospitals and interestingly, the government did not raise the DC rate for the Irrawaddy Road location where a hospital site last month fetched a record price of $1,600 psf ppr from Parkway group.

A spokeswoman for the Chief Valuer said: ‘Parkway’s record bid was an isolated case. In general, there’s no compelling evidence that market values for hotel/hospital use in the area have moved up so much.’

Source: Business Times 1 Mar 08

Property development charges barely budge

Small revision of fees points to dwindling deals, slow price growth

IT’S official: the property market has gone deathly quiet.

The Government barely tweaked development charges in its semi-annual revision of fees yesterday, reflecting the property sector’s subdued state over the last six months.

Development charges, which can run in the millions of dollars, are what a developer has to pay to buy and redevelop an existing site.

Average islandwide charges for office, hospital, hotel and non-landed housing sites merely inched up, while landed residential sites saw no change in the fee at all.

This marks a big reversal from last year, when the frantic pace of land acquisition led to record hikes in development charges for many sectors.

In super-hot locations, the fees were even doubled.

This time, the only major change was in the industrial sector, where charges jumped 16.8 per cent – compared to 2 per cent in the last round.

This was due to a previous low base, as well as rising demand for back-office space, which led to recent land sales at benchmark prices in areas such as Commonwealth and Ubi, said experts.

Development charges are set by the chief valuer based on recent land and property values, and are adjusted every six months, so their growth rate can be used to indicate market activity.

Property watchers said yesterday’s small rises show what the market has known for some time: Property deals are dwindling and the pace of price growth has slowed.

‘The rates have been moderated as a result of the limited transactions over the last six months, attributed in part to the more cautionary sentiment,’ said Mr Lui Seng Fatt, the regional director and head of investments at Jones Lang LaSalle.

But fees rose for areas on the city fringe, showing that activity is spilling out from prime spots, said Savills Singapore’s Mr Ku Swee Yong.

Development charges rose for non-landed residential sites in Upper Thomson, Tiong Bahru, Balestier and Chancery, among others.

This was probably due to some collective sales late last year, said Mr Nicholas Mak of Knight Frank.

These include the sale of Toho Gardens in Yio Chu Kang and 15 terrace houses in Balestier.

Mr Mak said the fee rises in these areas could further affect the already cautious sentiment in the market.

The overall impact, however, is ‘not as major’ as that from the last round of hikes in charges, he added.

Still, developers looking for new land will probably start relying more on government sales – which do not involve development charges – than on collective sales, said Mr Li Hiaw Ho, the executive director of CB Richard Ellis Research.

In the office and shops sector, the recent sales of transitional office land helped boost development charges in Tampines and Scotts Road.

Thomson and Paya Lebar also saw bigger hikes than the rest.

Hotel sites had increases mainly in central areas, while the fees for industrial sites rose across the board.

Source: The Straits Times 1 Mar 08

Marina Bay to provide 1.1m sq m of office space

It will become a seamless extension of Raffles Place, says Mah

THE upcoming financial district at Marina Bay will be twice the size of London’s Canary Wharf and will provide as much Grade A office space as Hong Kong’s Central.

Revealing more plans for Singapore’s new financial hub, National Development Minister Mah Bow Tan told Parliament yesterday that Marina Bay remains the centrepiece of the government’s efforts to provide more office space.

‘URA (the Urban Redevelopment Authority) will make available more sites for development in this area over the next five to six years, in line with market demand,’ he said. ‘When completed, these new developments will provide more than 1.1 million sqm of office space, to match the total amount of office space at Raffles Place today.’

The area will become a seamless extension of Raffles Place, Mr Mah said. It is expected to take more than 15 years to materialise, depending on market demand.

The existing central business district will not be neglected, he said. URA will release land around the Tanjong Pagar precinct as well as redevelop the Ophir/Rochor corridor into an office cluster.

Mr Mah also touched on plans for Orchard Road, saying that URA plans to work with the private sector to build a pedestrian network with underground links, walkways at street level and second-storey links between buildings.

The Ministry of National Development will set out its land use plans for the next 10-15 years in the next few months in its Master Plan 2008. The plans have been developed with three key objectives in mind – to ensure that Singapore has sufficient land to support economic growth; to reduce commuting by bringing jobs closer to home; and to provide greater greenery and leisure options.

Addressing a now-hot topic, Mr Mah said that sustainable development will continue to be a priority.

To encourage environmentally friendly practices, the government will look at a range of measures including public education, research and development, and possibly legislation, he said.

Source: Business Times 29 Feb 08

Newton area growing as a hub for hybrid offices

NEWTON is shaping up as a centre for hybrid offices, with another company, The Ascott Group, moving to the neighbourhood.

The Urban Redevelopment Authority (URA) also said yesterday that it would release not one, but two, transitional office sites between Scotts Road and Anthony Road for sale.

Ascott, which is officed at the former Temasek Tower, could not say how much space has been decanted in the move but did say that its new offices in Newton will accommodate some 50 to 80 employees, including trainers, trainees and staff who will support the training activities at its Ascott Centre for Excellence there.

A spokesman for Ascott said that it leased the former Anthony Road Girls’ School in mid-2007 on a 3+3+3 year lease from the Singapore Land Authority, and started moving in from the end of last year after refurbishing it.

URA offered its first transitional office site in Newton in August 2007 too. This was sold to Hwa Hong Corporation and KOP Capital for $37 million – $219 per square foot per plot ratio (psf ppr).

While the two new sites now being offered are equally well located, Knight Frank director (research and consultancy) Nicholas Mak believes bidding ‘will be more cautious this time’.

Both parcels are to be sold on short-term leases of 15 years, and Knight Frank estimates the first of the new sites, Parcel A,

which can yield a maximum gross floor area (GFA) of 140,189 sq ft, could see bids of between $14 million and $18.2 million, or a unit land price of $100-$130 psf ppr.

Parcel B, which can yield a maximum GFA of 145,915.4 sq ft, could see bids of between $14.6 million and $19 million, representing the same unit price range of $100-$130 psf ppr.

Mr Mak noted that current monthly gross rents for the Scotts Road area are comparatively low at between $6 and $8 psf.

He also highlighted that the proposed transitional office developments are expected to be completed by the middle of next year – and about 2.6 million sq ft of new office space is expected to be supplied to the market in 2009.

Savills Singapore director of commercial services June Chua believes that there could still be an attractive profit margin for any developer, but adds that the developer, or possibly even contractor, would have to secure a tenant first, so that there is a minimal ‘void period’, during which the landlord has to secure a tenant.

She also said that the target rental would have to be around $7 psf per month.

Source: Business Times 29 Feb 08

URA launches 2 more temp office sites in Newton

Analysts see good demand just like for a nearby plot launched earlier

TWO more transitional office sites have been launched by the Urban Redevelopment Authority (URA) in a move to help ease some of the pressure on space.

The adjacent sites – parcel A is 8,682.8 sq m in size and parcel B is 9,037.9 sq m – are near the Newton MRT station, between Scotts Road and Anthony Road.

The sites can accommodate developments of up to four storeys that can be built within a year.

Transitional office sites, a relatively new concept, were introduced as a quick fix to the lack of space in the Central Business District (CBD).

They have 15-year leases, significantly less than the usual 99-year leases for commercial buildings.

The response has been mixed. A plot launched by the URA in Aljunied recently flopped, with all bids rejected as being too low.

The URA believes the Newton sites will fare better.

‘Based on market feedback, there is still demand for transitional office sites in the city centre,’ it said.

Property experts also expect a more enthusiastic response.

Mr Nicholas Mak, Knight Frank’s head of research and consultancy, said the prime location near the CBD and Newton MRT would draw bidders.

And the sites being adjacent means a developer could combine the land.

‘There is a potential for amalgamation to create bigger floor space,’ added Mr Mak, who estimated that the sites could sell for around $100 to $130 per sq ft (psf).

This values the parcels from $14 million to $19 million each.

Mr Mak felt the Aljunied site was ‘too close to the red-light district of Geylang’.

For the two latest plots, the industry experts interviewed expect a level of response similar to the Scotts Spazio site, which is across the road and was eagerly received by developers.

KOP Capital is developing the site, which cost $37 million, with partners Hwa Hong Group and Dubai Investment Group.

Insurer Prudential will lease the four-storey building for 14 years, paying $6.50 psf a month. The company should move in by September.

However, some experts believe that transitional office sites will not be commercially viable given their brief tenure. Tenders for the two Newton sites close on April 24 for parcel A and April 30 for parcel B.

Source: The Straits Times 29 Feb 08

Two more hotel sites put up for tender

TWO more hotel sites have been put on the market – a 99-year leasehold plot in Race Course Road, offered by the Urban Redevelopment Authority, and a freehold plot in Bencoolen Street now occupied by Peony Mansion.

Peony Mansion’s owners want $50 million, which works out to about $850 per square foot of potential gross floor area including an estimated $2.65 million payable to the state for two smallish plots – one is a road ingress and the other houses an electrical substation – behind Peony Mansion.

The two plots total 2,760 square feet, while Peony Mansion runs to 11,964 sq ft. Peony Mansion comprises 33 apartments and two shop units.

Approval for a collective sale has been secured from owners controlling at least 80 per cent of share values – under the old en bloc rules.

Under Master Plan 2003, Peony Mansion is zoned for hotel use with a 4.2 plot ratio – the ratio of maximum potential gross floor area to land area.

Peony Mansion and the adjoining state sites can be redeveloped into a boutique hotel with about 200 rooms, assuming there are no food and beverage outlets. Peony Mansion will be marketed through a tender that closes on April 4.

Over in the Little India area, URA has launched the tender for a 0.9 hectare plot above Little India MRT station.

Jones Lang LaSalle regional director and head of investments Lui Seng Fatt says that assuming the plot is developed into a hotel of up to four-star standard and with about 500 rooms, the completed property would be worth about $600,000 a room or a total of $300 million.

Assuming construction costs of about $500 psf of gross floor area, the site’s land value works out to about $135 million or $400 psf per plot ratio (psf ppr).

However, CB Richard Ellis executive director Li Hiaw Ho reckons that top bids for the site will come in higher – around $600-700 psf ppr – given the plot’s location above an MRT station.

‘The plot can be developed into a four-star property. Bidders are also likely to include some retail/food & beverage facilities.’

The plot has a 3.5 plot ratio, resulting in a maximum gross floor area of 338,417 sq ft.

The tender for the confirmed list site closes on May 21.

Source: Business Times 28 Feb 08

Parkway justifies record land bid with vision for a ‘hospital of the future’

Focus will be on cardiology, oncology and orthopaedics

(SINGAPORE) Parkway Holdings will be building on its newly-acquired Novena site what it calls a ‘hospital of the future’, that will incorporate a hub of top medical professionals, with the latest technology, organised along a high level of thoughtfulness for the patient.

Speaking to the press and analysts for the first time since winning the Novena hospital site at a record bid of $1,600 per square foot per plot ratio (psf ppr), Parkway’s management yesterday justified the price – more than double the second-highest bid of $694.50 psf ppr.

‘We are already operating with capacity constraints at our present facilities, and with the ageing population and changing demographics, we would not be able to contribute as much as a leading private healthcare provider,’ said group president and CEO Lim Cheok Peng.

‘Administratively, we have begun to move non-clinical functions off-site to free up more space for the hospitals. This would not be enough as the shortfall for private patient beds by 2012 could be as many as 2,000.’

Parkway – which houses 767 beds at the Mt Elizabeth, Gleneagles and East Shore hospitals – is already operating at about 70 per cent capacity.

For a long-term solution to better manage patient turnover and expand its catchment of international patients, ‘it had to secure the land’, said chairman Richard Seow.

Development cost for the new hospital is estimated to be $300-500 million. To be completed by July 2011, it will have a 15-storey tower, linked to a five-storey podium block that will house mainly medical suites, retail and lobby areas.

The development will have a maximium gross floor area of 72,350 sq m, of which 30 per cent will be set aside for medical suites and 5 per cent for retail space. A large part will be taken up by the 324 patient rooms planned, and the rest for diagnostics and ancillary services, and a 255-lot basement carpark.

The new private hospital will focus on cardiology, orthopaedics and oncology specialties. It will also feature 100 per cent single rooms, patient floor balconies, gardens and rooftop landscape to enhance the inclusion of light and nature in a healing environment. The architect for the project is Hellmuth, Obata + Kassabaum (HOK).

Parkway was unable to discuss financial details ahead of the announcement of its full-year results, scheduled for release next Wednesday. But it had earlier indicated that the acquisition of the land, amounting to more than $1.2 billion, and the development cost will be financed through a mix of internal resources and bank borrowings.

Parkway shares have taken a beating this week since the award of the tender for the Novena site on Monday.

On the same day, its shares fell 8.3 per cent to $3.30 on concerns that the group may have overpaid for the land.

But COO Daniel Snyder yesterday expressed confidence in the project, saying that his strategy and business development team has been receiving calls from parties with investment offers.

The group has also received ‘unanimous support from our accredited doctors and partners’.

Parkway shares ended 4 cents lower to close at $3 yesterday.

Source: Business Times 22 Feb 08

Office rents in Singapore on upward climb: property firms

THE occupancy cost for office space in Singapore is now higher than in Hong Kong, according to a new report.

Data from property firm CB Richard Ellis (CBRE) show that total occupancy cost here hit US$10.42 per square foot per month (psf pm) at the end of 2007.

By comparison, total occupancy cost for Hong Kong was US$9.74 psf pm at the end of last year.

Total occupancy cost reflects base rents as well as other property-related expenses such as management fees and property tax, according to CBRE.

Prime office rents in Singapore rose 19.1 per cent in just the fourth quarter of 2007, CBRE’s report said. For the entire year, office rents rose a staggering 92.3 per cent.

‘Competition for pockets of vacant space in the central business district (CBD) remained intense, and several expansion transactions towards the end of the (fourth) quarter suggested that demand may be sustained,’ CBRE said.

In response to the report, the Urban Redevelopment Authority (URA) pointed out that CBRE represents just one viewpoint.

A recent Cushman & Wakefield (C&W) report, for example, said that office occupancy cost for prime office space in Singapore was US$10.80 psf pm in end-2007, much lower than the US$19.90 psf pm in Hong Kong.

The discrepancy between the two sets of data was due to the fact that CBRE considers office space in Hong Kong’s CBD as well as other areas outside the city centre when compiling office occupancy cost data for Hong Kong – while C&W only considers Hong Kong’s CBD.

Both firms look only at Singapore’s CBD when calculating occupancy cost here.

Separately, property firm Savills – which said that office rents in Singapore are close to Hong Kong’s at present – predicted that rents here could increase by another 15-20 per cent this year.

Office rents in Hong Kong, on the other hand, are expected to rise by a slower 5 per cent in 2008, said Simon Smith, Savills’ head of research and consultancy. He expected rents in Singapore to overtake rents in Hong Kong sometime this year.

Mr Smith also said that luxury home prices in Singapore will climb 8-12 per cent this year, after jumping about 50 per cent in 2007.

 

Source: Business Times 22 Feb 08

Tanjong Pagar hotel site may fetch $750 psf ppr

CONTINUING its rollout of hotel sites amid the current shortage of hotel rooms, the Urban Redevelopment Authority yesterday made available for application a reserve-list site in the Tanjong Pagar area.

The 99-year leasehold site, at the corner of Gopeng Street and Peck Seah Street, can be developed into a 30-storey hotel with about 330 hotel rooms.

The site will only be launched for tender upon successful application by a developer with an undertaking to bid at a minimum price which is acceptable to the state.

CB Richard Ellis executive director Li Hiaw Ho estimates that the plot could be worth about $700-750 per square foot of potential gross floor area.

Around the middle of last year, URA sold nearby hotel sites at Tanjong Pagar Road for $573 psf per plot ratio and $562 psf ppr.

The planning authority also awarded a hotel plot at Upper Pickering Street at $805 psf ppr and another plot at New Market Street/Merchant Road for $762 psf ppr in October 2007.

The latest plot, with a 2,311.3 square metre land area, has an 8.4 plot ratio (ratio of maximum potential gross floor area to land area) and a 30-storey height limit.

‘The plot will be ideal for a four-star business hotel serving the needs of businesses in the Central Business District,’ Mr Li said.

URA said that the Tanjong Pagar area was a ‘prominent gateway leading directly into the main financial and business areas of Shenton Way, Raffles Place and Marina Bay’.

‘It is also home to several hotels which have been established to serve the business community and tourist visitors. These include business hotels like the Amara and M Hotel, as well as award-winning hotels like Berjaya Hotel and The Scarlet.’

The planning authority, which is due to release Master Plan 2008 later this year, also noted that ‘the successful sale and on-going development of several new office, high-rise residential and hotel sites in the area will further enhance the vibrancy and activities of the Tanjong Pagar commercial district’.

 

Source: Business Times 22 Feb 08

Development fees may jump for non-residential sites

For residential areas where strong land sales have lifted values, charges could surge

DEVELOPERS may soon have to pay more to redevelop non-residential sites such as land for hotels or hospitals.

A key government fee for redeveloping sites will be revised again next month, and property consultants expect it to be raised for land used for purposes other than to build homes.

The good news is: Development charges should not jump much for residential plots this time, after already having been jacked up a few times last year.

Selected areas, however, could still see bigger fee hikes, said consultants. These include Novena, Geylang, Ang Mo Kio and Orchard Boulevard, where recent strong land sales have pushed up values.

Development charges, which can amount to millions of dollars, are based on recent land and property values. They are calculated based on sectors and 118 locations, and adjusted in March and September every year to keep them up to date.

A rise in these charges for residential sites in some areas means that, for instance, it would be more expensive for developers to buy and redevelop collective sale estates in these parts of Singapore.

Overall, however, the current slowdown in the housing market means that the upcoming round of revisions should result in only very moderate rises for most residential sites.

Development charges for non-landed residential sites are likely to go up by only 10 per cent on average, compared to 58 per cent last September, said Ms Tay Huey Ying, the director of research and consultancy at Colliers International.

She said the soaring land prices that sent development charges surging last year have ’screeched almost to a halt’ since last September.

In particular, the collective sale market – previously the main driver of spikes in development charges – has quietened to near-silence in the last few months.

Consultancy CB Richard Ellis also said it expects only ‘moderate increases’ in selected locations. These include Sixth Avenue and Sentosa for landed sites and Ardmore and Orchard Boulevard for non-landed sites.

It suggested that the Government may also slow the rate of rises in development fees after taking into consideration the ’subdued state’ of the residential market. The once-frenzied response to both development sites and new home launches has waned significantly.

On the other hand, non-residential sites – including hospital, hotel, office and industrial land – are still seeing buoyant activity and could be subject to heftier fee hikes.

Hospital land could see the biggest overall hike in charges, boosted by the recent record bid for a stateowned site at Novena, said Colliers’ Ms Tay. She is projecting a rise of between 15 per cent and 20 per cent on average for hospital sites.

DTZ Debenham Tie Leung added that funds have been moving their investments into hospital assets in Singapore, which could also prompt a rise in the development fees for this sector.

Also, industrial land – which saw a rise in development fees of just 2 per cent in the last round – should experience a much bigger jump, said consultants.

Office and hotel plots are also expected to have their development charges raised, by at least 30 per cent, said Jones Lang LaSalle.

Its director for South Asia research, Mr Chua Yang Liang, said the fees could be pushed up by recent office land sales at Jalan Sultan and Toa Payoh, and hotel plot sales at Upper Pickering Street and New Market Road.

 

Source: The Straits Times 22 Feb 08

STRONG FULL-YEAR GAINS: UOL still bullish on office rentals

OFFICE rents have been skyrocketing over the past 12 months but property group UOL Group reckons there will still be further rises to come.

The firm reported stellar full-year results yesterday. It said rents for retail space should benefit from high levels of employment, as well as strong tourist arrivals, although the pace of increase will moderate.

UOL is cautiously optimistic about the residential market and will launch three projects this year – Nassim Park Residences, Breeze by the East in the East Coast area and Green Meadows opposite Peirce Reservoir.

Its plans came with news yesterday of a 124 per cent jump in net profits to $758.9 million, on the back of a hefty revaluation gain.

The gain of $590.5 million on UOL’s investment properties boosted profit to such an extent that they exceeded revenue, which came in 18 per cent higher at $709.1 million for the 12 months to Dec 31.

Revenue from hotels was higher, due to improved numbers from hotels in Singapore, Australia and Vietnam. The inclusion of revenues from the former Negara on Claymore, now known as Pan Pacific Orchard, and subsidiary Pan Pacific Hotels & Resorts, also helped.

Full-year earnings per share rose from 42.72 cents to 95.38 cents, while net asset value per share rose to $4.96 per share as at Dec 31 last year from $3.97 previously. A final dividend of 10 cents a share and a special dividend of five cents apiece were declared.

 

Source: The Straits Times 21 Feb 08

Parkway dives 8.3% on record bid for site

Winning bid of $1,600 psf ppr for Novena hospital site is over twice the second highest offer

 

SHARES of Parkway Holdings took a beating yesterday as concerns emerged that the healthcare provider might have overpaid for a hospital site at Novena.

Parkway’s stock slipped as much as 9.7 per cent yesterday following Friday’s news that the company had put in the top bid of $1.25 billion for a 1.7 ha site at Novena Terrace/Irrawaddy Road.

The stock ended the day down 30 cents, or 8.3 per cent, at $3.30. The Urban Redevelopment Authority (URA) officially awarded the site to Parkway yesterday.

Parkway’s bid, which works out to be about $1,600 per square foot per plot ratio (psf ppr) is a record price for land, and tops the previous record set by Australia’s Lend Lease, which paid $1,455 psf ppr for a commercial site above Somerset MRT station in August 2006.

The bullish bid was also more than twice the $540.9 million offered by second highest bidder, Napier Medical.

Analysts, who estimate that Parkway’s total development cost could be about $1.6 billion-$1.8 billion, said that Parkway had overpaid for the site.

‘We believe capacity constraints at Mount Elizabeth Hospital and Gleneagles Hospital have pressured Parkway Holdings to be overly aggressive to secure the site,’ said UOB-Kay Hian analyst Jonathan Koh. ‘Parkway also does not want a competitor to secure the hospital site.’

Mr Koh’s recommendation on Parkway is under review due to the massive bid. He previously had a ‘buy’ call on the stock.

Citigroup analyst Lim Jit Soon reiterated his ’sell’ call on the stock, pointing out that the project will stretch Parkway’s balance sheet.

‘Gearing could rise to 171 per cent even before development costs are factored in,’ Mr Lim said. ‘In a credit crunch environment, securing financing might be an issue.’

Mr Lim added that Parkway’s strategy could be to finance the development of the hospital by selling the medical suites to doctors at between $4,000 and $5,000 psf. But while this strategy could work, ‘the company will have to convince investors that it did not overpay for the site’, he said.

CIMB Research agreed that Parkway has overpaid, especially when looking at prices in the Novena area.

‘Compared to bids for land sites in the Novena area, (Parkway’s) bid is more than three times that of Far East Organization’s bid of $501.2 psf ppr for a hotel site at Sinaran Drive in January 2007 and Frasers Centrepoint’s bid of $506.9 psf ppr for a residential site at Sinaran Drive in July 2006,’ said analyst Tan Wei Ling.

Ms Tan cut Parkway’s target price to $4.19 from $4.53 due to rising risk aversion.

But she is maintaining Parkway’s ‘outperform’ rating for now due to the company’s growing regional franchise, good earnings prospects and relatively attractive dividend yields, she said.

 

Source: Business Times 19 Feb 08

Merchant Square and Waldorf Mansions up for sale

MERCHANT Square, a four-storey office building off Merchant Road, is up for sale with a guide price of $73 million.

With a total net lettable area (NLA) of about 50,262 square feet, the unit price works out to $1,450 psf of NLA.

The property, which was developed by carpet manufacturer Jackson Carpet and completed in 1996, sits on a land area of approximately 28,083 sq ft and has two levels of basement carparking for 76 vehicles.

CB Richard Ellis is marketing the 99-year leasehold building and its director (Investment Properties) Charles Hoon said the entry yield is about 2 per cent.

He added that while the average rental is $3.80 psf per month, new leases are being contracted at $6.50 – $7 psf per month.

The lease profile also shows that close to 50 per cent of the current leases will be expiring over the next two years.

‘Smallish mid-sized office buildings similar to Merchant Square present a good acquisition opportunity and remain sought-after amongst end-users in view of tight office space supply,’ Mr Hoon said.

The property is currently 96 per cent occupied and has as its anchor tenant cosmetics company Estee Lauder.

Waldorf Mansions at Balestier Road has also been put up for sale. The asking price is $21 million, or $659 per sq ft per plot ratio (psf ppr).

The freehold 11-storey block comprising 16 apartments has a site area of 11,384 sq ft, a plot ratio of 2.8, and maximum gross floor area of 31,876 sq ft.

The site is marketed by Realtorhub Real Estate (RH), whose executive director Daniel Ng said it can be redeveloped into a high-rise condominium with 26 units of about 1,200 sq ft each.

He added that the site is capable of being amalgamated with the two adjoining sites, Balestier Towers and Scenic Heights, to form a larger development.

Based on the asking price, Mr Ng said that the en bloc sellers will make a premium of about 33 per cent over the current market price for Waldorf Mansions.

In July last year, RH brokered the deal for nearby Ruby Plaza which was sold to Soilbuild Group for $69 million, or $582 psf ppr.

 

Source: Business Times 19 Feb 08

Amex signs up for Marina Bay Financial Centre

It is said to be taking 50,000 sq ft in Tower 2, in the project’s 1st phase

AMERICAN Express International is the latest new tenant at Marina Bay Financial Centre (MBFC), which means that slightly more than half of the total 2.9 million square feet of offices in the entire development has been taken up.

BT understands it will take about 50,000 sq ft or two floors in the 50-storey Tower 2, which is under MBFC’s first phase and slated for completion by early 2010. Amex will join British bank Barclays, Swiss private bank Pictet and UK-based stockbroking firm Icap as tenants in Tower 2.

Barclays is said to have agreed to lease about 100,000 sq ft or four floors in the tower, Icap is taking 35,000 sq ft and Pictet around 25,000 sq ft.

MBFC’s Tower 2 will have nearly one million sq ft of net lettable area (NLA).

The 33-storey Tower 1, also in the development’s first phase, has about 600,000 sq ft of NLA and is fully leased, mostly to Standard Chartered, which is taking 508,298 sq ft.

Smaller tenants in that tower include French corporate and investment bank Natixis, which is taking 65,000 sq ft, and Wellington International Management Co (21,000 sq ft).

DBS has leased about 700,000 sq ft in MBFC’s Tower 3 – which will be in the project’s second phase and slated for completion by early 2012.

Office leasing interest in Singapore since the start of the year does not seem to have been dented by sub-prime writedowns that have struck international banks. ‘Most banks still see Asia as a bright spot and will continue to invest in Asia,’ an executive with a major office landlord told BT.

CB Richard Ellis executive director (office services) Moray Armstrong, whose firm is the leasing agent for MBFC’s office space, declined to be drawn into speculating about the latest tenants at MBFC, when contacted by BT.

However, he said, there is a ‘healthy level of active leasing negotiations going on and further announcements are expected within the next three months’.

‘Generally, too, leasing momentum in the Singapore office market has carried forward from 2007. There has been relatively minor impact arising out of the external sub-prime crisis. There’s still plenty of activity and leasing negotiations in motion,’ he said.

CBRE data show that Grade A office rents in Singapore rose 96.5 per cent last year to hit $17.15 psf a month.

‘We expect a more modest rate of rental growth in the order of 15 to 20 per cent this year. Upside remains because of the severe shortage of available office space. But because rents have moved up so sharply, a more modest pace of growth is likely, combined with greater caution among occupiers, which is understandable. These twin factors will contribute to more moderate rental growth.’

American Express International Inc currently has operations at The Concourse while American Express Bank has operations at Hitachi Tower.

 

Source:

Amex signs up for Marina Bay Financial Centre

It is said to be taking 50,000 sq ft in Tower 2, in the project’s 1st phase

By KALPANA RASHIWALA

AMERICAN Express International is the latest new tenant at Marina Bay Financial Centre (MBFC), which means

that slightly more than half of the total 2.9 million square feet of offices in the entire development has been taken

up.

BT understands it will take about 50,000 sq ft or two floors in the 50-storey Tower 2, which is under MBFC’s first

phase and slated for completion by early 2010. Amex will join British bank Barclays, Swiss private bank Pictet and

UK-based stockbroking firm Icap as tenants in Tower 2.

Barclays is said to have agreed to lease about 100,000 sq ft or four floors in the tower, Icap is taking 35,000 sq ft

and Pictet around 25,000 sq ft.

MBFC’s Tower 2 will have nearly one million sq ft of net lettable area (NLA).

The 33-storey Tower 1, also in the development’s first phase, has about 600,000 sq ft of NLA and is fully leased,

mostly to Standard Chartered, which is taking 508,298 sq ft.

Smaller tenants in that tower include French corporate and investment bank Natixis, which is taking 65,000 sq ft,

and Wellington International Management Co (21,000 sq ft).

DBS has leased about 700,000 sq ft in MBFC’s Tower 3 – which will be in the project’s second phase and slated for

completion by early 2012.

Office leasing interest in Singapore since the start of the year does not seem to have been dented by sub-prime

writedowns that have struck international banks. ‘Most banks still see Asia as a bright spot and will continue to

invest in Asia,’ an executive with a major office landlord told BT.

CB Richard Ellis executive director (office services) Moray Armstrong, whose firm is the leasing agent for

MBFC’s office space, declined to be drawn into speculating about the latest tenants at MBFC, when contacted by

BT.

However, he said, there is a ‘healthy level of active leasing negotiations going on and further announcements are

expected within the next three months’.

‘Generally, too, leasing momentum in the Singapore office market has carried forward from 2007. There has been

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relatively minor impact arising out of the external sub-prime crisis. There’s still plenty of activity and leasing

negotiations in motion,’ he said.

CBRE data show that Grade A office rents in Singapore rose 96.5 per cent last year to hit $17.15 psf a month.

‘We expect a more modest rate of rental growth in the order of 15 to 20 per cent this year. Upside remains because

of the severe shortage of available office space. But because rents have moved up so sharply, a more modest pace

of growth is likely, combined with greater caution among occupiers, which is understandable. These twin factors

will contribute to more moderate rental growth.’

American Express International Inc currently has operations at The Concourse while American Express Bank has

operations at Hitachi Tower.

Two more govt agencies to vacate downtown offices

IDA, SLA making room for private businesses to ease office shortage

MORE help is on the way to ease Singapore’s office shortage, which has led to soaring rents.

At least two government agencies will give up their downtown offices to make room for private businesses that need more space.

The Infocomm Development Authority (IDA) will relinquish about a third of its 11,300 sq m office in Suntec City by moving some divisions to the Mica building in Hill Street by the end of the year.

Although it will still be close to town, IDA plans to move again in a few years to a ‘more appropriate location outside the central business area’ that can accommodate all its headquarters staff.

The Singapore Land Authority (SLA) is also planning to give up its seven floors at 8 Shenton Way, formerly Temasek Tower, although it has yet to find a new home. This is a considerably larger office space than the one IDA is vacating this year.

Other state departments may follow suit.

Finance Minister Tharman Shanmugaratnam said on Friday that the Government would move several agencies out of the central area by the first quarter of next year.

This will free up 20,000 sq m of precious prime office space for the private sector – equivalent to about 20 floors of a Suntec City office tower, Mr Tharman said in his Budget speech.

Although office space in the Republic is still cheaper on average than in Hong Kong or Tokyo, he said, the rate at which rents have risen has been ‘rapid and unsettling for businesses’.

Prime office rents shot up by 78 per cent on average last year, catapulting Singapore into the world’s top 10 most expensive office markets for the first time. The Republic jumped 10 spots to seventh place in the latest rankings, according to a report last week.

The Government has taken several steps to address the situation, including releasing temporary office sites and state properties, but these have had little noticeable effect so far.

Meanwhile, surging rents are also acting as a push factor for agencies that are relocating, especially those whose leases will expire soon.

The Economic Development Board (EDB), for example, is said to be firming up plans to move to Fusionopolis when its lease at Raffles City Tower is up next year.

Asking rents at Raffles City, where the EDB has been since 1985, have doubled in the last 15 months to about $17 per sq ft per month.

But other statutory boards that have ongoing leases – such as IE Singapore in Bugis Junction, whose lease extends to 2011 – will stay put.

Experts said this latest move would help relieve some of the immediate supply crunch, ahead of a slew of building completions expected in 2010 and beyond.

In particular, it will make things easier for firms already located in Suntec City or 8 Shenton Way that are looking to expand, said Ms Tay Huey Ying, director of research and consultancy at property firm Colliers International.

She added more agencies could jump onto the bandwagon.

‘Even those who own their own buildings could move out and lease out the offices, thereby releasing some space for the market and, at the same time, earning rental returns,’ she said.

Government offices still located downtown include the Ministries of Finance, Law, and Trade and Industry, all within the Treasury building in Hill Street next to Funan DigitaLife Mall.

There is ‘no real need’ for some of these departments to be in the central business district, and they could free up space for other occupiers who need the location more, said Mr Chua Yang Liang, head of research (South Asia) at Jones Lang LaSalle.

Merchant Square on sale for $73m

A MODEST office development with well-known cosmetics company Estee Lauder as its anchor tenant is up for sale at an indicative price of $73 million.

The price for the 99-year leasehold Merchant Square – located in Merchant Road, opposite Riverside Point – works out to $1,450 per sq ft (psf) of net lettable area.

The latest office property transaction in the vicinity involved the Apollo Centre, sold last December for $1,378 psf.

Merchant Square, completed in 1996, comprises a four-storey office tower integrated with two blocks of conserved shophouses.

CB Richard Ellis, which is marketing the property, said potential buyers can expect substantial rental appreciation in the short to medium term.

Nearly 50 per cent of the property’s leases will expire over the next two years.

Some of the leases were signed at rates as low as $3 to $4 psf, while others are at the current rates of $5 to $5.50 psf.

The Merchant Square vicinity is quiet – a far cry from the other side of the road where Riverside Point and Clarke Quay are located. It is currently 96 per cent occupied.

Estee Lauder takes up 1-1/2 floors, or about 15 per cent, of the space.

Merchant Square has a net lettable area of 50,262 sq ft and sits on a 28,083 sq ft plot. There are two basement carpark levels with 76 lots.

It was originally intended to be a retail project.

Back in 1995, however, owner Jackson International reportedly took advantage of the narrowing gap between office and retail rents to convert three of four shop floors in the development into offices.

Jackson owns one industrial building, but its main business is as a carpet and rugs distributor and manufacturer.

The tender for the property closes on March 12.

Source: The Straits Times 19 Feb 08

BUDGET 2008: STRATEGY – Some govt units moving out to free up city space

20,000 sq m or more will be available to private sector

THE government has decided to relocate several agencies out of the Central Area to free up space of 20,000 square metres or more by first quarter next year for use by the private sector.

The space being released, which will help to address the office space shortage in the near term, is equivalent to 20 floors or more of an office tower block in Suntec City.

Finance Minister Tharman Shanmugaratnam did not identify the government agencies that will be moving out of the city but market watchers suggest that they may include Singapore Land Authority, which currently occupies several floors at Temasek Tower near Tanjong Pagar MRT Station; the Energy Market Authority, which is housed in Singapore Power Building on Somerset Road; Intellectual Property Office of Singapore, located at Plaza by The Park on Bras Basah Road; and Info-Communications Development Authority of Singapore, now at Suntec City.

The Workforce Development Agency, housed at One Marina Boulevard, has also been highlighted by market watchers as being a possible candidate for relocation out of its prime CBD offices.

The Economic Development Board is expected to vacate its offices at Raffles City when its lease expires next year and move into Fusionopolis at one-north in Buona Vista.

Market watchers suggest that some of these government agencies with public counters are likely to move to city fringe locations, rather than to outlying areas to minimise inconvenience to the public. ‘Vacant state properties could be their new homes,’ an industry observer reckons.

In his Budget speech, Mr Tharman noted that in the short term, Singapore faces tight office space capacity, caused by the surge in business growth, especially in the business and financial sector.

‘Office rentals have risen sharply. Although office space still costs 30 to 50 per cent less in Singapore on average, compared to Hong Kong and Tokyo, the pace of cost increases has been rapid and unsettling for businesses,’ he added.

‘The tightness in office space should ease over the medium term, with the completion of major projects currently under construction, such as phases one and two of the Marina Bay Financial Centre, the Marina View sites and South Beach. By 2012, we will have an additional 1.4 million sq m of office space.’

To address the problem in the short term, the government has released a total of 15 transitional office sites and vacant state properties, which will yield 150,000 sq m of additional office space. Companies are already relocating to some of these sites, and to new regional centres, Mr Tharman noted.

Source: Business Times 16 Feb 08

Parkway’s Novena bid poised to set govt land sales record

(SINGAPORE) Hospital operator Parkway Holdings looks set to shatter all records for government land sales (GLS) with its $1.25 billion bid for a hospital site at Novena.

Parkway’s bid, which works out to be about $1,600 per square foot per plot ratio (psf ppr), topped the previous record set by Australia’s Lend Lease, which paid $1,455 psf ppr (or $617.2 million) for a commercial site just above Somerset MRT Station in August 2006.

The Urban Redevelopment Authority (URA) will assess all bids and award the site in a few weeks’ time, but it is unlikely that Parkway’s bid will lose out to the two other bidders, Napier Medical and Raffles Medical Management, which put in bids of $694.5 psf ppr and $344.1 psf ppr respectively.

On its likely win, a spokesman for Parkway Holdings said: ‘We believe that the value we have placed in this tender reflects ParkwayHealth’s desire to enhance Singapore’s position as a global medical hub with leadership in specialist services.’

He added that the hospitals that it operates – East Shore, Gleneagles and Mount Elizabeth Hospitals – are operating at capacity and the new hospital will add beds and critical space needed.

The Novena site, which has a permissible gross floor area of 778,768 sq ft, is the first hospital site to have been launched in about 30 years. URA said that the last hospital site launched was at Mount Elizabeth in 1976.

Knight Frank director (research and consultancy) Nicholas Mak, who had earlier estimated that the Novena site could fetch bids of $770-860 psf ppr, said that it is difficult to price the site. However, he believes the broad range of bids received suggests that his estimated price would be closer to market expectations.

Mr Mak also noted that Parkway’s bid could boost the value of neighbouring properties, especially Novena Medical Centre, where medical suites sold for around $2,500-3,000 psf last year.

Parkway has not indicated that there could be medical suites for sale if it builds a hospital, but Mr Mak estimates these would have to sell for around $4,000 psf. He added that a unit at Mount Elizabeth Hospital recently sold for around $5,000 psf.

Still, Mr Mak does not believe Parkway’s record bid price will be used as a benchmark for future land sales, and may be considered more of an anomaly.

The possibility of injecting the new hospital into Parkway’s healthcare real estate investment trust, Parkway Life Reit, also seems unclear. ‘To put it in the Reit, the land price should be lower to make the deal yield accretive,’ he added.

Napier Medical director Mark Wee also ‘cannot fathom’ Parkway’s bid except to suggest that it could have been a defensive play against competition.

Based on Napier’s own projections, a new hospital would probably not make money for the first six years either.

 

Source: Business Times 16 Feb 08

BUDGET 2008: More office sites in the offing to ease space crunch

AT LEAST 20,000 sq m of office space – equivalent to 20 floors or more of an Suntec City block – will be freed up to help the private sector deal with the space crunch.

The initiative will kick in by early next year.

Finance Minister Tharman Shanmugaratnam said the tight supply of office space, a short-term problem, stemmed from the surge in business growth, which has brought higher rents in its wake.

‘Although office space on average still costs 30 per cent to 50 per cent less in Singapore than in Hong Kong and Tokyo, the pace of cost increases has been rapid and unsettling for businesses,’ said Mr Tharman.

The Government is even planning to relocate several agencies out of the pricey and congested central business district (CBD). A Jones Lang LaSalle report said these could include the Economic Development Board at Raffles City, the Singapore Land Authority at Temasek Tower, and the Ministry of Law and Ministry of Finance at The Treasury.

Mr Donald Han, the Singapore managing director of property consultant Cushman & Wakefield, said the move was a practical one: ‘It’ll create some breathing space for the private sector. Government agencies will be better off, as they won’t need to incur the opportunity cost of prime CBD rental.’

Mr Tharman said the Government has released 15 transitional office sites and vacant state properties, which will yield 150,000 sq m of additional office space.

‘Companies are already relocating to some of these sites and to our new regional centres,’ he said.

He noted that the shortage should ease over the medium term, given the completion of big projects now under construction. These include Phases 1 and 2 of the Marina Bay Financial Centre, the Marina View sites and South Beach.

‘By 2012, we will have an additional 1.4 million sq m of office space,’ said Mr Tharman.

The Government will also defer projects worth about $1 billion to ease the pressure on construction costs. This follows a decision last November to postpone public-sector building projects worth at least $2 billion.

But the latest deferment will not affect key projects such as the expressways, the Downtown Line or NUS University Town.

 

Source: The Straits Times 16 Feb 08

S’pore world’s 7th most expensive office location

Prime office rents rose 78% last year to US$130.48 psf per annum: report

SINGAPORE has jumped 10 places to become the world’s seventh-most expensive office location.

According to Cushman & Wakefield’s (C&W) report on office occupancy costs, prime office rents rose 78 per cent in Singapore last year. Occupancy costs are now at US$130.48 psf per annum, up from US$954 psf per annum in 2006.

Rental increases here were the fifth highest globally last year, after locations in Turkey and Norway. However, Singapore still ranks below London, Hong Kong, Tokyo, Mumbai, Moscow and Paris in terms of occupancy costs.

London remains on the top of the list, with occupancy costs rising 30 per cent to US$312 psf per annum followed by Hong Kong, with an increase in occupancy costs of 40 per cent to US$238.58 psf per annum.

Paris, which was put in sixth place, registered occupational costs of US$141.57 psf per annum.

C&W executive managing director (South-east Asia) Arsh Chaudhury said that rental growth in Singapore was led by strong demand from the banking and services sectors coupled with limited supply of quality office space.

He said: ‘Whilst the effect of a US slowdown on Asia will be muted, the uncertainty of growth plans of US institutions, especially banks, may possibly result in an easing of demand.’

But he said that C&W expects the upward trend in rents to continue, albeit at a slower pace.

The C&W report compares office occupancy costs in 203 locations in 58 countries. New entries include Kyiv in Ukraine at 16th place with occupancy costs at US$78.22 psf per annum, and Ho Chi Minh City in Vietnam at 17th place with occupancy costs at $75.81 psf per annum.

Of these 203 locations, 79 per cent registered rental growth, 20 per cent showed stable growth and only one per cent experienced a fall in rentals compared to 6 per cent in 2006.

Perhaps also interesting to note is that of the bottom 10 locations in C&W’s list of 58 countries, neighbouring South-east Asian cities took up four spots.

Bangkok took the 58th position, with office occupancy costs at US$26.52 psf per annum, preceded by Jakarta, at 57th position with occupancy costs at US$26.54 psf per annum, Manila in 50th place with occupancy costs at US $33.75, and Kuala Lumpur 49th, with occupancy costs at US$34.39 psf per annum.

Source: Business Times 14 Feb 08

S’pore is world’s seventh most expensive office market

It jumps 10 spots in global ranking of occupancy costs by property consultancy

SINGAPORE has moved into the global top 10 most expensive office markets for the first time due to a severe office shortage.

A survey of office costs in 203 locations in 58 countries by global real estate consultancy Cushman & Wakefield saw the Republic jump 10 places to seventh spot.

This came after prime rents shot up by 78 per cent, on average, due to the tight supply.

The consultancy found that occupancy costs in Singapore – which include rents and other costs of running an office – hit an annual average of about US$130 per sq ft (psf).

Office rents, the largest component of occupancy costs, rose 40 per cent on average in the world’s top 10 office locations, it said.

Office rental rises in Singapore were also led by strong demand from the banking and services sectors, said Cushman & Wakefield’s annual Office Space Across The World report.

Worldwide, rents climbed by 14 per cent on average, compared with 10 per cent in 2006, it said.

London’s West End – where rents rose 30 per cent last year – remains the most expensive office location in the world, followed by Hong Kong, then Tokyo. Mumbai, Moscow and Paris were next on the ranking.

Another fast-rising Asian centre, Ho Chi Minh City, is now at 17th spot, with occupancy costs at US$75.81 psf a year, ahead of Sydney, Seoul and Shanghai.

The strong performances in India and Vietnam helped the Asia-Pacific region to achieve the strongest regional growth, with rents up 23 per cent over the course of last year.

Of the 203 locations Cushman & Wakefield surveyed last year, 79 per cent showed rental growth.

Singapore registered the fifth-highest increase in office rents in the world. Istanbul’s Levent district registered a 95 per cent rise in office rents, which was the highest annual growth in all locations.

‘Last year saw the fastest level of growth in office occupancy costs in many of the world’s top locations since the turn of the property cycle in 2001, with the strongest demand coming from the financial sector,’ said the firm’s head of business space research and consultancy, Ms Elaine Rossall.

‘We are unlikely to know the full effects of the current credit squeeze on the world’s main office locations until further into 2008.’

But last year’s strong rental growth is expected to ease this year, she said.

In Singapore, the United States sub-prime crisis has affected the expansion plans of some firms.

Last year, up to nine out of 10 companies had expansion plans. ‘But now, we could perhaps see five out of 10 companies looking to expand,’ said Mr Donald Han, Singapore managing director of Cushman & Wakefield.

‘We are still seeing new firms being set up, and these firms in the financial services sector must have a Raffles Place address.’

Office rental increases will be more moderate this year and next year, he added.

Instead of a 78 per cent rise in occupancy costs to US$130.48 psf a year – or about $15.44 psf a month on average – a 20 per cent increase is likely this year, he said.

But recent rental deals done at coveted buildings in Singapore, such as Republic Plaza and Millenia Tower, have already surpassed average levels.

For instance, the asking rents at Centennial Tower are now hovering at around $18.50 psf or more.

In Raffles Place, the asking rents for some prime Grade A office space have crossed the $20 psf mark.

Some tenants have complained that their office rents rose by as much as three times or even more when their leases came up for renewal.

The majority of Raffles Place office buildings are operating at 98 per cent to 99 per cent occupancy, so rents will not come down before a major chunk of supply comes onstream in 2010, said Mr Han.

That is when phase 1 of the huge Marina Bay Financial Centre will be ready.

Because of the steep increases, some bigger space occupiers are moving their non-frontline operations to suburban locations.

Some are reconfiguring their work space to make better use of it, property consultants said.

Others are looking to relocate to fringe areas or industrial locations.

These include the Beach Road corridor, conservation shophouses, business parks and transitional sites, where rentals are generally going at single digits – which is hard to find in Raffles Place.

 

Source: The Straits Times 14 Feb 08

Stanchart joining quest for space in Changi

Bank seeks to build complex of up to 400,000 sq ft to house backroom operations: sources

STANDARD Chartered looks set to be the next financial institution to head out east to Changi Business Park (CBP), which is fast becoming a hub for financial backroom operations.

Already, Citibank, Credit Suisse, DBS and OCBC have either staked their claims on space there, or are in the process of doing so.

As for Standard Chartered, sources say that it is looking to build a complex of between 300,000 and 400,000 sq ft to consolidate its backroom operations currently spread out in locations like Tampines, Bukit Merah and Bras Basah.

It is also understood that the bank expects to increase its headcount when it expands its offices to CBP.

It has already committed to take up over 500,000 sq ft of space at the upcoming Marina Bay Financial Centre.

Industrial and business parks developer Ascendas, which is a subsidiary of JTC Corporation, is said to be the developer of Standard Chartered’s CBP offices.

It will be a built-to-suit building which will be leased to Standard Chartered in a similar way that Ascendas Real Estate Investment Trust (in which Ascendas holds a 60 per cent stake) is developing and leasing to Citibank its new backroom office space at CBP.

Earlier, Citigroup said it would invest $220 million to cover the capital, relocation, rental and operating costs of the new CBP office and will lease the space until 2016 and has an option to extend its lease for another six years.

CBP is a 66.54 ha business park which currently comprises around 60 development plots. JTC revealed earlier that about 50 per cent of these have already been allocated. While it is not clear which plot will be the site for Standard Chartered’s new backroom office, a JTC map of the area reveals that Ascendas has been allocated plots near The Signature, which is also near Expo MRT Station.

Other plans afoot at CBP include a hotel.

While the idea of a hotel was first mooted several years ago, there was little interest from industry players then.

It is understood that interest for a hotel has now been revived with CBP growing to become more than just a business park.

Cushman & Wakefield managing director Donald Han believes that while CBP may not have the critical mass to become a sub-regional town centre, it could become a fringe commercial centre along the lines of Harbourfront or Alexandra Road which Mr Han believes came about through ‘organic growth’.

With more businesses moving to CBP, Mr Han says that the authorities may have to, ‘over time, transform CBP into a fringe centre too’.

Mr Han also believes that in the process, Singapore Expo could be amalgamated to create the critical mass that will sustain support functions like the hotel as well as retail facilities.

For now, however, Mr Han reckons CBP is still ‘a bit disconnected’.

 

Source: Business Times 12 Feb 08

Developer stocks may rise above flat property prices

Goldman says that physical market correction already priced in

(SINGAPORE) Goldman Sachs predicts that private home prices will remain flat this year, but is sticking to its view that Singapore’s strong structural story is driving a sustainable multi-year residential upswing.

The US bank does not expect a repeat of the mid-1996 (anti-speculation) regulatory measures that caused Singapore’s residential market downturn or an economic environment like in 1998, when property prices fell sharply amid negative economic growth and job creation, and an interest rate spike. Goldman Sachs has also upgraded CapitaLand from Neutral to Buy.

‘We argue that the share prices of developer stocks have priced in a severe physical market correction, which we believe is unwarranted.

‘Notwithstanding near- term headwinds, we recommend investors start accumulating Singapore property developer stocks. We believe developer stocks will start trending up to their RNAVs (Revalued Net Asset Values) once investors get comfortable that property markets in Singapore and China are not heading for a severe correction,’ Goldman Sachs said in a report dated Feb 8 and authored by its analyst Leslie Yee.

Even after lowering its RNAVs for Singapore developers, Goldman’s 12-month target prices (set at parity to 2008 Estimated RNAV) offer potential upside of around 28-37 per cent.

Goldman Sachs attributed its lowering of 12-month target prices and valuations to Singapore private home prices staying flat, lower values of listed investments and a lower multiple of 15x (from 20x) for asset management fees.

Although Goldman Sachs assumes zero growth in overall private home prices this year, it acknowledges that prices may increase in the second half of the year.

The property market is currently caught between the negatives of macro concerns over the fallout from a US-led recession on the Singapore economy and equity market weakness, and the positives of strong Singapore domestic growth drivers such as robust job creation and wage growth, Goldman’s report said.

‘We have greatest confidence in the private mid- to mass-market segment, based on our analysis of different key drivers, such as affordability, income growth, population growth, and HDB resale market trends, among others. We believe strong Singapore fundamentals support this segment, which is likely to benefit most from any reduction in mortgage rates.

‘In the prime residential segment, we see a dampener from a fall in speculative activity but would not underestimate the appetite of bulk buyers such as the Middle Eastern funds. We note affordability for the mass market remains strong, while the prime segment should benefit from the rise in the number of people with high incomes,’ it added. Besides the Singapore residential market, other key drivers for developer stocks are the performance of the Singapore office market, the Chinese residential and commercial markets, and real estate investment trusts, the US bank said.

It argues that new office supply here in 2011/2012 can be absorbed without significant negative impact on rental and occupancy rates, and expects capitalisation rates across various property asset classes in Singapore to remain stable.

Goldman Sachs also sees little downside for residential prices in the China market, and has a positive bias on the outlook for Beijing, Shanghai and selected second-tier cities.

As for Singapore Reits, Goldman sees their unit prices rising from current levels over the next six months – given firm property rentals and the possibility of the overhang from primary and secondary equity raisings being removed.

Goldman has lowered its 2008 estimated RNAV for City Developments from $15.80 to $14.70 and for CapitaLand from $8.30 to $7.70.

‘Amidst a more uncertain environment, our top pick is CapitaLand, which we upgrade to Buy from Neutral. With its multiple growth engines, highly regarded management team and low gearing, our Buy rating on CapitaLand is premised on its attractive and resilient valuation which performs well in various stress tests,’ Goldman said.

The US bank is maintaining its neutral rating for CityDev.

 

Source: Business Times 12 Feb 08

Increases in cost of offices, shops starting to slow down

RESPITE may be in sight for those who have been griping about the surging cost of doing business in Singapore.

Latest figures show that the increases in the cost of shops and offices eased in the fourth quarter of last year, in line with a general slowdown in the property market.

Prices and rentals for these commercial properties soared for most of last year, especially for office space, which reached an all-time high amid an acute short supply.

This prompted complaints from businesses and sparked off worries about Singapore’s competitiveness.

But official data released by the Urban Redevelopment Authority yesterday may finally calm these jitters.

Rentals for offices rose by 10.9 per cent between October and last month, down from 14.8 per cent in the previous three months – which was a decade-high jump, said Mr Li Hiaw Ho, the executive director of CBRE Research.

The slowing could be ‘the initial sign that the numerous efforts by the Government to cool the sector are taking effect’, said Ms Tay Huey Ying, the director of research and consultancy at Colliers International.

These moves include releasing more land for offices as well as immediate steps such as short-term leases in existing buildings and temporary office plots.

Colliers’ own data shows that office tenants are becoming increasingly resistant to further rent rises. Rents for office space in several areas, including Grade A buildings in Raffles Place, have seen declining growth rates for the past two to three quarters, said Ms Tay.

She said this is because firms are more willing to explore alternative business space locations, including business parks and high-tech industrial space.

For the whole year, rentals for office space jumped by 56.1 per cent. The rental index is now at an all-time record of 175.1 points, said Mr Li.

Ms Tay expects growth to moderate next year as tenants hold out for the expected large new supply in 2010.

She is forecasting a rise of up to 20 per cent for Grade A office space.

As for shops, the rise in rentals has all but peaked. Overall rentals rose by 0.6 per cent in the fourth quarter, compared with 8.1 per cent in the previous quarter.

In Orchard Road, rental growth was almost flat at 0.3 per cent in the quarter. Shops on the fringes saw slightly higher growth, but suburban retail space did the best with a 1.3 per cent rise.

For the whole year, shop rents rose by 18.2 per cent.

But landlords wanting to raise rents this year are likely to face strong resistance from retailers, said Mr Nicholas Mak, the director of research and consultancy at Knight Frank.

‘With the projected large supply coming on stream next year, retailers would have more space choices and would resist large increments in retail rents.’

He expects rents to increase by 5 to 10 per cent for this year.

 

Source: The Straits Times 26 Jan 08

79 Anson Rd stake sold for 3rd time in 2 years

SEB Asian Property Fund pays $215m for 55% stake

TRADING office buildings continues to be flavour of the month in the real estate market. A 55 per cent stake in the freehold 79 Anson Road has changed hands for the third time in about two years. The latest deal involves a fund managed by Ferrell Asset Management selling the space to an SEB Asset Management fund for $215 million.

Ferrell’s fund, FAM Maximilian Real Estate Investment Fund, last year bought the space – spread over 12 floors of the 23-storey building, for $149 million from two parties, at least one of which is linked to the Lippo group.

Pramerica Asia had sold the property to Lippo entities for over $90 million in early 2006.

The latest acquisition, by SEB Asian Property Fund SICAV-FIS, for $215 million works out to about $1,937 per square foot based on a lettable area of 110,976 sq ft.

The fund, which was launched in late-August last year, invests in Asia only. The plan is to develop a broad-based portfolio, primarily in China, Japan, South Korea and Singapore, over the coming months.

This is not the German group’s first acquisition in the Singapore office sector. It made at least two purchases last year.

In September, SEB bought 12 floors at Springleaf Tower nearby for $2,088 psf of net lettable area. And a few months before that, in April, the group bought SIA Building for about $526 million or $1,783 psf from TSO Investment, a fully owned subsidiary of a property fund managed by CLSA Capital Partners.

TSO had purchased the office block from Singapore Airlines in June 2006 for $343.88 million, or about $1,165 psf.

A Ferrell-SEB joint release yesterday said the space transacted at 79 Anson Road is currently about 98 per cent occupied. Major tenants include Kellogg Brown & Root, Mitsubishi Chemicals, interTouch and Infor Global Solutions.

Ferrell Group managing director David Lee said the group will keep searching for development and investment opportunities in the commercial property sector.

SEB Immobilien-Investment managing director Choy-Soon Chua said the group expects to capitalise on the ‘extremely positive growth prospects’ in the Singapore office sector due to rising demand and limited supply.

The remaining 45 per cent of 79 Anson Road is owned by the Central Provident Fund Board.

 

Source: Business Times 25 Jan 08

Govt rejects Aljunied site bid; offers flood Jalan Sultan plot

THE Government has decided not to sell a short-term office site in Aljunied because the sole bid that came in last week offered too low a price.

This decision follows a recent string of lower-than-expected offers for state land and is the first time since 2001 that the Urban Redevelopment Authority (URA) has rejected bids for a government-owned site.

Demand for some commercial land, however, appears to still be going strong. A state parcel at Jalan Sultan, reserved for office or hotel use, received 20 offers when its tender closed yesterday, the URA announced.

The top bid came from Chiu Teng Estates. It offered $14.8 million, or $973.60 per sq ft (psf) of gross floor area, almost double the lowest bid, from NYP Holdings, of $8 million.

The Jalan Sultan site, comprising 17 two-storey conservation shophouses that have to be restored, also got offers from Fragrance Group, Hotel Royal and Hind Lifestyle.

This compares to the single bid for the Aljunied office site, submitted by Mezzo Development, at $7.8 million – just $38.37 psf of gross floor area.

Property consultants say the market may have reached a saturation point for transitional office sites, introduced last year as a quick relief to the office space crunch.

Any development built on these short-term sites is likely to be completed only next year or in 2010, when they will have to compete with a slew of new office space set to come onstream, they added.

One such building is the new $60 million Straits Trading block in Battery Road. The 28-storey building is expected to be completed late next year and could fetch high rents of $18 psf, analysts estimate.

Average rents of Grade A blocks in Raffles Place are now $16.64 psf, said Colliers International. The old Straits Trading building fetched rents of $7 psf.

Mainboard-listed Straits Trading, which owns the building, brushed aside worries that it would be affected by a possible office oversupply that could emerge after 2010.

‘If there’s an oversupply, our building will be out before that,’ said president and chief executive Norman Ka Cheung Ip.

 

Source: The Straits Times 23 Jan 08

Genting confirms talks to build hotel in Sports Hub

Shatec signs pact to be master caterer of hub for 25 years

(SINGAPORE) Genting International plc (GIL) yesterday confirmed a BT report that it is currently in preliminary talks with Singapore Sports Hub Consortium to build a hotel in the Sports Hub.

In an announcement on the Singapore Exchange, GIL said ‘preliminary planning suggests the future hotel could have over 500 rooms which would significantly add to the managed room stock of the company’s integrated resort on Sentosa when it is operational.’

This is not expected to have any material impact on the consolidated net tangible assets and earnings per share of the company for the financial year ending Dec 31, 2008, it added.

Representatives of its subsidiary Resorts World at Sentosa Pte Ltd were present at a celebration yesterday for the SSH consortium for being chosen as the preferred bidder for the Sports Hub – to be called Premier Park – from among three short-listed consortiums.

Krist Boo, deputy director of communications at Resorts World at Sentosa told BT that the proposed arrangement is for GIL to build and operate the hotel over the 25-year tenure but details on the hotel itself are still being worked out.

Resorts World at Sentosa, the integrated resorts project by Genting International, is building six hotels with a total of 1,830 rooms by 2010.

A BT report had quoted managing director of Dragages Singapore Ludwig Reichhold as saying that the consortium is in discussion with GIL to invest in a hotel in the Sports Hub, with a potential construction cost of $200 million.

The report added that the SSH consortium is in talks to team up with Frasers Centrepoint on the Sports Hub’s retail space.

Talks with GIL and Frasers Centrepoint were already underway during the tendering process. An SSH booklet on the overview of its proposal contained logos of its team members including GIL and Frasers Centrepoint. A spokesperson for Dragages confirmed that discussions dated back to 2006.

Dragages Singapore is the lead partner in the SSH consortium and is a subsidiary of France-based Bouygues Construction, which has been involved in more than 30 public-private-partnership (PPP) projects world wide and developed infrastructures such as the Stade de France stadium in Paris and the Asia World Expo in Hong Kong.

Under the Public-Private-Partnership arrangement, the government will pay the consortium a total net present value of $1.87 billion to design, finance, build and operate the Sports Hub over the 25-year tenure. The construction cost of the Sport Hub is estimated to be some $1.2 billion.

The Sports Hub, which occupies a 35-hectare site in Kallang, is the first and largest sports facilities infrastructure PPP project in the world.

Another organisation set to ride the buzz surrounding the Sports Hub is the Singapore International Hotel and Tourism College (Shatec), which has signed an agreement with the SSH consortium to be the master caterer over the 25-year tenure.

Shatec will provide a complete set of lifestyle food and beverage catering solutions for all special events and activities at the Sports Hub.

‘As the master caterer, Shatec will be part of all decisions on catering within the hub and will also be the primary operator of the central and satellite kitchens, corporate boxes and hospitality suites,’ Shatec chief executive Steven Chua said. ‘This in turn shall provide our students the best exposure to the spectrum of hospitality and tourism opportunities.’

The consortium’s comprehensive sporting calendar guarantees at least 90 event days at the National Stadium and 46 days at the Singapore Indoor Stadium. Given the number of events to be held here, the demand for F&B catering at the Sports Hub is expected to be robust, he added.

To ensure timely and responsive on-site management operations, Shatec’s F&B services will be delivered under a new corporate subsidiary, which will have overall purview over the entire hub except for the retail and commercial areas.

 

Source: Business Times 22 Jan 08

Service apartments seek shorter stays to ease hotel room crunch

Industry association proposes rule on stay of 7 nights or more be lifted

FOR 20 years, there has been a little-known rule governing service apartments: Guests have to stay seven nights or more.

Now, with an eye on the current hotel room crunch, the Serviced Apartments Association proposes that this condition be lifted.

There are at least 3,500 service apartment units here, compared to more than 37,000 hotel rooms.

If the association gets the go-ahead, this will have an impact on the shortstay accommodation market. Association president Alfred Ong told The Straits Times it is high time the rule was lifted – a rule he said is unique to Singapore.

He added: ‘If Singapore wants to be a first-class city, then it should give customers the choice, whether it be service apartments, hotel rooms or budget accommodation.’

Although the association said it began preliminary discussions with the Singapore Tourism Board (STB) and the Urban Redevelopment Authority (URA) in 2006 and stepped them up last year, the two agencies said they have yet to receive a formal proposal to lift the rule.

Travel industry players said such a move will help ease the room crunch in Singapore where hotels have registered high average occupancy of more than 80 per cent.

This has led to higher room rates, which in turn have led to concerns over Singapore’s competitive edge in the mass tourism sweepstakes.

The latest American Express market forecast on hotels in the Asia-Pacific, released last week, predicts that corporate rates in Singapore will go up by some 29 per cent this year.

This is higher than its projections on Hong Kong at 17 per cent, Beijing at 21 per cent and Kuala Lumpur at 20 per cent.

This is despite the 8,850 rooms added last year and this year.

Mr Prashant Aggarwal, head of American Express Consulting for Japan, the Asia-Pacific and Australia, cited increased demand with higher visitor arrivals as part of the reasons driving its projection.

However, Plaza Royal on Scotts hotel general manager Patrick Fiat said the industry should not be too concerned about the rates hike.

He told The Straits Times: ‘For the past 10 years, hotel rates have been low. So, the current spike is just hotel rates catching up with rates elsewhere.’ He expects levelling out by next year.

However, he is opposed to allowing service apartments to accept shorter stays.

But the service apartment industry sees the proposed move as complementary rather than competitive.

Ms Tonya Khong, general manager of Fraser Suites and Fraser Place, said: ‘There may not be much impact on the industry’s occupancy if the minimum duration of stay requirement is lifted.

‘We foresee that this move can help bridge the gaps for medical and family tourism, as cooking and children-friendly facilities as well as spacious living space will mean a great deal to these visitors.’

Mr Ong said in other Asian cities, most service apartment guests are middle- to long-term guests. Only about 30 per cent are short-stay guests.

But he added that allowing shorter stays will mean more efficient use of service apartments, which always have some spare days between long-term guests.

 

Source: The Straits Times 22 Jan 08

Hotel rooms during F1 race period going fast

RATES of $1,000 a night and higher have not deterred Formula 1 fans from snapping up trackside hotel rooms for the inaugural Singapore Grand Prix.

Hotels ranging from the glitzy Ritz-Carlton Millennia Singapore to the Peninsula-Excelsior Hotel are already fully booked for the Sept 26 to 28 race. This is despite significantly higher than normal room rates of over $1,000 per night for the Ritz (about a 100 per cent increase) and $300 for the Peninsula (about a 50 per cent increase).

Two other hotels – Swissotel The Stamford and Pan Pacific Singapore – anticipate a 100 per cent occupancy rate.

One reason for the higher rates is that the Government will be imposing a special hotel tax on total room revenue from Sept 24 to 28 – the week of the race.

The tax will range from 30 per cent – for the 11 trackside hotels – to 20 per cent for all other hotels.

Trackside hotels such as Marina Mandarin ($1,500 per night) and Fairmont Singapore ($1,830) are still entertaining bookings.

The Fullerton has yet to confirm rates, but will place those interested on a wait-list.

The high take-up rate is not confined to trackside hotels.

The Four Seasons, along Orchard Boulevard, also managed to sell out all of its rooms from Sept 20 to 28.

The race will be held on Sept 28. Qualifying sessions begin on Sept 27.

Tourists are expected to form a significant portion of the 100,000 fans expected for the grand prix, and they are expected to spend around $100 million on hotels, and at food and beverage outlets, nightspots and the like.

Corporate hospitality packages ranging from $3,500 to $7,500 per head have also been selling well. These were put on the market by race organisers Singapore GP in November.

A Singapore GP spokesman declined comment, but it is believed that suites in areas such as the pit area and exclusive Paddock Club are close to being sold out.

 

Source: The Straits Times 19 Jan 08

Home prices stay firm even as property stocks retreat

Amid weak sentiment in a quiet market, many players are adopting a wait-and-see attitude

SINGAPORE’S property stocks have been taking a hammering lately but the property market has so far remained unscathed.

After riding the boom to dizzy heights, property counters have now dropped by up to 60 per cent or so from their high points over the past 12 months. Home prices, on the other hand, have not softened noticeably, if at all, although the number of transactions has shrunk significantly.

The share price of Wheelock Properties, for instance, closed at $1.87 yesterday, down 48.9 per cent from its one-year high on Nov 4.

But caveats lodged with the Urban Redevelopment Authority and anecdotes of more recent transactions showed no evidence of property sellers lowering their prices.

‘The stock market must fall convincingly before property prices will be hit,’ said DMG & Partners Securities head of research (retail) Terence Wong, explaining the apparent disconnect between physical properties and stock prices.

Stock investors’ worries stem from serious trouble in another housing market – the United States, which is currently embroiled in a sub-prime mortgage crisis. Fears are growing that the US is headed for recession.

In Singapore, while property buying sentiment is weakening as liquidity dries up, prices are not likely to head south any time soon, analysts said.

They say that is because most potential buyers are believed to be taking a breather for now and watching to see what comes next.

If and when these would-be buyers believe the worst of the current financial worries are over, they are set to jump back into the market, they said.

Mr Ku Swee Yong, director of Savills Residential, said: ‘Asia is still very strong and so is the Singdollar.’

‘The problem is not bad enough that expatriates have to be repatriated. Our finance industry is still growing and the expats are still renting.’

But things could get worse in the US and that would hit the general investment mood. ‘Sub-prime is but the tip of the iceberg,’ said Mr Ku.

Knight Frank managing director Tan Tiong Cheng said: ‘A prolonged US recession could contain any price increases in the property market this year. But the property market is fundamentally sound and there are buyers on the sidelines.’

Prices of upcoming launches are expected to remain firm, analysts say.

‘I believe the major developers will hold as their pockets are deep enough,’ said DMG’s Mr Wong.

Favourable interest rates will enable them to hold for a longer period, analysts say.

While launch prices are not likely to be hit, resale prices could fall, one analyst said.

Still, analysts believe many people bought properties at high prices in the past year or so and are unlikely to dump them now. Many of them are believed to have strong holding power.

Mr Ku said buyers who made use of the deferred payment scheme before it was scrapped will not be worrying about their buys for several years.

But analysts think some speculators who bought high, hoping to make a quick buck from high-end properties in Sentosa Cove, Marina Bay and the Orchard Road area, are now panicking.

High-end homes have crossed the $5,000 per sq ft mark – more than double the record price in the last peak in 1996.

The days of making quick money from the high-end property market are likely over. ‘The clock is running and there would be some speculators out there who cannot service the loans on their property,’ said one analyst.

Even so, speculators do not form a large part of the market, analysts say.

With buyers adopting a wait-and- see attitude given the current uncertainty, the market is expected to remain quiet for a while.

 

Source: The Straits Times 18 Jan 08

Transitional office site fetches just one bid

Mezzo’s $7.8m offer for Aljunied site also below expectations

INTRODUCED as a quick fix to address the shortage of office space, the new transitional office sites may just as quickly become redundant.

The Urban Redevelopment Authority (URA) closed the tender for the fourth transitional office site at Aljunied Road and Geylang East Avenue 1 yesterday with only one bid received.

The bid price was also below earlier market expectations at $7.8 million or a unit land price of $38.35 per square foot per plot ratio (psf ppr).

The bidder was Mezzo Development, which also put in the top bid for the third transitional office site at Mountbatten earlier this month. Only three bids were received then with the top bid coming in at $69.17 psf ppr.

In November 2007, the second transitional site in Tampines also received a single bid of $80.65 psf ppr.

The recent tenders are a stark comparison to the first one, which saw 11 bids received in August 2007 and a top bid of $219 psf ppr.

That the site was next to Newton MRT Station may have had something to do with it.

Cushman & Wakefield managing director Donald Han said that demand (and prices) could increase if the transitional office sites are more attractive. But at the going rate, these sites could well be phased out. Mr Han said:

‘At some stage if demand (and prices) drops even further, the government will have to decide if these sites are relevant.’

As at December 2007, the URA had said in its H1 2008 land sales press release that, ‘more sites in a number of locations will be made available for the development of transitional offices’.

But as Mr Han notes, the closer in time these sites are released to 2010, when projected new office supply comes onstream, the higher the risks involved in developing them. ‘The window of opportunity for whoever buys these sites is getting narrower,’ he added.

While Savills Singapore director (marketing and business development) Ku Swee Yong does not believe that there would be an oversupply of office space in 2010, he does feel that transitional offices are not entirely feasible either.

‘Especially when you consider construction time and rising construction costs,’ he said.

Mr Ku, who estimated that construction time alone could take between 9 and 12 months, added: ‘I don’t think we need to keep launching these (transitional) sites.’

 

Source: Business Times 17 Jan 08

New Orchard MRT passageway set to dazzle

Opening today, the entrance-exit will link station to ION Orchard

BE ready to be greeted by friendly ushers and, if you are early enough, the aroma of a free cup of coffee will make your day too as you exit from the ticket counter at Orchard MRT station today.

Also, take time to admire the largest LED walls in Singapore when you ride the escalator to get out onto Orchard Road.

All these and more are what await commuters when a new 90-metre entrance-exit, boasting stylish design finishes and creative ceiling lighting, opens this morning at Orchard MRT station.

It replaces the existing Exit C of the station, which was sealed off for ongoing construction of ION Orchard above the station.

The new shopping mall boasting several global fashion brands is slated to open in early-2009.

Commuters should have no problem finding their way.

Other than ION Orchard’s suave male ‘butlers’ serving gourmet coffee and fruit juice to early commuters and MRT staff ushers, Wisma Atria has engaged a dancing ‘traffic cop’, believed to be the first in Singapore, to guide commuters who want to go to Wisma Atria and Ngee Ann City.

Traffic policemen who dance while directing traffic were popularised when videos of them were first posted on YouTube.

Disoriented commuters can also look to homegrown dance group Sugar N Spice for directions at the station this weekend.

‘The new entrance gives commuters a sense of anticipation for ION Orchard,’ said Soon Su Lin, chief executive officer of Orchard Turn Developments.

‘Aesthetics, comfort and convenience guide us in the design of our mall, as has been the case for this new MRT entrance-cum-exit.

‘When ION Orchard is completed, shoppers can expect a seamless and convenient access to the mall by train, car and public road transport and direct connectivity to adjacent and nearby buildings,’ Ms Soon said.

The new entrance-exit at the station brings commuters closer to Wheelock Place, Tangs and the upper side of Orchard Road.

The passageway also leads pedestrians to a new 117-metre walkway that stretches from the traffic light junction to Wisma Atria and Ngee Ann City.

The walkway will be fully covered in two weeks.

 

Source: Business Times 15 Jan 08

Retail space turns competitive

Concerns over new supply, rising costs even though occupancy is high

DTZ Debenham Tie Leung has raised some concerns about the market for retail space turning competitive as more developments are completed in the next few years.

It said that while occupancy in the retail market remained high at 90 per cent, there were some concerns about the effect of rising costs and the surge in new retail developments since 2006, as more than three million square feet of retail space, about 7 per cent of existing stock, was completed in the past two years.

According to its report, a further 15 per cent of new space can be expected to be added to the existing stock of 28.5 million sq ft of retail space by 2010.

As such, DTZ expects the retail market to be increasingly competitive, with substantial retail space that will be completed in the next three years.

These include projects like ION Orchard (663,000 sq ft) and Orchard Central (270,000 sq ft) which will be completed in 2008 and will house a significant number of retailers new to the Singapore market.

The rate of increase for first-storey monthly fixed gross rents in the Orchard/Scotts Road area slowed marginally in 2007, registering a 6.6 per cent increase year-on-year (YOY) compared with a 7.4 per cent increase in 2006 YOY.

For Other City Areas (OCA), first-storey monthly fixed gross rents rose by 5.9 per cent in 2007 YOY, up from 5.4 per cent for 2006.

First-storey monthly fixed gross rents in Suburban Areas (SA), rose 5.7 per cent in 2007 YOY, up from 4 per cent for the same period in 2006.

DTZ executive director Ong Choon Fah said that she expected new malls to continue to set new benchmark rents this year, but added: ‘Run-of-the mill malls could suffer.’

Noting that there has been ‘more resistance from retailers’ in terms of rental increases, Mrs Ong also highlighted that while there was limited growth in average monthly fixed gross rents, there was greater increase in turnover rents, or the component of the rent determined by the retailer’s revenue.

And active management of malls, as demonstrated by some of the Reit-owned malls, remains a key factor in staying competitive.

Saying that ‘not all malls work’, Mrs Ong added that mall managers will have to work to ‘tease out shoppers’ dollars’.

On some of these new strategies, DTZ associate director for retail Anna Lee added: ‘New niche retail space continues to energise the retail market as mall managers actively raise additional retail space through refurbishments, asset enhancement and redevelopment.’

Competition is also coming from abroad.

Mrs Ong said that there is anecdotal evidence that many Singaporeans have been travelling to Kuala Lumpur over the current festive season to shop. She also noted that as development costs are lower there, mall owners can afford larger malls that offer more innovative retail concepts. ‘It is not uncommon for new malls to be one million sq ft in size and there are even two million sq ft malls.’

DTZ also noted that young shoppers especially are valuing individuality more than before and prefer to shop through less popular channels, such as virtual retail, for exotic brands.

So besides having to grapple with significant supply, the retail market will also have to respond to structural changes in retailing and emerging consumer preferences, DTZ said.

 

Source: Business Times 15 Jan 08

Converting hotels into condos just got harder

Rules to ensure that sites zoned as hotels are not switched to other uses

(SINGAPORE) Redevelopment plans involving the likes of Four Seasons Hotel along Orchard Boulevard and Negara on Claymore may have to go back to the drawing board after the government tightened hotel conversion rules yesterday. If the owners of these properties had visions of converting them to other uses – including residential – they may have to think again.

The tightened rules will put a dampener over possible conversion plans. At the same time they will ensure that there is sufficient supply of hotel rooms in key tourist districts like Orchard Road, amidst the tourism boom.

As a general rule, hotels located on sites zoned for hotel use under the Master Plan will not be allowed to convert to other uses. The same goes for hotels that are located within zones for other uses but where there is a specific planning or sales requirement for a minimum hotel quantum to be provided, Urban Redevelopment Authority and Singapore Tourism Board said in a joint release yesterday evening.

‘The revised approach to evaluating hotel conversion applications will ensure that the location and number of hotel rooms safeguarded are in line with planning intentions and strategic planning objectives,’ the two government bodies said.

This supersedes a policy revision announced in 2002 when 19 hotels which had been previously safeguarded for hotel use under an earlier 1997 ruling were removed from the safeguard list. This meant that their owners could apply to convert the properties to other uses.

However, owners of 18 of these 19 hotels will now not be allowed to convert their sites to other uses such as residential, since these sites are zoned for hotel use under the current Master Plan 2003.

Apart from Four Seasons and Negara on Claymore, the affected hotels include York Hotel along Mount Elizabeth, Hotel Grand Central, Hotel Supreme and Holiday Inn Parkview – all in the Kramat/Cavenagh roads vicinity.

These are all prime district locations and their owners could have had aspirations to convert them to other uses, especially residential, to optimise their land values.

Hotel Properties Ltd has long-standing plans to redevelop Four Seasons Hotel, along with its other three neighbouring properties – Hilton Hotel, Forum and HPL House – into a mega project along Orchard Road.

In 2006, UOL Group gained control of Hotel Negara Ltd, eyeing its key asset, the hotel that it has since renamed Negara on Claymore.

Market watchers had expected UOL to redevelop the property into a residential project or a small office, home office (Soho) development in the longer term.

The list of 19 hotels removed from the hotel safeguard list in 2002 and which are zoned for hotel use under Master Plan 2003 also include a string of hotels in the Bencoolen/ Waterloo/Victoria streets area such as Allson, City Bayview and Strand hotels.

Yesterday’s changes also affect non-hotel developments currently on sites that are zoned for hotel use: these properties will only be allowed to be redeveloped into hotel uses, in line with the Master Plan intention.

URA said it will take a case-by-case approach to any applications for exceptions to these latest rules, factoring in the land use and planning intention for the area, as well as ensuring sufficient supply of hotel rooms to meet Singapore’s tourism needs.

Elaborating on the rationale for the changes, a URA spokeswoman pointed to record visitor arrivals and tourism receipts as well as high hotel occupancies and revenues. Demand is high for hotels, especially in the key tourist belts like Orchard Road and Singapore River.

However, these areas are already largely built up, leaving limited state land that can be made available for new hotel developments.

‘Hence, the loss of hotels within the key tourist districts is irreversible and even the conversion of just a few of the existing hotels would significantly impact the critical mass of hotel rooms within these areas,’ the URA spokeswoman added.

The presence of hotels in major tourist areas contributes to the mix of uses that is critical to the vibrancy and character of these areas as Singapore shapes up as a global city, she added.

With a decision on whether a hotel site can be converted to other uses now based on the plot’s Master Plan zoning, ‘the change puts the land use regulatory framework for hotels in line with other uses’, URA said.

 

Source: Business Times 15 Jan 08

Space surge may slow Orchard Rd rent rises

Almost 2m sq ft to be added between now and 2011

AN IMPENDING surge of new shop space in Orchard Road may put the brakes on the growth of retail rents along the shopping stretch.

Almost two million sq ft of new retail gross floor area is set to open in the area between now and 2011, said property firm Knight Frank.

That is about one-third the current retail space on Orchard Road and double the size of Ngee Ann City.

Most of it will come from new malls, with two – Ion Orchard and Orchard Central – due to be completed this year. They are the first new malls to open in Orchard Road in a decade.

Some consultants say the huge increase in retail space in the next few years may make it hard for mall landlords along the prime shopping belt to keep raising rents at the current pace.

But they add that more outlets may not lead to oversupply as long as shopper demand and tourist numbers keep growing.

Knight Frank’s deputy managing director Danny Yeo said the new malls could achieve benchmark rentals, but some older properties may feel the heat.

Monthly rents along Orchard Road grew at a slower 2.6 per cent to hit $45.50 per sq ft at the end of last year, said Knight Frank.

It expects islandwide prime retail rentals to rise a smaller 10 per cent to 15 per cent for this year, down from last year’s 22.1 per cent.

This is mainly due to the influx of new space. This year alone, 930,000 sq ft of new shops could come up in Orchard and Scotts Roads, said consultancy DTZ Debenham Tie Leung. Besides the new malls, the additional space includes extensions to existing buildings.

The latest to jump on the bandwagon are Paragon Shopping Centre, as well as Specialists’ Shopping Centre and the adjacent Hotel Phoenix. They revealed upgrading plans last week.

Experts lauded these plans. ‘This is a chance for older malls to revamp, or introduce new retailers, or change their concepts,’ said Jones Lang LaSalle retail director Daisy Loo.

Wisma Atria, for one, added several new stores last year. Some are from first-time retailers in Singapore, such as Australia’s Cotton On, French footwear label Schu and Brazilian fashion store Beijaflor.

Mall owners say that they welcome the new shopping centres, and do not view them as competition.

‘Our belief is that the number of shoppers to Orchard Road will increase significantly with the new supply,’ said Ms Amy Lim, general manager of pro- perty management at Macquarie Pacific Star.

CapitaLand Retail, which is building Ion Orchard, also sees minimal conflict between the new and old malls.

Chief executive Pua Seck Guan said most of the retailers that Ion Orchard is drawing in are not moving from existing Orchard Road locations. Sixty per cent will be new to Singapore, trying new concepts or opening a flagship store.

 

Source: The Straits Times 15 Jan 08

Govt to check hotel conversions islandwide

THE Government has made a key policy change regarding land set aside for hotels at a time of heightened concern over the supply of rooms during the tourism boom.

It has discontinued the hotel safeguarding policy, so developers with land designated for hotels may find it harder to convert the site for other uses, such as apartments.

Applications will now be considered based on the need to ensure sufficient hotel facilities and must be in line with the Master Plan, a broad blueprint outlining Singapore’s development. The plan is up for review this year.

The new guidelines represent a key shift from the existing policy. Hotel safeguarding allowed the Government to stop hotel sites from being converted for other uses but was restricted to core areas like the Orchard Road corridor.

But now hotel sites across the country will be under the spotlight. And all conversion applications will be assessed the same way, said the Singapore Tourism Board and the Urban Redevelopment Authority (URA) yesterday.

Hotel conversion applications will generally not be allowed if the area is zoned for hotel use or needs of a certain level of rooms.

‘Instead of just safeguarding the hotels in core areas, they are now effectively safeguarding all hotels – on land with hotel zoning – across Singapore,’ said Knight Frank director of research and consultancy Nicholas Mak.

‘It gives the Government more flexibility to regulate hotel supply in the future.’

The change reflects how the Singapore market has altered, particularly for hotels. The hotel safeguarding policy was introduced in 1997 to check the trend of hotels being converted to condominiums. The Seaview and ANA hotels were turned into residential sites in recent years.

Having sufficient hotel rooms is critical given the aim to attract 17 million visitors to Singapore and $30 billion in tourism receipts by 2015. The 10-millionth visitor landed on Dec 22 last year and in November the average hotel room rate in Singapore reached a record $226.

Demand for hotels within key tourist districts such as Orchard Road and Singapore River is high, but these areas are already largely built up.

The URA said: ‘Hence, the loss of hotels within the key tourist districts is irreversible and even the conversion of just a few of the existing hotels within the key tourist districts would significantly impact the critical mass of hotel rooms within these areas.’

Last year, a few hotels opened, bringing the total number to 227. Typically, it takes about three years to build one. If an existing hotel is converted to other uses, it will take that long for a new one to replace it.

‘Such lead time can affect the available room supply to meet the growing demand as well as the landscape and the attractiveness of the district as a whole,’ said the URA.

 

Source: The Straits Times 15 Jan 08

Industry players feel pinch of rising hotel rates

They are a concern for leisure travel sector; the going may get tougher for Mice operators also

(SINGAPORE) The average daily hotel room rate for 2007 is expected to have hit a record $200. And although 2,000 new rooms will be added this year, there will be no let-up in rising rates.

For 2008, consultancy firm HVS International tips a 15 per cent year-on-year rise in the average room rate (ARR) to $230, then a further 13 per cent rise to $260 in 2009.

But these increases are lower than that last year. According to the Singapore Tourism Board (STB), the ARR rose 23 per cent year on year between January and November 2007. For the month of November, it hit a record $226.

In comparison, the ARR for the same period in Hong Kong was $221.80. And the estimated ARR for Shanghai (which HVS notes was comprised of mostly high-end hotels), was $277.

Pressure on room rates will likely ease with new supply. For 2008, HVS reckons government land-sale sites could yield more than 4,600 rooms. But the actual number will depend on the take-up of such sites – and their cost.

HVS managing director David Ling said: ‘As demand for the economy and mid-tier segments is expected to surge, the land-sales programme for hotel projects should be tailored to locations that encourage developments of this type. Such sites are likely to be outside the prime area due to land costs.’

STB has been encouraging the industry to develop a range of options to add to the hotel mix to cater to different markets.

STB director (travel and hospitality business) Caroline Leong said: ‘In terms of hotel room rates, while we are seeing a record in Singapore, we are actually just keeping up with market rates in Asia. Also, prices are determined by demand.’

Industry players will be monitoring room rates closely.

Chan Brothers Travel executive (marketing, communications) Jane Chang said: ‘Rising rates are a concern for the leisure travel sector as it becomes increasingly difficult to source rooms at competitive prices.’

Chan Brothers also has a meetings, incentives, conference and exhibitions (Mice) arm, and on the upside, Ms Chang said: ‘Despite the increase in rates, bookings remain high as demand for corporate travel continues to grow.’

A tour operator who spoke on condition of anonymity bemoaned the skew towards the Mice sector. Many Singapore hotels now prefer to take corporate bookings, he said.

‘I believe top-notch hotels earn up to 60 per cent of their revenue from corporate travellers. Five years ago it was the reverse.’

Also in Singapore, accommodation can eat up as much as 26 per cent of a package-tour budget, the operator pointed out. ‘Spending one night in Singapore is equivalent to spending two to three in Bangkok or Denpasar.’

While he expects more hotel rooms and budget airlines to bring costs down, he said: ‘At the moment the number of packages we book has been decreasing and our margins are slimmer.’

Even for Mice operators, the going may get tougher.

Dilys Yong, immediate past-president of the Singapore Association of Convention and Exhibition Organisers and Suppliers, and president of Mice organiser HQ Link, said: ‘The quoted average room rate for 2007 is bearable for exhibitors and average trade visitors, but not budget trade visitors. However, the fact is that during the run-up to big events, room rates are even higher than the quoted average rate due to a shortage of rooms.’

As such, Ms Yong says that while the forecast 2008 average room rate is still ‘bearable’, actual rates will be higher.

Budget Mice visitors will find it virtually impossible to get a room, as Ms Yong reckons affordability in this segment is limited to $120 per night.

Inbound travel depends partly on the strength of the economy in the traveller’s home country, and SA Tours marketing and communications manager Ruth Lim noted: ‘There is an influx of leisure tourists to Singapore at this point as generally, these economies are rather robust.’

Until six months ago, SA Tours did not have an inbound leisure travel arm, but Ms Lim said: ‘Our inbound tourism clientele base has been steadily increasing.’

 

Source: Business Times 14 Jan 08

CityVibe put up for sale at $140m

CITYVIBE, a new three-storey retail and entertainment complex opposite Clementi station and next to the future Clementi Central Hub, is for sale through an expression of interest exercise at an asking price said to be $140 million.

This could work out to a 5-5.25 per cent net yield for the property, which will have a net lettable area of 26,581 sq ft, sources say.

Developer Grandview has obtained official approval to redevelop the existing property on the site – a two storey building that used to house a theatre – into the new complex.

Using construction methods that involve more steel and less concrete, CityVibe will be built between February and November this year, according to Jones Lang LaSalle, which is handling the sale of the property on a completed basis.

JLL is also the marketing agent for leasing of the units in the new building.

Grandview’s shareholders are Victor Boh See Fook, Eric Cheng Kwee Kiang and Woon Yong Thai.

CityVibe will be developed on a site with a remaining lease of about 70 years. Grandview is believed to have bought the asset a few years ago.

Asked about potential competition that retailers at CityVibe will face from the adjacent Clementi Central Hub when it is completed in 2010, JLL’s regional director and head of investments Lui Seng Fatt said: ‘Clementi Central Hub will be a magnet for the whole area and benefit CityVibe as well.

‘In any case, the location has a very strong catchment not only from the surrounding HDB estate but also from nearby tertiary institutions such as National University of Singapore, Singapore Polytechnic, Ngee Ann Polytechnic and Singapore Institute of Management.’

JLL expects the expression of interest exercise for CityVibe, which closes on Feb 1, to attract local and foreign investors because it offers an investment-grade retail property in the HDB heartland.

The site is zoned for commercial use with a 40:60 split between retail/F&B and entertainment/office use.

CityVibe has been exempted from providing carpark lots because there is sufficient parking nearby, JLL said.

Source: Business Times 11 Jan 08

Phoenix site to rise again as hotel-retail complex

Straits Trading in talks to redevelop site; new complex to roll out in 2011

(SINGAPORE) A new 580-room hotel and a retail complex with a net lettable area of about 150,800 square feet is slated to come up on the Specialists’ Shopping Centre and Hotel Phoenix site in 2011.

OCBC Bank, which owns the land parcel, told BT yesterday that work on the site is likely to start in the second half of 2008 and will take about three years to complete.

The upcoming hotel will occupy about 60 per cent of the complex’s gross floor area and the remaining 40 per cent will be taken up by retail shops. The complex will have about 262 parking lots, OCBC said. Right now, the complex has a gross floor area of about 539,000 sq ft.

OCBC was responding to queries from BT after Straits Trading Company said in a filing to the Singapore Exchange that it is in ‘advanced negotiations’ with the bank to be appointed to develop a hotel and retail complex at the Specialists’ Shopping Centre and Hotel Phoenix site.

Under the deal, a wholly owned special-purpose vehicle (SPV) of Straits Trading will fund and build the complex based on a maximum development cost, which will be agreed on between Straits Trading and OCBC.

Once the complex is completed, Straits Trading will then sell the SPV to OCBC and at the same time lease the complex for a period of three years – with an option to renew for a further three years at an agreed fixed annual rent. The terms of the arrangement are currently being discussed and negotiated, Straits Trading said.

Structuring the deal this way minimises development risk for OCBC. ‘As a bank, we believe that it is inappropriate for us to assume development risk,’ said Koh Ching Ching, head of group corporate communications for OCBC Bank.

OCBC appears to be going ahead with its plans to develop its Specialists’ Shopping Centre and Hotel Phoenix complex – rather than working with its insurance subsidiary Great Eastern Holdings, which owns shopping mall Orchard Emerald just across the road.

OCBC and Great Eastern seemed poised to redevelop the Specialists’ Shopping Centre and Hotel Phoenix complex together with Orchard Emerald just a few months ago, judging by the two companies’ submissions to the Urban Redevelopment Authority (URA).

Data released by URA last October showed that provisional permission for the development of the two properties was given in August 2007.

But yesterday, OCBC said: ‘Orchard Emerald is held by the Great Eastern Group and we believe that Great Eastern is at a very preliminary stage with regard to this potential redevelopment.’

Straits Trading, one of Singapore’s oldest companies, is now seeing a buyout offer from Tecity Group, an investment firm owned by several members of the family that have stakes in OCBC.

Tecity offered on Sunday to buy all Straits Trading shares it did not already own for $5.70 a share – valuing the company at some $1.86 billion.

OCBC, which has direct and indirect interests totalling 26 per cent of the shares in Straits Trading, said on Monday that it has not decided whether to accept the buyout offer. About 20 per cent of the shares are held by Great Eastern.

Analysts said that OCBC’s plan to launch a new hotel in place of the ageing Hotel Phoenix is timely as Singapore will continue to see a shortage of hotel rooms over the next few years due to increasing visitor numbers.

OCBC’s shares shed 14 cents to close at $8.10 yesterday, while shares of Straits Trading rose one cent to close at a one-year high of $5.67.

 

Source: Business Times 11 Jan 08

Office redevelopment worsens space crunch; rents soar

CBD supply fell 3.7% y-o-y in Q4 2007 to 19.98m sq ft

ONLY 341,180 sq ft of new office supply became available for the whole of last year. At the same time, 1.02 million sq ft of office space was taken away, as a result of buildings undergoing redevelopment or addition and alteration work.

A report by DTZ Debenham Tie Leung shows that existing stock in the central business district (CBD) was 19.98 million sq ft in the final quarter of the year, a decline of 3.7 per cent year-on-year.

Island-wide, the decline of existing stock was marginally less at 1.2 per cent to 56.04 million sq ft.

For non-central areas, existing stock increased by 0.6 per cent to 15.16 million sq ft.

Tight supply has pushed up occupancy levels to 97.5 per cent island-wide, an increase of 2.5 percentage points from the comparable quarter in 2006.

DTZ says that office rents have consequently risen to record levels, with prime office rents in Raffles Place for the quarter 94.1 per cent higher than 12 months previously, at $16.50 psf per month.

High rents prompted companies to consider relocating to lower-cost premises in the CBD fringe, non-central areas and several business parks.

Average monthly gross rents for office buildings in areas like Marina Centre, Alexandra Belt and Tampines Finance Park jumped 81.3 per cent to $14.50 psf per month, 85 per cent to $7.40 psf per month and 62.2 per cent to $7.30 psf per month respectively year-on-year.

While the short-term situation remains challenging, DTZ believes the mid and long-term situation could prove better for office tenants.

DTZ executive director Cheng Siow Ying said: ‘The pace of rental growth is expected to moderate as tenants become more rent-sensitive and more choices of office supply such as transitional offices, disused state properties and business park space are made available to occupiers.’

DTZ is forecasting that about 7 million sq ft of net lettable area could come on stream in the next four years.

In 2007 alone, it estimates that 1.9 million sq ft of gross floor area of office space was generated through the conversion of disused state properties for office space and transitional office sites.

Supply of business park space in the industrial sector also increased in 2007.

Island-wide, existing stock of industrial space increased 4.1 per cent to 297.36 million sq ft.

Of the 7.6 million sq ft of private industrial space that was completed in the first three quarters of 2007, DTZ said that 5 per cent was business park space. DTZ also estimates that 7 per cent of the 20.4 million sq ft potential supply of private industrial space over the next three years could be business park space.

DTZ executive director Chua Wei Lin said: ‘An increased number of business park developments, built-to-suit and high-tech facilities are expected to come on stream, partly due to heightened demand from qualifying office users as the office market tightens.’

Average monthly gross rents for business park/science park/high- tech industrial space recorded increases of 50 per cent year-on-year to hit $3.90 psf per month.

 

Source: Business Times 11 Jan 08

NEWS OF ASSET SALE: Eng Wah shares soar to record high

CINEMA group Eng Wah Organisation’s share price shot up by 16.5 cents to 85 cents – an all-time high – on news that its portfolio of properties was up for sale.

The counter went as high as 91 cents during the day.

Eng Wah’s properties could be worth as much as $190 million so, based on the 150 million shares in the market, shareholders could get as much as $1.20 in cash per share if all the cash proceeds were distributed.

The group announced in May that it would buy the business of Japanese pharmaceutical firm Transcutaneous Technologies (TTI) by issuing new shares to TTI shareholders. Existing assets of Eng Wah would be sold off, with practically all of the proceeds going back to the shareholders.

Yesterday, Ms Goh Min Yen, Eng Wah’s managing director, reiterated that the asset disposal had always been part of the deal.

Still, a report unveiling details of the sale of the properties by marketing agent Jones Lang LaSalle breathed life into the counter.

Kim Eng Research calculated that each share’s fair value is $1.70. That means even after the jump to 85 cents, the shares look undervalued.

The assets up for sale are the Toa Payoh Entertainment Centre, Jubilee Theatre at Ang Mo Kio, the former Mandarin Theatre at Kallang Bahru, Empress Theatre at Clementi and the 16th floor of Orchard Towers.

 

Source: The Straits Times 11 Jan 08

Bids for transitional office site fall short of expectations

THE Urban Redevelopment Authority (URA) has named the bidders for a 15-year leasehold transitional office site at Mountbatten Road. The top bid came in at $14.9 million or $69.17 per square foot per plot ratio (psf ppr) – 14 per cent less than the last site awarded, in Tampines.

Of the three bids received, the top price was offered by Mezzo Properties Pte Ltd. The bidder is understood to be associated with MV Land, which was awarded an industrial site at Sin Ming Lane in a public tender with a bid of $68.9 million or about $50 psf ppr in October 2007.

Superbowl Land put in the second highest bid of $14.8 million (or $68.70 psf ppr) while Soilbuild Group bid $10.93 million (or $50.77 psf ppr).

The URA said that the decision on the award of the tender will be made after the bids have been evaluated.

While the top bid falls short of market expectations, Cushman & Wakefield managing director Donald Han believed that the URA is likely to award the site as transitional offices have a mandate as a ‘quick fix’ to address the critical office supply crunch.

Based on recent tenders, prices for transitional office sites appear to be falling.

In November 2007, a tender for a transitional office site in Tampines drew just one bid of $10 million, which works out to $80.65 psf ppr, lower than the $100 psf ppr region that most property consultants had estimated.

The Mountbatten site being closer to the city and opposite the future sports hub, Mr Han had expected bids to be around $140 psf ppr. He said that based on the top bid, the potential developer of the Mountbatten site could stand to reap double digit yields if the space can be leased at $4-5 psf per month.’

 

Source: Business Times 10 Jan 08

Eng Wah properties put up for sale

Portfolio worth around $190m; bulk of proceeds may go to shareholders

(SINGAPORE) Eng Wah Organisation, the subject of a reverse takeover, has put a portfolio of five cinema, retail and office properties up for sale, which sources suggest could be worth about $190 million.

The five are Toa Payoh Entertainment Centre and Jubilee Theatre at Ang Mo Kio – both of which are shopping/ entertainment complexes anchored by Eng Wah cineplexes – as well as the former Mandarin Theatre in Kallang Bahru and Empress Theatre in Clementi (which have been shut down) and the 16th floor of Orchard Towers.

The space in Orchard Towers comprises offices spread across three units – one occupied by Eng Wah and the other two leased out. There are plans for a collective sale of Orchard Towers, which stands on a freehold site in the prime Claymore area.

The other four properties are on sites with remaining leases ranging from 61 to 70 years.

Of the four cinema/retail assets, the ones in Ang Mo Kio and Toa Payoh (both close to MRT stations) can be refurbished and repositioned for a higher yield, while the other two properties at Clementi and Kallang Bahru, which are currently vacant, are candidates for redevelopment, said Jones Lang LaSalle’s regional director and head of investments Lui Seng Fatt. JLL is marketing the portfolio through an expressions of interest exercise that closes on Feb 14.

‘Eng Wah is open to selling the entire portfolio of five properties or any one or more of these properties individually,’ he added.

Eng Wah is prepared to lease back the cinema space in Toa Payoh and at Jubilee Theatre in Ang Mo Kio if the buyer offers it at a mutually agreeable rental rate. However, leaseback is not a condition for the sale, Mr Lui added.

The cinema-cum-entertainment group is in the midst of a reverse takeover by Japanese pharmaceutical firm Transcutaneous Technologies (TTI).

Eng Wah has said that upon completion of the deal, the group’s operations would be discontinued and substantially all its assets would be disposed of.

An earlier BT commentary pointed out that except for $10 million which will go to TTI, Eng Wah will distribute all proceeds from the sale of assets, together with cash in hand, to its shareholders.

At the time that the RTO was announced in May last year, Eng Wah managing director Goh Min Yen said the group was studying various options, including selling the entertainment businesses to the Goh family.

On the stock market yesterday, Eng Wah closed unchanged at 68.5 cents. It stood at 40.5 cents just before it made its RTO plans public.

 

Source: Business Times 10 Jan 08

9 tenants, developer in legal dispute over Square2 mall

Retailers sue over empty pledges; Novena Point counter-sues for unpaid rent

SLUGGISH business in the shopping mall sitting above the Novena MRT station has led to a legal tussle between a group of disgruntled tenants and the developer.

The nine tenants of Square2 have sued the developer for misrepresentation, claiming that they were made several promises, such as the scale of advertising and promotion campaigns, which have remained unfulfilled.

Novena Point, which is under the Far East Organization umbrella, has denied making misrepresentations and is counter-suing the tenants for rent and other charges.

The mall, conceptualised as a Korean-themed one, has 150,000 sq ft of retail space on five levels. It has more than 200 retail tenants.

The nine tenants, including a gift shop, a hair salon, a fashion retailer and an eatery, opened for business in the first two months of last year.

Depending on shop size, they pay rents ranging from about $1,900 to over $12,000 a month.

Last month, the nine, represented by lawyer Leonard Loo, filed a lawsuit in the Subordinate Courts against Novena Point.

The claim did not specify the quantum of damages, as the plaintiffs are asking the court to assess the amount they deserve if they win the case.

Alternatively, the plaintiffs are asking that their tenancy agreements be rescinded and for the rents they have paid to be refunded. In their statement of claim, they say they took up their shop spaces based on oral representations made to them by the developer’s representatives and its brochures.

The promises, the tenants claim, include:

• That there would be specific shopping zones such as a ‘digital world’ selling electronic gadgets in the basement and Korean-themed shops on Level 3, where shop staff would wear traditional Korean costumes;
• That Korean artistes like K-pop star Rain would be brought in monthly to promote the mall;
• That $6 million would be spent on advertising and promotion.

  But the defendant failed to deliver on these, the tenants said.

  The shops have not been zoned, but are scattered, and no ‘digital world’ has been created. They added that

Korean artistes did not grace the mall every month, and that the defendant had not spent $6 million on promotions.

Some tenants claimed they have been locked out of their shops and that their rent cheques have been rejected without reason.

The defendant, represented by Allen & Gledhill, is denying these claims. In its defence filed last week, it said that while it had approached electronics retailers to take up shop units, it never set out to pitch Square2 as an IT mall like Sim Lim Square or Funan.

It added that while Level 3 has a Korean theme, it never said operators would wear Korean costumes. Korean artistes have come to the mall, but it was never promised that such appearances would happen every month.

As for Rain, it said that all that was said was that it would try to bring him in.

The developer also claimed to have put in considerable effort into promoting the mall, but never committed to spending $6 million on this. It has so far spent $2.9 million.

It asserted that six of the tenants were in rental arrears despite reminders, so their leases were terminated.

Their cheques were returned because partial payments were not accepted.

It is contending that the tenants each owe between $1,800 and $51,000 in rent.

 

Source: The Straits Times 10 Jan 08

Middle Road office block up for sale

A FIVE-storey office building in the Beach Road district has been launched for sale amid a severe shortage of office space in Singapore.

The freehold building is the former P H building at 33 Middle Road and has an indicative price of $23 million, said marketing agent Colliers International.

‘We forsee strong interest from investors who are attracted by the opportunity posed by the current tight office supply in the market,’ said the firm’s executive director of investment sales, Mr Ho Eng Joo.

The property is owned by a trading company, added Mr Ho.

The site is near the upcoming mega mixed-development South Beach, developed by a City Developments-led consortium, and within a short stroll to the City Hall and Bugis MRT stations.

It sits on an area of 3,749 sq ft and has a gross floor area of 16,954 sq ft. The site is zoned for commercial use with a gross plot ratio of 4.2 and can be built up to six storeys.

The property has showroom space on the ground floor and offices from the second to fifth storeys. It also has carpark facilities.

Mr Ho said rents of similar grade office space along Middle Road are priced from $7 per sq ft (psf) to $7.50 psf.

The building is fully tenanted, but all the tenancies are due to expire by the third quarter of this year, said Mr Ho.

 

Source: The Straits Times 9 Jan 08

Paragon in $82m facelift, expansion

SPH investment to yield contemporary facade, more retail, commercial space

THERE will be a new look for Paragon shopping centre come October. The Orchard Road mall will get a $45 million makeover – to update its building facade and increase retail space.

The facelift will begin this month, and is expected to be completed in October.

In addition, the commercial space above its retail podium will be expanded – at a cost of $37 million, including the payment of land premium. This is scheduled to be completed by end-2008.

The total cost of the facade makeover and the addition of commercial space is $82 million.

Singapore Press Holdings, which owns and manages the prime retail and office complex, says that the makeover is part of Paragon’s continuous efforts to enhance its retail environment and shopping experience for customers.

And shoppers need not fret: Paragon will remain open and operate as it normally does during the renovation period. The shopping centre’s current glass and granite facade cladding will make way for a ‘contemporary yet elegant’ look with the installation of pop-out glass boxes.

They will be made of multi-faceted layers of aluminium panels and fritted glass with in-built energy-saving LED lights.

The new three-dimensional facade will comprise multiple transparent, glazed and volumetric external shop-fronts installed above the walkway level.

Five duplexes of designer stores facing Orchard Road will front the mall and each will see its shop front increase by three times the current height. ‘At the busy intersection of Orchard Road and Bideford Road, a luxury brand’s flagship store will enjoy a looming five storeys of shopfront starting from ground floor, providing a dramatic visual interest at this significant landmark junction,’ said SPH.

Paragon’s renovation and higher concentration of sophisticated designer stores are in line with the transformation of Orchard Road into a shopper’s paradise for the increasing number of well-heeled international visitors coming to Singapore.

‘The design is also prompted by luxury brand retailers looking for more space to expand and build their signature flagship stores and an opportunity to do something different,’ said Linda Kwan, general manager of Paragon.

‘Paragon’s facade, when expanded forward by four metres towards the Orchard Road pedestrian walkway and spanning 115 metres in total length, will provide these tenants with significant visibility and brand expression.’

The facade project is undertaken by DP Architects, which also oversaw the integration of Paragon and the former Promenade into a single shopping mall in 2003.

There will be minor upgrading works within Paragon, including the addition of new balustrades for a contemporary look.

Upon completion of the enhancement works, the nett lettable area at the retail podium will increase by about 11,600 square feet.

The commercial space above the Paragon retail podium will be expanded by another 29,000 square feet – with the construction of two more floors for medical and office use.

 

Source: Business Times 8 Jan 08

NEW LOOK, MORE SPACE: Paragon to get $82m makeover

PARAGON Shopping Centre will soon sport a new look.

The icon along Singapore’s Orchard Road shopping strip is embarking on an $82-million makeover that will give it a new facade and more retail and office space by the end of the year.

Its new front will include pop-out glass boxes that will lift shopfronts above the ground level.

Stores at the front of the building will sport windows three times taller than the current ones.

And a yet-to-be-disclosed flagship store will make its mark with a five-storey high shopfront.

The makeover ‘will provide these tenants with significant visibility and brand expression,’ said Mrs Linda Kwan, Paragon’s general manager.

The new look for the mall at the junction of Orchard and Bideford roads is the work of DP Architects, which oversaw the integration of Paragon and the former Promenade into a single mall in 2003.

DP aims to create a modern and upmarket look for Paragon, to reflect its status as a leading mall for international luxury goods.

The latest renovation will also add 11,600 sq ft to Paragon’s nett lettable area, which now stands at 650,000 sq ft. Besides the extra retail space, two more floors, or 29,000 sq ft, will also be added for use as offices and medical clinics.

The mall will remain open during the renovation.

 

Source: The Straits Times 8 Jan 08

Market St Car Park may be redeveloped into offices

The total project cost could range from $1 billion to $1.5 billion

CAPITACOMMERCIAL Trust (CCT) has been granted outline planning permission by the Urban Redevelopment Authority (URA) to redevelop Market Street Car Park into an office tower that could cost up to $1.5 billion.

Lynette Leong, chief executive of CCT’s manager CapitaCommercial Trust Management Ltd, said the viability of the project would depend on the development premium to be paid for changing the use of the 58,964 sq ft site from a car park to an office tower.

The premium will depend on the enhancement in land value as assessed by the chief valuer, which CCT expects to be made known by May.

Ms Leong said the outline permission is subject to the payment of 100 per cent of the enhancement in land value, instead of the standard 70 per cent, as well as there being no extension of the present lease, which runs to 2073.

Assuming a land value for 99-year commercial land of $900 psf per gross floor area, and adjusting for the shorter leasehold of the site, CCT estimates the land and development premium to be $800 psf.

Including construction and other costs, the project cost would be $1.25 billion.

But CCT said that depending on the development premium, the total project cost could range from $1 billion to $1.5 billion.

Assuming that necessary approvals are granted, a new office tower with an estimated gross floor area of 850,000 sq ft could be built within 36 or 40 months. Ms Leong said that existing tenants, who only moved into

Market Street Car Park in end-2006 after a $14 million renovation, will be given notice soon.

Currently, there are 704 car parking spaces, 28 tenants, and 21,205 sq ft of net lettable area. As at June 1, it was valued at $59 million.

Saying that CCT has no plans to divest the office tower if built, Ms Leong added: ‘When completed, the property would augment the core assets in CCT’s portfolio which currently includes landmark office buildings such as Capital Tower and 6 Battery Road.’

She said she was bullish on the office sector. While she did not reveal estimated yields for the development, she said that it was looking at projected rents of $12-$14 psf per month.

The outline planning consent comes years after CCT parent CapitaLand first mooted plans to redevelop both Market Street Car Park and Golden Shoe Car Park.

It was reported that the URA first rejected redevelopment plans for the car parks as earlier as in the mid-1990s when the properties belonged to the now defunct Pidemco.

Ms Leong said there are currently no plans to redevelop Golden Shoe Car Park, although it has also applied for a change of use for the site.

 

Source: Business Times 4 Jan 08

Two property investment opportunities in the offing

Changi Hotel site going for $55m, Geylang shophouse devt priced at $36m

THE site of Changi Hotel, on Changi Road, is being offered for redevelopment with an asking price of $55 million.

The 26,433 square foot site has a plot ratio of 3.0 and can be redeveloped with a maximum gross floor area (GFA) of 79,299 sq ft. The site is being marketed by CB Richard Ellis (CBRE).

The property consultancy estimates that, including a development charge of about $12.5 million, the unit price for the site equates to about $850 per square foot per plot ratio (psf ppr).

Various corporate buildings sit on this same stretch of road, including AIA Changi and Great Eastern @ Changi.

CBRE executive director of investment properties Jeremy Lake said: ‘This regular site provides an excellent investment opportunity for the redevelopment of a corporate building or a boutique hotel.’

Colliers International has also put up for sale a newly restored two-storey shophouse development located at 512-534 Geylang Road with an indicative price of around $36 million.

To be sold via private treaty, the freehold property comprises 12 two-storey shophouse units with a total strata floor area of 29,504 sq ft.

Under the 2003 Master Plan, the subject property, which is also located in the Geylang Conservation area, is zoned for commercial use.

Colliers executive director of investment sales Ho Eng Joo said the island block of shophouses comes with 24 strata titles. They will be sold with vacant possession.

Mr Ho said that a potential use for the property is as a food and beverage establishment, as the area is already known for F&B. ‘Alternatively, the property is also suited for showrooms, karaoke lounges, pubs, shops and offices,’ he said.

 

Source: Business Times 3 Jan 08

POPULAR DESPITE RENTAL HIKES: Queensway still best place for sports retailers

QUEENSWAY Shopping Centre is rundown and fairly inaccessible, it has none of the frills its rivals have, such as a cinema, and rents have been rising. However, tenants at the well-known sporting goods haunt appear willing to stick with it.

Queensway, said Jeans Arcade proprietor Mohamed Yahya, who was echoing what five other retailers in the mall said, is ’still the best place for a sports retailer’. It has managed to maintain its reputation for being the place to go for one’s sporting needs over the years.

He has been at the mall for more than 30 years now, and is currently paying about $14 per sq ft (psf) for his 330-sq ft, second-floor unit. Last year, when his two-year tenancy agreement ran out, his landlord raised his $3,500 rental to $4,500, a whopping 29 per cent increase. The net effect, he said, is that he is just breaking even now.

Three other tenants that renewed leases within the last year reported rental hikes of between 3 and 20 per cent.

Another factor behind Queensway’s continued popularity is that rents at other locations have moved up too.

The mall, which sits at the junction of Alexandra Road and Queensway, opened in 1976. Individual owners own the freehold units. A check with tenants there found rental rates ranging from about $13 psf to over $18 psf, depending on the location.

The Straits Times saw only one shop unoccupied.

New tenants such as Kobe 2000 proprietor Chan Chan Seng, 66, have been attracted to Queensway because rents there are lower than in other locations in the Katong and National Stadium area. His shop specialises in triathlon equipment. He is paying about $16 psf for the 135-sq ft unit – not as low as he would like, but still less than what landlords in other locations were asking, he said.

The mall is even attracting new, non-sports retailers such as Games Factory, which specialises in Sony gaming products. Its owner, 23-year-old Fred Yeo, signed the tenancy agreement two weeks ago, paying $14 psf for his 248-sq ft unit. He was considering a tiny $25 psf, 160-sq ft unit at the popular Far East Plaza near Orchard Road earlier, but decided to rent the cheaper Queensway unit just in case his business failed.

 

Source: The Straits Times 17 Dec 07

Asking rents at specialist malls rise by up to 30%

Some retailers pay willingly for locale’s reputation, others prefer mix of shops

 

RETAILERS in specialist malls such as Sim Lim Square, Queensway Shopping Centre and United Square have not escaped the tide of rising rentals seen at other malls here.

Some tenants have reported demands for rent hikes of up to 30 per cent when the time came to renew their shop leases.

For some, it makes sense to pay the higher rent and stay put and enjoy the advantages of being in a specialist-themed mall. Others say that more variety in the tenant mix might draw even more shoppers.

A check with tenants at the three malls – well-known for electronic products, sporting goods and children’s products respectively – found that rentals went from a low of about $11 per sq ft (psf) to a high of more than $30 psf.

This is still lower than the $44 psf commanded by retail space in Singapore’s prime shopping belt – Orchard Road.

Knight Frank director of research and consultancy Nicholas Mak said that, despite these rental hikes and the limited walk-in appeal of such malls, setting up shop in specialist malls can make sense.

This, he said, is because a concentration of specialist shops can create a useful ‘cluster effect’ for a retailer.

A grouping of specialist retailers can give a locale a reputation as the ‘place to go’ for such products or services. This attracts customers looking for particular products, and in turn attracts more of such retailers to the mall.

For example, Sim Lim Square is known to both locals and tourists as the place to get electronic products. This means that a visitor to Sim Lim Square is much more likely to buy something than someone visiting a ‘generic, cookie-cutter’ mall, he said.

The owner of computer retailer IT Harvest, who wanted to be known only as Mr Sajan, said he has no intention of moving out of Sim Lim Square, even though his monthly rent is more than $30 psf.

‘Sim Lim…is the IT hub. You can’t do business in electronics elsewhere.’

Likewise, Queensway Shopping Centre is known as the place to go for sporting goods, which is why retailers continue to set up shop there.

In 2002, United Overseas Land (UOL) relaunched United Square, located next to the Novena MRT station, and themed it a ‘Kids Learning Mall’, targeting middle- to upper-income shoppers ‘who want to provide the best for their children’, said UOL spokesman Ruth Yong.

One tenant, who declined to be named, said sales at her children’s apparel outlet are on a par with those at her branch in Suntec City, where she pays a higher rental. The latter mall does not have any specific theme.

The tenant, who has had her United Square outlet for about a year now, said that while ‘traffic is lower than I had expected…it’s not a bad choice’.

But things can also be more competitive in a specialist mall.

For example, while the number of potential buyers of electronic gadgets at Sim Lim is likely to be higher than that at Suntec City, the presence of so many competitors will also make it hard for a new computer parts retailer to stand out and secure a sale, Mr Mak said.

Mall specialisation does not always guarantee hordes of shoppers and, in fact, may deter those who are not looking for those particular products.

This is the concern of one tenant at United Square, where rents have risen by an average of 30 per cent this year, according to industry watchers.

Unlike Sim Lim Square or Queensway, where shop units are owned and rented out by individual owners, United Square is owned and managed by property giant UOL.

One tenant, Ms Cordelia Ling, has approached UOL to ask that she be allowed to break her two-year-contract.

She started her four- month-old children’s furniture shop at the basement in United Square ‘because I thought it was central and the crowd was a good fit, but I can’t even cover my rent’, she lamented.

She pays $13 psf in rent, plus 10 per cent of profits made, for her 468-sq ft, basement-level unit.

Ms Ling puts it down to over-specialisation. ‘There are no walk-in customers, and when the schools do not have classes, the place is practically dead,’ she said.

• A concentration of specialist shops can create a useful ‘cluster effect’ for retailers.

• It can give a locale a reputation as the ‘place to go’ for such products or services.

• This attracts customers looking for particular products, and in turn attracts more of such retailers to the mall.

Source: The Straits Times 17 Dec 07

Office sector to finish 2007 as property’s star performer

Prime office rents grew 92% this year; premium office rents have done even better – up 96%

RESIDENTIAL property may have been red hot, but office rents – with their phenomenal growth amid a severe supply crunch – will finish up as the year’s star performer.

Latest figures from property consultancy CB Richard Ellis (CBRE) confirm the trend.

CBRE executive director of office services Moray Armstrong told The Straits Times yesterday prime office rents grew 92 per cent this year from last year. Premium, or grade A, office rents did even better – up 96 per cent.

He said, however, this growth ‘won’t be sustainable next year’.

‘We’re likely to see it moderating at 15 per cent to 20 per cent’.

One trend seen this year, which is likely to accelerate next year, is the number of companies moving out of the Central Business District into non-prime areas, he said.

‘The costs are too high in prime areas. In the short term, there’s still a critical shortage of office space, and this will remain a favourable market for landlords and investors.’

Singapore’s monthly prime office rents shot up 82.6 per cent to $12.60 per sq ft (psf) in the year ended Sept 30, CBRE said previously.

Current levels have already exceeded the historical high reached in the early 1990s of $11.50 psf.

At a separate event yesterday, LaSalle Investment Management also predicted a 15 per cent to 20 per cent growth in office rents next year.

LaSalle, a unit of real estate broker Jones Lang LaSalle, placed the growth rate for grade A office rents at 70 per cent this year. ‘This is the fastest growth rate in the region,’ said the firm’s regional investment strategist for Asia-Pacific, Mr David Edwards.

‘In comparison, rents in the private residential market rose at a healthy, but milder, 25 per cent,’ he said.

The Urban Redevelopment Authority said office space rentals rose an overall 40.7 per cent for the nine months ended Sept 30 based on its official office rental index. Its figures for the year are due next month.

The Government has released transitional office sites – where buildings can be constructed quickly – to relieve the short-term supply crunch.

Two of these – at Scotts Road and Tampines – have been awarded, while two more at Mountbatten and Aljunied Road are now being tendered.

A more permanent supply is expected by 2010, and Mr Armstrong believes this will ‘deliver a great balance between supply and demand’.

Some analysts, such as Citigroup, however, recently warned of a supply glut to come. ‘We see no reason to conclude it will be an oversupply situation,’ countered Mr Armstrong.

‘With Singapore’s diversified economy boom, mass market residential and retail properties will also perform well,’ said Mr Edwards.

LaSalle plans to invest $20 billion in Asia-Pacific properties over the next three to four years, half of which will be in Japan. Demand is rising for modern logistics offices and shopping malls, said Mr Edwards.

The firm also recommends South Korea, for moderate-risk investors, and emerging markets such as China, India and Southeast Asia, for investors with a bigger appetite for risks.

LaSalle said it would also integrate sustainability concerns into its investment strategies.

‘Where environmental concerns was previously ‘interesting’, it is now necessary,’ said Mr Edwards. Given the soaring prices of crude oil, energy- efficient buildings have become very attractive investments.

‘Tenants are also increasingly demanding green buildings. In the long term, if investors don’t take this sustainable approach, it will have a negative impact on their portfolio,’ added Mr Edwards.

 

Source: The Straits Times 15 Dec 07

Shop rents rising faster in city fringe, suburbs than in Orchard

Landlords enjoy good takings as demand spills over from prime belt

ORCHARD Road may be the epicentre of shopping buzz, but malls in quieter areas are coming into their own.

Rents of shops on the city fringe and in suburban areas rose faster than those in the prime shopping belt in the October to December period, according to Knight Frank.

The property consultancy said the biggest increase in rents came from shopping malls on the fringe of Orchard Road, such as Tanglin Mall and Park Mall. Retail rents in this area climbed by 8.9 per cent in the quarter, thanks to a spillover from Orchard Road and a better tenant mix, said Knight Frank.

In contrast, rents of malls in Orchard Road proper – including Wisma Atria and Ngee Ann City – rose only 2.6 per cent. Suburban malls such as Tampines Mall and Jurong Point fell in between, with rents rising 5.8 per cent.

The main reason for this is rents in Orchard Road have already risen so much that any further increases will be quite small, said Knight Frank’s director of research and consultancy, Mr Nicholas Mak.

On the other hand, retail rents in suburban and fringe areas are starting from a lower base, so they will rise by more, he added.

Indeed, Knight Frank’s data shows that despite having the smallest rent increases, the central areas still have the highest rents, and vice versa.

In the heart of Orchard Road, average gross monthly rents have soared to double those of malls on the fringes. This is because over this year, rents in Orchard Road central have gone up the most. They rose by 17.2 per cent this year, almost double the 9.9 per cent rise in Orchard Road fringe malls. In suburban malls, retail rents rose just 7.5 per cent for the year.

But overall, it has been a good year for landlords of shopping malls islandwide.

They have raised rents by more than market experts had forecast, thanks to higher wages, a strong economy and a booming property market.

Islandwide, shop rents in well-located malls jumped by a better-than-expected 22.1 per cent for the whole year, said Knight Frank. Its report on retail rents analysed prime shop space of between 400 and 800 sq ft, typically located on the ground floor of malls, with good frontages.

But rent growth is expected to moderate next year to 10 to 15 per cent, it said. While retail sales and demand for shop space are likely to stay strong, new malls will open with 2.3 million sq ft of space. These include West

Coast Plaza, Iluma at Bugis, Ion Orchard, Orchard Central and Jurong Point’s new wing.

‘Landlords who try to raise rentals in the later part of next year are likely to face stronger resistance from retailers,’ said Mr Mak.

This may come as a relief to retailers. One retailer, who asked not to be named, said she had to move a boutique out of Paragon last year when rents nearly doubled. Another outlet at Suntec City has had rents rise by 30 to 40 per cent.

‘We used to be making money at most of our shops, but now because of the rental increases we are only breaking even at some,’ she said.

‘We can handle rents rising to a certain point, but after that it is untenable.’

 

Source: The Straits Times 14 Dec 07

Ten Mile Junction site up for sale

THE Urban Redevelopment Authority (URA) yesterday launched for sale by tender a site with a twist at Choa Chu Kang.

The URA is selling a 1.56ha site with a three-storey commercial development – the existing Ten Mile Junction Mall. The sale excludes the third-storey Light Rapid Transit (LRT) station, now in operation.

This is the first time the URA is selling a residential site for homes above an LRT station. A similar site sold previously was the Ion Orchard site above the Orchard MRT station.

The latest 99-year leasehold site, at the junction of Choa Chu Kang Road and Woodlands Road, has a gross floor area of 254,394 sq ft for residential use, either for flats or service apartments. The mall has a fixed gross floor area of 121,191 sq ft.

The site could cost $75 million to $90 million at a market price of about $200 to $250 per sq ft, which allows smaller developers to also bid, said Savills Singapore’s director of business development and marketing, Mr Ku Swee Yong.

Occupancy levels and property values are rising in that area, and the new project may add some buzz to the district, said Mr Ku.

In the past, the area has struggled to take off. Ten Mile Junction was reported as a ‘ghost town’ for some years after it first opened 1999.

After a series of tenants failed to create a buzz, supermarket chain Sheng Siong took over as master tenant in 2003 and drew in crowds.

Sheng Siong managing director Lim Hock Chee says his business is doing good as the mall is ‘reasonably busy’. He, however, has expressed concern about the change in owners.

The URA said the tender would close at noon on April 3 next year.

 

Source: The Straits Times 14 Dec 07

SLA rents out 3 properties for office use, offers 2 more

Successful bid for former police HQ in Pearl’s Hill Terrace is 40% above guide

THE Singapore Land Authority (SLA) has awarded three state-owned properties for rental through a public tender.

And the successful bids were 17-40 per cent above the guide rents it had set.

The former Police Headquarters at 195 Pearl’s Hill Terrace, the former Haig Boy’s School in Mountbatten Road and a former office and showroom at 169 Sims Avenue went for monthly rents of $53,501, $139,003, and $7,700 respectively.

All three sites are for office use.

The top bid of $53,501 for the Pearl’s Hill Terrace property works out to almost 40 per cent more than the guide rent.

The property, which has a gross floor area (GFA) of 145,431.2 square feet cost roughly $2.70 per square foot per month (psf pm).

Businessman Tan Yong Boon, who won the tender, said: ‘We plan to sub-let units to new start-up companies and those who have been forced out of their existing offices.’

The Mountbatten Road property, which has an estimated GFA of 96,039.9 sq ft, fetched a top bid of $116,000 or 20 per cent above the guide rent. This works out to $0.70 psf pm.

Ritzland Investment, which won the tender, plans to pump in $2 million to refurbish the property.

The winning bid of $7,700 psf pm for the Sims Avenue property, with a GFA of 4,151.6 sq ft, was 17 per cent above SLA’s guide rent and works out to $0.54 psf pm.

It was awarded to businessman Koh Teck Lee who plans to sub-let the units within three months after a $300,000 refurbishment.

A fourth property, the former Queenstown Neighbourhood Police Station, with a GFA of 12,780 sq ft, drew a top bid of $55,888 – more than double the guide rent. The bids for this property are still being evaluated.

SLA also said that two more sites have been put up for public tender.

The first, the former Upper Aljunied Technical School at 102 Upper Aljunied Road, was first put up for tender in October for short-term office use. There were no takers.

The site, with GFA of 83,118.9 sq ft, has now been re-designated for office and mixed use.

The second site is the former Alexandra fire station at 55 Queensway. Also for office and mixed use, the property has a GFA of 34,548.9 sq ft.

 

Source: Business Times 13 Dec 07

Corporate abodes with style

Big names in professional services believe an address in the Marina Bay area will boost accessibility and branding

It’s not only banks that want to be located in a financial centre. The big professional services – law, auditing, management consultancy – are all hustling to Marina Bay, the new downtown.

The suits hobnobbing there will not only be pin-striped bankers, but also legal advisers and accountants. The spanking new One Raffles Quay, for instance, which houses banks UBS, Credit Suisse and Societe Generale, is also home to auditor Ernst & Young and law firm Norton Rose.

‘Being located in the centre of the business district puts us where we can have our finger on the pulse of business activity,’ said Ong Yew Huat, country managing partner of Ernst & Young. The firm occupies eight levels of the 50 in the North Tower of One Raffles Quay.

He pointed out that the heart of Singapore’s business district was shifting southward, towards the bay area from Raffles Place, as the Marina Bay district develops. ‘We welcome and look forward to more offices, shops and other developments being set up nearby, which will inject colour and life to the area,’ he said.

One Raffles Quay was built by the same developers now constructing another massive project called the Marina Bay Financial Centre. Together, the two projects will double the supply of premium office space in the central business district.

Many are expecting the new buildings, which will stand alongside other coming attractions such as the Sands casino and the Singapore Flyer, to further energise Singapore’s business district, which has traditionally referred only to the area around Raffles Place.

‘One of the benefits to Allen & Gledhill is the accessibility to clients located in the area,’ said the law firm, which is located at One Marina Boulevard. ‘It is also convenient for employees, as there is easy access to various modes of transportation, shops and food outlets.’

As it is, some firms in and around Marina Bay are expanding.

Legal firm Drew & Napier, for instance, said it will require more space within Ocean Towers, its current abode right next to Raffles Place MRT station.

‘We will remain in Ocean Towers till 2010. Accordingly, our priority over the next couple of years is to secure more office space, if possible, in Ocean Towers,’ it said. The firm added that it intends to remain in the city area should it relocate. Even in the age of the internet and mobile technology, the firms say that geographical location is still of the utmost importance.

‘There is no substitute for meeting face-to-face with our clients,’ said Ernst & Young’s Mr Ong.

Said Allen & Gledhill: ‘Even with the availability of various lines of communication, it is important to us to meet our clients. Accessibility and convenience for our clients are therefore important considerations.’

There’s another reason why companies are choosing the new downtown – image.

Besides the posh offices and their plush interiors, the larger Marina Bay area is also home to the historic Fullerton Hotel, the old Supreme Court and several national theatres and museums. These lend the area a certain highmindedness and sense of the serieux. Simply put, for a top law firm, being located next to a fast-food joint on Orchard Road just wouldn’t have the same gravitas.

Norton Rose’s chief operating officer in Asia, Bob Ikin, said the legal firm’s location ‘enhances brand visibility, as One Raffles Quay is a very new and prestigious building’.

But it is not just the law and auditing firms that are gravitating to Marina Bay, but also Sophis, a software developer and service provider to the treasury, capital and commodity markets. As such, it’s natural that it would be in the financial centre. But besides the obvious need to be close to its business partners, the company also had to think about its brand, said Nigel John Ford, business development director in Asia.

‘Sophis takes particular care in choosing the right office address for its operations around the world,’ he said. ‘In New York we are on Broadway, in London we are in Gracechurch Street, and in Hong Kong we are in International Finance Centre 2. Marina Bay Financial Centre just has to be the address for our business in Singapore.’

For prospective customers, ‘it shows we have discerning standards and reveals something of our corporate culture and brand,’ he said. The company officially opened its Singapore office – on the 25th floor of One Raffles Quay’s North Tower – in February.

For Ernst & Young’s Mr Ong, ‘the choice of a top-notch building and state-of-the-art work facilities reflects our attitude towards our people’.

Besides accessibility and image, some firms said they chose the Marina Bay area precisely because they could be somewhere else, quickly.

Management consultant McKinsey & Company, which is located at Centennial Tower, wanted to be near the city’s main road arteries.

‘Being a consultant often means being on the road travelling to and from client meetings,’ said Chinta Bhagat, head of McKinsey in Singapore. ‘We also fly in experts and consultants from our other global offices. Marina Bay is an excellent location with doorstep access to top hotels, restaurants and other facilities, and particularly rapid access to Changi airport.

‘The people you see running up the boarding ramp just before they close the gate, they’re unfortunately usually us,’ he said.

 

Source: Business Times 13 Dec 07

Apollo Centre sold for $205m

Buyer AEW intending to refurbish it

US PROPERTY fund manager AEW Capital Management has bought Apollo Centre for $205 million, or $1,378 per sq ft (psf) of lettable floor area, the property firm that brokered the deal said yesterday.

Apollo Centre, in Havelock Road, is a seven-storey commercial building with shops on the basement, first and second storeys and offices on the upper floors.

It sits on 54,600 sq ft of land and has a gross floor area of around 217,500 sq ft. The lettable floor area is 148,700 sq ft. It is on a 99-year lease, with 75 years left.

Knight Frank, which marketed the building, said the purchase shows continued investor confidence in the Singapore commercial market since the US sub-prime crisis.

Apollo Centre was sold by Singapore Exchange-listed Apollo Enterprises. The company also owns and manages Furama City Centre Singapore and Furama RiverFront Singapore.

Knight Frank put up the property for sale in September and the tender closed on Oct 16. Several parties were interested and negotiations went on for several weeks after, said Knight Frank executive director Foo Suan Peng.

AEW and its affiliates manage more than US$41 billion of real estate assets and securities in North America, Europe and Asia. The group set up an office in Singapore in April as a base from which to expand in the region. AEW intends to refurbish Apollo Centre, BT understands.

Right now, office rents in the area are about $8.00 psf per month (psf pm) while retail rents range from $8.00- $8.50 psf pm.

 

Source: Business Times 13 Dec 07

US real estate fund pays $205m for Apollo Centre

Deal reaffirms confidence in Singapore’s office market

APOLLO Centre on Havelock Road has been sold to a United States fund manager for $205 million.

This higher-than-expected price comes as a relief to property watchers, who say it is a strong sign that foreign investors remain confident in the Singapore office market despite the US sub-prime mortgage crisis.

Marketing agent Knight Frank launched the seven-storey office building near Chinatown for sale in September, hoping to get at least $200 million.

The final sale price, paid by US real estate fund manager AEW Capital Management, works out to $1,378 per sq ft (psf) of net lettable area.

This is a ‘fair price’, considering that ‘in today’s market, prime offices about 10 minutes’ walk from this building are going at close to $3,000 psf’, said Mr Donald Han, the managing director of property consultancy Cushman & Wakefield.

At nearby Chinatown Point, office prices are already hovering around $1,300 psf, he added.

The sale of Apollo Centre is significant as it shows that foreign buyers are starting to look outside the prime Central Business District (CBD) for good deals, said Knight Frank’s executive director, Mr Foo Suan Peng.

Most high-profile office sales in recent months have been of gleaming ‘trophy’ office buildings in the heart of the CBD.

As office prices skyrocket amid the space crunch, however, older properties on the CBD fringe are starting to look more attractive, even to foreigners who might not be familiar with Singapore’s office market.

‘Local buyers usually don’t mind properties that are a bit out of the CBD, but a lot of overseas investors concentrate on prime Grade A buildings in the CBD,’ said Mr Foo.

The 99-year leasehold Apollo Centre, which has 75 years left on its lease, is not a prime Grade A office building. It returns rents of about $8 psf, compared with about $18 psf for spanking new One George Street across the road, according to Mr Han.

Apollo Centre, however, has ‘tremendous’ potential in terms of increasing its lettable area, he said. When refurbished, it could command rents of at least $10 psf, he added.

The sale is ‘certainly very good news now, when just one or two months ago, the market was trying to find its footing after the backlash from the US sub-prime crisis’, he said.

‘It’s refreshing to know that foreigners, such as AEW, YTL and even Jackie Chan, have started to buy portfolios in Singapore.’

Mr Han was referring to Malaysia’s YTL Corp, which last month bought Westwood Apartments on Orchard Boulevard for a record price, and Chan’s recent purchase of 1 Neil Road.

AEW, which set up an office in Singapore in April, is also believed to have bought a row of conservation shophouses at Murray Terrace, off Maxwell Road. It is understood that the fund manager is looking to buy properties in Bangkok, Kuala Lumpur and Hong Kong.

Most of the tenants at Apollo Centre, within walking distance of the Subordinate Courts, are law firms.

 

Source: The Straits Times 13 Dec 07

DBS Bank to move headquarters to Marina Bay Financial Centre

AFTER months of speculation, DBS Bank has finally announced that it will move its headquarters from Shenton Way to Singapore’s next financial hot spot – the Marina Bay Financial Centre.

DBS will take 700,000 sq ft of office space spread across 22 storeys, the largest lease deal ever in the Republic after the 508,298 sq ft of office space also at the Marina Bay Financial Centre leased to Standard Chartered Bank.

By moving to Marina Bay, DBS joins French corporate and investment bank Natixis, Swiss private bank Pictet and other financial heavyweights that will park themselves within the new development being built at the edge of the Central Business District facing the sea.

Outgoing DBS chief executive Jackson Tai said at a press conference that the 12-year lease would start in 2012.

‘In the 1970s, the DBS Building at Shenton Way was the tallest in Singapore. Today, with the signing of this lease, we are pleased to anchor the new financial business district at Marina Bay,’ Mr Tai said.

The new DBS headquarters will allow the bank to consolidate its various customer-facing units, trading operations, treasury and capital markets business in one building.

The bank’s key support functions and ‘various units’, meanwhile, will relocate to a nine-storey building at Changi Business Park, near the Expo MRT station in 2010.

Goldman Sachs, which owns the development that now houses DBS’ two office towers, is seeking buyers for the property, according to The Business Times, citing unnamed sources. The US investment bank bought DBS’ offices two years ago.

The financial centre, according to Jones Lang LaSalle Asia Pacific head of investments Lui Seng Fatt, used to be the area surrounding OCBC Building, UOB Plaza and OUB Centre.

DBS’ move to the ‘new downtown’, with attractions such as Las Vegas Sands’ upcoming casino-resort, merely highlights the fact that the business hub is moving down south.

‘I do not pre-empt after this round. We see a lot of those buildings that will start upgrading themselves, including some of the older buildings such as OUB Centre,’ Mr Lui said.

Marina Bay Financial Centre general manager David Martin said DBS’ move cemented Marina Bay Financial Centre’s reputation and would significantly add to the centre of banking and financial excellence and vibrant urban setting his group was creating at Marina Bay.

 

Source: The Straits Times 13 Dec 07

Celebrity plans to open piano bar, reflexology business, offices

Jackie Chan pays $11m for Jinriksha Station at 1 Neil Road

HONG KONG movie superstar Jackie Chan’s love affair with Singapore property continues with his latest purchase – the former Jinriksha Station at 1 Neil Road.

He fell in love with the historic building – once the central depot for rickshaw drivers in Singapore – and bought it for $11 million.

The three-storey corner building in Tanjong Pagar now houses a music lounge called EZ50 on the ground floor. Its sale price works out to $818 per sq ft (psf).

‘It’s a good price because the individual shophouses there are about $1,000 over psf on average,’ said Mr Simon Kwan, who helped broker the deal about a fortnight back. ‘As long as he purchases it at or below the market price, he will be comfortable,’ he said, of Chan.

Mr Kwan, who is the star’s property agent, also runs EZ50 and The 50s pubs, as well as the recently opened Jackie Chan’s Cafe Coffee and Tea at 1 Nassim Road.

The star purchased 1 Neil Road from a firm owned by Mr S. L. Cheong, which also owns the 1 Nassim Road property leased to Chan.

Mr Cheong, the uncle of SC Global chief Simon Cheong, also sold Chan The 50s entertainment complex on Tanjong Pagar Road for $8.8 million in 1996.

Both the Tanjong Pagar buildings are in the Neil Road conservation area.

‘You can’t find buildings like this anywhere else,’ said Mr Kwan. ‘These are the two most outstanding buildings in Tanjong Pagar.’

The former Jinriksha station was built in 1903.

It is a commercial building with space for rent. The One Family KTV karaoke lounge used to occupy the second and third floors, but it had since closed down, according to Mr Kwan, who is managing the building on behalf of Chan.

Mr Kwan has plans for a piano bar, a foot reflexology business or offices for the 8,500 sq ft of space on the second and third floors.

‘The highest possibility is to have offices,’ he said, explaining that this plan would leave him time to concentrate on running Chan’s new restaurant business in Singapore.

Also, office rents are currently strong, supported by tight supply.

Rents at the nearby Red Dot Traffic Building are at $6 psf a month, while those at International Plaza next to the Tanjong Pagar MRT station are going for $7.50 to $8 psf.

Mr Kwan said they could have seven to eight office units.

A decision will be made after a trip to Hong Kong to meet up with Chan and firm up plans, he said.

Apart from commercial buildings, the movie star also owns a few condominium units in the Orchard Road area, including a three-bedroom unit in The Grangeford condo on Leonie Hill Road.

The 99-year leasehold Grangeford is by now known for the property that sold en bloc for more than half of Horizon Towers’ price on a psf basis.

Chan bought his Grangeford apartment, which is being rented out, for only $1.3 million back in 1996.

He will stand to reap about $3.4 million from the collective sale, which he was originally not keen on joining.

Another Hong Kong superstar, Andy Lau, also used to own an apartment at Grangeford, as well as a unit at the UE Square condo.

Mr Kwan said he had since sold these off for Andy Lau. He also used to manage the Singapore properties of the late Teresa Teng and Anita Mui.

Savills Singapore’s director of business development and marketing, Mr Ku Swee Yong, said there would be more celebrities entering Singapore’s property market.

‘For one, the Formula One event will bring in a lot of celebrities.’

 

Source: The Straits Times 12 Dec 07

Dubai World’s Limitless sets up office here

S’pore base will look for investments in the region

DUBAI World’s real estate arm, Limitless LLC, officially started operations at it new regional office here at UOB Plaza yesterday. It will use Singapore as a base to look for new investment opportunities here and in the region.

On route to Hanoi for the ground-breaking ceremony of its US$220 million Halong Star mixed development project in Vietnam, Limitless CEO Saeed Ahmed Saeed said yesterday: ‘Without doubt, South-east Asia is one of the most exciting and dynamic regions for Limitless. Its fast-growing economy presents us with endless opportunities to demonstrate our core skills of master planning large-scale, balanced projects and waterfront development.’

To date, Limitless, which was established in July 2005, has a portfolio of five real estate projects worth about US $100 billion. Three are in the Middle East, with the others in India and Vietnam.

Limitless has considered development sites in Singapore, including the first parcel at Marina View, although it decided not to put in a bid eventually.

‘We took strategic position on Marina View and decided it was not the right time to tender for it,’ said Philip Atkinson, regional director (South-east Asia) at Limitless.

Mr Atkinson added: ‘The Singapore market now is buoyant and fast paced, and we would take a cautionary view.’

Dubai World, through its subsidiary Istithmar, has however, recently acquired a one-third stake in the government land sales development site now known as South Beach, which is estimated to cost a total of $2.5 billion.

Mr Saeed would not say what its expected target rate of returns would be for its projects but added: ‘Different countries have different hurdle rates.’

Like its parent company, Limitless will mostly fund its investment with equity but Mr Saeed said that it could also raise debt from the capital markets.

Limitless is also likely to be looking at emerging markets around the world as this is where large-scale projects that can leverage on its town-planning skills will be.

Particularly bullish on the two huge markets, Mr Saeed said: ‘India and China will probably need new homes for the next 100 years.’

 

Source: Business Times 11 Dec 07

78 Shenton Way sold for $650m to German group

$1,857 psf deal shows foreign players still prize S’pore office market

FOREIGN institutional investors continue to be drawn to the Singapore office market.

The latest investor to come in is Germany’s Commerz Grundbesitz Investmentgesellschaft (CGI) group, which has bought 78 Shenton Way for $650 million, BT understands. The price works out to $1,857 per square foot based on a total net lettable area of about 350,000 sq ft. This comprises about 275,000 sq ft in the existing 34-storey office tower and a further 75,000 sq ft that is being built in an extension that will be spread across six levels of offices above the carpark podium.

The extension is expected to be completed in the second half of 2009.

78 Shenton Way is on a site with a remaining lease of about 75 years. The property was sold by a joint-venture between Credit Suisse and CLSA funds which bought the 34-storey tower this January for $348.5 million.

Sources say that the vendors are expected to pump in about $80 million to build the extension and spruce up the existing property.

Jones Lang LaSalle is said to have advised 78 Shenton Way’s sellers, while buyer CGI – which is making its maiden entry into the Singapore real estate market – is understood to have been advised by CB Richard Ellis. CGI is the capital investment company for the open-ended fund Haus-Invest.

The $1,857 psf of net lettable area achieved for the deal is in line with current office values in the area, industry observers say. In April this year, TSO Investment, a unit of a CLSA Capital Partners-managed property fund, sold SIA Building at Robinson Road to European pension fund manager SEB for about $1,780 psf of net lettable area.

In September, SEB also bought 12 floors at Springleaf Tower in the Anson Road area at $2,088 psf of net lettable area.

In October, Allco Commercial Real Estate Investment Trust picked up KeyPoint in the Jalan Sultan/Beach Road area for $370 million or $1,186 psf of net lettable area. The deal includes income support of up to $10.5 million for two years to be provided by the seller.

In August, a Goldman Sachs-linked fund bought Chevron House (formerly Caltex House) along Raffles Place for $2,780 psf, a record for an office block here. Chevron House stands on a site with a remaining lease of about 81 years.

The Goldman Sachs group is also expected to stitch a deal early next year to buy the nextdoor Hitachi Tower, which faces Collyer Quay, for about $3,000 psf, industry observers say. A higher price can be justified for Hitachi Tower due partly to its superior tenure (999-year leasehold) and orientation. As well, Hitachi Tower is not weighed down by rental caps for a major tenant, as in the case of Chevron’s lease at Chevron House, which limits the near term rental upside of the property, according to an earlier media report.

 

Source: Business Times 11 Dec 07

Ion Orchard plans to kick off ad campaign in Q108

(SINGAPORE) Ion Orchard intends to launch an advertising campaign to promote the mall in the first quarter of next year – almost a whole year before the Orchard Road mall opens its doors to shoppers in end-2008.

For starters, the mall will run a print ad campaign in selected international publications such as the Wall Street Journal Asia and the Financial Times.

Designed to convey a mood of luxury and sophistication, the campaign will feature international models dressed in specially produced couture outfits and accessories whose design inspiration comes from the mall itself – or rather, the mall’s facade which aims to light up the building once it is up. Closer to the day of the mall’s opening, ads will also run in the local newspapers.

The mall is owned by a joint venture (JV) between Singapore-listed CapitaLand and Hong Kong’s Sun Hung Kai Properties.

‘Our new marketing campaign reflects our vision to be a world-class retail destination that will bring a truly unique retail experience to shoppers,’ said Soon Su Lin, chief executive of the JV company. ‘Even though Ion Orchard is still under construction, we are happy to be adding to the vibrancy of Orchard Road, and look forward to delighting shoppers in the near future.’

The mall also unveiled four-metre high hoardings last week at the site.

The campaign account was won by marketing communications agency DDB after its contest against six agencies.

‘I think Ion Orchard will light up Orchard Road in a bold and fashionable way,’ said David Tang, chief executive of DDB Group Singapore. ‘The campaign will have to be just as bold and fashionable.’

Ion Orchard is part of a retail-cum-residential development located at the heart of Orchard Road. When opened in end-2008, the mall will offer some 400 retail, F&B and entertainment stores. Marketing for the retail space has already begun, BT understands.

 

Source: Business Times 10 Dec 07

Beach Road could be next prime hot spot

Set for a snazzy makeover, boasts a good mix of shophouses and strata-titled commercial and residential units on the market for the average investor

FORGET the Central Business District. Property investors priced out of prime zones but still hunting for a good buy should look to downtown’s upcoming hot spot – the Beach Road, Ophir-Rochor district.

This hotchpotch of an area – with old shophouses dotting its landscape, juxtaposed with towering modern office blocks – is set for a snazzy makeover, as announced by the Government this week.

Already, property experts have identified strong potential upside for properties in the district.

Minister of State for National Development Grace Fu said it would be ‘an extension of Bugis’, complementing the Marina Bay financial district.

Although most major buildings, including The Gateway, Shaw Towers and the Bugis Junction office tower, are owned by single developers, there is a good mix of shophouses and strata-titled commercial and residential units on the market for the average investor.

The 101, Premier Centre and The Plaza, for example, are all strata-titled properties with a mix of commercial and residential units.

One shop owner, Mr Thomas Tan, who purchased a 1,300 sq ft unit on the ground floor of The 101 for $1.4 million – or $1,077 per sq ft (psf) – in April, told The Sunday Times he was glad he had taken the bold move to buy earlier this year.

The same unit now costs more than $2 million – or $1,539 psf – on the market, said the 61-year-old retiree.

Over at The Plaza, residential units are currently priced at around $933 to $1,222 psf.

While Singapore’s property bull run seems to be taking a breather, prices in the Beach Road, Ophir-Rochor area are likely to stay strong and move upwards in the long run with new developments, said Savills Singapore’s director of business development and marketing, Mr Ku Swee Yong.

Beach Road already has its own crown jewel in South Beach – an eco-friendly, $2.5 billion mixed project developed by a City Developments consortium. By 2012, South Beach will boast two towers of up to 45 storeys, two luxury hotels, service apartments and conserved military buildings of the old Beach Road camp.

On Thursday, the Government said it would release one more 2.74ha plot – between Rochor and Ophir Roads, surrounding Parkview Square – as a multi-use ‘white site’ next year, yielding 495 hotel rooms and 139,740 sq m of commercial space.

CBRE Research executive director Li Hiaw Ho said the new projects would complement each other and add much vibrancy to the area.

‘A mini-Raffles City on the white site is likely to do very well,’ added Mr Ku.

Shophouses are now particularly attractive, especially those facing the new plot, he said.

Currently, trendy eateries and drinking spots occupy shop houses along Haji Lane and Tan Quee Lan Street.

The area, with its proximity to Bugis Junction, has, in recent years, developed into a fashionable hang-out famed for good food and cheap beer.

Shophouses in the area have been going for $800 to $1,000 psf, and other surrounding commercial units have been sold for about $1,600 psf, said Mr Ku.

Considering that just across the street, Suntec is commanding up to $2,500 psf, there is much potential for capital values of properties in the area to appreciate.

Still, before that can happen, certain parts of the district have to be ’spruced up’ and polished, added Mr Ku.

Some small commercial buildings, shophouses and independent hotels there are old and shoddy and will need facelifts to match the area’s new trendy image.

Although the area does not command Grade A rents or tenants, it still gets a good mix of quality tenants with occupancy rates at a high 95 per cent, Savills director of commercial services June Chua said.

Office rents are now in the range of $9 to $11 psf a month, up from $4 to $5 psf more than a year ago. This translates into good rental yields for owners.

Mr James Smith, managing director of a media company based at the Evershine & Century Complex, is one tenant who has had his rent doubled in the last six months, and he may consider investing.

While the latest news will likely translate into higher rents in the future, Mr Smith says the upside is that more quality offices will sprout in the area, and this will have a good ‘trickle-down effect’.

‘This district will remain attractive, especially to us, as it’s a creative hub with lots of knowledge-driven businesses and schools in the vicinity,’ he said. ‘It’s got a good vibe.’

Mr Tan recalled that the old Beach Road, in the 1950s to 1960s, was ‘the’ entertainment hub, with good food from the old Satay Club, and two cinema houses lining the road.

‘Perhaps in the next decade, the hustle and bustle of the old Beach Road will be revived and it will regain its old glory,’ he said.

 

Source: The Sunday Times 9 Dec 07

RESPONSE TO TOURIST BOOM: More hotel plots up for sale next year

TEN hotel sites will be made available next year to meet demand from the fast-growing tourism sector.

Three are new sites in the Government’s land sales programme for next year, while the others are carried over from last year’s programme, said the Ministry of National Development yesterday.

One of the new sites is between Balestier Road and Ah Hood Road, near the Sun Yat Sen Nanyang Memorial Hall. It had been put up for sale before but there were no takers, so the Government enlarged the parcel to include a park and an adjacent land plot.

The other two new sites are downtown. One is at the corner of Gopeng and Peck Seah Streets, and can host 330 hotel rooms. The other is at the corner of Clemenceau Avenue and Havelock Road, and can accommodate 260 rooms.

The Balestier Road site, which can hold 675 rooms, is on the confirmed list and will be released in March. The only other hotel site on the confirmed list is at the junction of Race Course and Bukit Timah Roads. It will be launched for sale in February.

All the other hotel sites on sale, including the Gopeng Street and Clemenceau Avenue plots, are on the reserve list. This means they will not be launched for tender until a developer puts in an acceptable bid.

The other reserve list plots are at Victoria Street, New Bridge Road, Kallang Road, Jalan Bukit Merah, Jalan Besar and Bernam Street.

 

Source: The Straits Times 7 Dec 07

Simpler rules for deciding DC payment from Jan

URA will use only 2003 Master Plan to cap development baseline values

RULES on whether proposed building works will have to pay a Development Charge are to be simplified.

The DC, which can be payable when land is redeveloped more intensively, is at present calculated using baselines set in the 2003 Master Plan, or sometimes with the earlier MPs of 1958 or 1980. From January 1, the Urban Redevelopment Authority (URA) intends to use only the 2003 MP to cap development baseline values.

However, some existing developments will have their higher baseline values safeguarded, and will be exempt from paying a DC even if the site is redeveloped to a baseline value higher than MP 2003.

After the recent increase in DC rates, the charge can in some cases amount to more than $100 million, which is a hefty amount compared to the average of $250 million that the URA has collected annually in DCs for the last five years.

The URA said yesterday that only about 2 per cent of all existing private land lots (or about about 1,700 plots mostly in the Central Region) have high historical baselines and even fewer approved developments are built over the plot ratios stipulated in MP 2003.

One such development, which is currently up for collective sale, is Pacific Mansion in River Valley.

Marketed by Savills Singapore, its director of investment, Steven Ming, estimates that the 45-year-old Pacific Mansion is currently built up to a 3.84 plot ratio.

Under the MP 2003, the plot ratio for the area is only 2.8, but Mr Ming says that the URA will permit any new development built on the site to be built up to the present plot ratio of 3.84, making the site particularly attractive as no development charge will be payable.

Mr Ming says that if the URA had not honoured the existing built up plot ratio and not given a development charge exemption, and instead levied development charges based on the existing gross floor area, the development charge for a new development built up to a plot ratio of 3.84 would amount to around $112.8 million, based on the current DC rate of $9,100 psm for the area. This, incidentally is almost three times the DC rate at the end of 2003 when it was about $2,300 psm.

The savings from not having to pay a DC is ‘hypothetical’, as most developers would have factored this into the land value. But as DC rates rise, so does this hypothetical development charge. Mr Ming adds: ‘This is definitely a figure that a developer will consider when looking for a collective sale site.’

Another attractive site on the market is Elizabeth Towers at Mount Elizabeth which has an indicative price of $673 million or about $2,666 per square foot per plot ratio (psf ppr).

Marketed by Newman & Goh, its head of investment sales Jeffrey Goh estimates that the existing building is currently built up to a plot ratio of 4.65 while the plot ratio based on the MP 2003 is also 2.8.

And Mr Goh added: ‘With Westwood Apartments (off Orchard Boulevard) setting a new benchmark price, I expect DC rates to be revised upwards again.’

As with Pacific Mansion, a redeveloped Elizabeth Towers can be built up to the existing built up plot ratio. And the charge of about $110 million, based on the current DC rate of $11,900 psm for the area, is not payable.

But there are not many of such sites around.

Also up for sale with no DC payable is Grange Heights on Grange Road. It is marketed by Jones Lang LaSalle, whose regional director, Lui Seng Fatt, says that not all old developments see such huge figures in the exempted DC amount. ‘For many developments, it may be around $10 million,’ he said.

Indeed, for most developments on the collective sales market, there will be no DC payable because the existing development has not been built up to the current MP 2003 plot ratio.

Willyn Ville at Holland Village is currently built up to an estimated 1.3 plot ratio, even though the plot ratio based on earlier MPs was higher than the 1.4 stipulated in MP 2003.

The difference of course is that Willyn Ville was never built up to the old plot ratios. It is marketed by Chesterton International, whose associate director, Mark Yuen, said: ‘A development that has been built up over the existing MP 2003 is different because the government can’t take back what has already been paid for.’

The revised baseline definition was first announced in 2003. Before the change, development baselines were determined by the highest baseline in MP 1958 or 1980 or that of the approved development.

 

Source: Business Times 6 Dec 07

Plum industrial site in Playfair Road for sale

Site near future MRT station expected to fetch $65-70 psf ppr

THE Urban Redevelopment Authority has released a site at Playfair Road near the future Upper Paya Lebar MRT Station, and which is on the reserve list of the Government Industrial Land Sales Programme.

The 0.86 ha site is one of four new industrial sites for the reserve list for H2 2007.

The site, which is designated for Business 1 industrial development, has a plot ratio of 2.5 and will be sold with a 60-year lease.

Savills Singapore director of industrial business space Dominic Peters believes that the Playfair Road site could see bids ranging from $65-$70 per square foot per plot ratio (psf ppr) because of its choice location.

‘A developer is likely to build a strata-titled development for sale,’ he added.

Based on the estimated land price and an average construction cost of around $120 psf, Mr Peters believes units could be sold for around $220 psf.

There are currently four sites on the reserve list, including the latest site at Playfair Road.

The demand for industrial sites has appeared to have slowed down together with demand in the rest of the property market. ‘Developers appear to be monitoring the market,’ Mr Peters said.

Recent sales of industrial sites include a site on the confirmed list at Sin Ming Lane which went for about $50 psf ppr or $68.9 million in October.

In August a site with a 30-year lease at Kaki Bukit Road was sold for $72 psf ppr – the highest-ever unit land price for a 30-year leasehold industrial site.

 

Source: Business Times 5 Dec 07

South Beach project to cost $2.5b: CityDev

(SINGAPORE) City Developments’ upcoming mixed-use project along Beach Road will cost some $2.5 billion in all – including the land cost of some $1.69 billion – the company’s chairman Kwek Leng Beng said yesterday.

Mr Kwek was speaking to reporters after signing the building agreement for the site.

CityDev, together with its partners Istithmar (part of the Dubai World Group) and US-based Elad Group, secured the 3.5-hectare site in a government land tender in September. The three partners hold a one-third stake each in the project.

The development, which will be called South Beach, is set to become a ‘revolutionary New Eco-Quarter in Singapore’ when it is completed by 2012, CityDev said. Construction will start next year.

South Beach will have premium office space, luxury hotels, residential apartments and retail space with a total gross floor area (GFA) of some 1.6 million square feet, CityDev said.

The partners are required to set aside at least 40 per cent of the total GFA for office use, and another minimum 30 per cent of the total GFA for hotel use.

In line with this, the consortium is planning two luxury hotels. One of the hotels will be a high-end boutique hotel with about 250 rooms, while the other will be a five-star hotel with about 450 rooms, CityDev said. The partners intend to bring in upmarket hotel brands for both hotels.

The partners are also looking to bring in branded residences for the luxury apartments they will be building on the site – such as The Plaza in New York, which is owned by Elad.

Looking ahead, Mr Kwek said he believed that the property market in Singapore is in a period of ‘consolidation’ brought on by the sub-prime mortgage crisis in the US. ‘In 2008, a lot will depend on how much the sub-prime recovers and whether the US will go into a deep recession,’ he said. ‘2008 will have a little storm here and there, but Asia Pacific will grow.’

For Singapore, Mr Kwek said that there is still a potential upside for mid-range home prices, which are still below their historical peaks.

 

Source: Business Times 5 Dec 07

Govt sees potential in Rochor area remake

Plans not firm but it intends the area to complement Marina Bay development

(SINGAPORE) The government intends to remake the Ophir Road/Rochor Road corridor into a commercial centre that will complement the Marina Bay area, Minister of State for National Development Grace Fu said yesterday.

‘This area could be developed as a mixed-use corridor featuring offices, hotels and other supporting uses, connecting the established commercial node at Marina Centre to the Bugis area,’ Ms Fu said. ‘The corridor will inject vibrancy and activities into this part of the city.’

Ms Fu was speaking at the signing of the building agreement for a 3.5-hectare mixed-use site along Beach Road.

The Urban Redevelopment Authority (URA) awarded the site to Singapore-listed City Developments and its foreign partners Istithmar (part of the Dubai World Group) and Elad Group in September for some $1.69 billion.

‘The government intends to build on the momentum by developing the land parcels along Beach Road and at the Ophir Road/Rochor Road corridor,’ Ms Fu said.

The URA will release more details of the plans for the Beach Road/Ophir Road corridor early next year, Ms Fu said, but she did not provide a timeline for the development of the area.

The authorities could partner both local and foreign developers to draw up development plans, she said.

In fact, there is increasing foreign interest in real estate investment in Singapore, Ms Fu said.

Foreign real estate investment in Singapore has come to about $8.8 billion for the year-to-date, Ms Fu said. The amount is an increase of 66 per cent over the 2006 total of $5.3 billion.

The amount also represents a huge jump over the amount of foreign real estate investments seen in 2005 and 2004.

For 2005, foreign investment came to $4.1 billion and in 2004, the figure was only $800 million.

‘This dramatic increase reflects the optimistic economic outlook and development potential in Singapore,’ Ms Fu said.

The Beach Road project marks the first participation of Istithmar and Elad, two major international investors, in a government land tender in Singapore.

Dubai World – which is the investment holding firm of the Dubai government – and Elad Group each have a one third stake in the Beach Road project.

Together with CityDev, the consortium will invest some $2.5 billion in all to build the project, CityDev said yesterday. The amount includes the land cost of $1.69 billion.

Dubai World is merging its two subsidiaries Nakheel and Istithmar Real Estate into a single unit as it looks to increase its property portfolio in Asia, Yu Lai Boon, the group’s chief investment officer, said. He added that the group hopes to invest some US$50 billion in Asia over the next 10 to 15 years.

Dubai World is set to raise $300 million with its first listed property trust by June next year.

The real estate investment trust, which will be based on Dubai World’s residential properties in the United Arab Emirates, will be listed in Dubai and have a secondary listing in either London or Singapore.

 

Source: Business Times 5 Dec 07

Easing in property rally can be good: Developers

PROPERTY developers are so rushed off their feet that they say the idea of the United States sub-prime crisis taking some froth out of the exuberant market can only be good.

CapitaLand’s chief executive, Mr Liew Mun Leong, said in Ho Chi Minh City yesterday that market confidence has been affected a little by the sub-prime issue but a slowdown may not be bad.

‘If the economy moderates, the property market will moderate… It is not necessarily a bad thing,’ he said.

‘Sometimes you need a little bit of slowdown,’ he added. This is so that businesses can be sustained.

Mr Liew also said that developers will probably not pay bumper high prices for collective sale sites and that supply volume may slip.

However, prices have been holding and he does not see them falling next year.

A similar note was struck by Mr Simon Cheong, the president of the Real Estate Developers’ Association (Redas).

He told the Association’s 48th anniversary dinner last night that the build-up of new projects has left the industry a little breathless.

‘We are now the victims of our own success. Our biggest worry is now rising costs, shortage of construction materials and inadequate skilled labour,’ said Mr Cheong at the Ritz-Carlton Millenia Singapore hotel.

He added that developers share the Government’s concerns about rising exuberance in the market and backed its efforts to apply a touch of the brakes.

Mr Cheong was also quick to add that it has taken almost 10 years for the property market to turn around.

‘Redas is of the view that it is difficult to micro-manage, especially in a global context where the flow of funds into Singapore property is driven by a bigger picture than just short-term opportunistic buy-ins,’ he said.

Singapore is no different from other major gateway cities, where prime real estate commands premium rents, he added.

Trade and Industry Minister Lim Hng Kiang, who was the guest-of-honour, said rising costs are a challenge that accompanies the growth in all parts of the property market.

The Government, he reiterated, is ensuring there will be a sufficient supply of office, residential and hotel space.

Mr Cheong also said that Redas has created a foreign investment committee, to be chaired by Hongkong Land director Robert Garman, to encourage foreign companies to come to Singapore and stay invested.

He warned that developers should take stock of the storm brewing globally as they respond to local opportunities.

‘Rising oil prices, a weakening US dollar, the sub-prime crisis and occasional shocks in the supply of construction materials cannot be taken too lightly.’

 

Source: The Straits Times 5 Dec 07

Ophir-Rochor area slated for trendy makeover

Redevelopment will see new hotels, offices and shops; area to become an ‘extension of Bugis’

IT IS all a bit sleepy and humdrum now, but the walkways of the Ophir-Rochor zone are set for a jazzy makeover that will add trendy hotels and shops, offices and more.

Plans to rev up the hotchpotch zone – it has old colonial lanes at one end and a hot air balloon at the other – were unveiled by the Government yesterday.

The makeover already has its centrepoint and crown jewel – the eco-friendly South Beach project designed by world- renowned British architect Norman Foster and his partners.

The development includes two towers of up to 45 storeys linked to the conserved military buildings of the old Beach Road camp by an eye-catching ‘environmental filter’ canopy.

There will also be premium office space, two luxury hotels of up to 700 rooms, service apartments and shops on the 3.5ha site, which is being developed by a City Developments consortium.

Minister of State for National Development Grace Fu said yesterday that the landmark project ‘will be a first glimpse into exciting plans ahead for the Ophir Road/ Rochor Road corridor’.

She added that the Government intends to ‘build on the momentum’ by developing land parcels.

The Urban Redevelopment Authority will release more details early next year, but some sites may be included in the Government Land Sales Programme due later this month.

Potential plots up for grabs include the Ophir Road/Beach Road tract in front of Parkview Square – this hosted Cirque Du Soleil in 2005 – and the site at Tan Quee Lan Street, now home to the DHL balloon.

Ms Fu added that the new district will be an ‘extension of Bugis’, connecting Marina Centre to Bugis and Singapore’s civic district.

The landscape, rich in colonial charm, has been constantly changing in the last decade.

When Bugis Junction opened in 1995, property pundits predicted that the project would fail to draw the crowds as it was not a prime location.

But Bugis has blossomed into a trendy youth hangout, complemented by fancy dining and drinking hot spots along Seah and Purvis Streets.

The bohemian charm of independent shops that line nearby Haji Lane also keeps the area buzzing.

Property analysts welcomed the plans.

‘The market needs something on the fringe of the Central Business District (CBD). Office buildings with a mix of retail and hotels will be popular,’ said Mr Ku Swee Yong, director of business development and marketing at Savills Singapore.

Mr Colin Tan, head of research and consultancy at Chesterton International, agreed there was great potential in the area, but said offices would not likely command Grade A rents like in the CBD.

‘Offices here will be ideally suited for small and medium-sized enterprises,’ he said. But more road infrastructure such as broader lanes or expressways are needed to relieve congestion, he added.

Knight Frank’s director for research and consultancy Nicholas Mak welcomed the plans to liven the area, as it ‘has always been a bit sleepy’, but hoped that the area’s heritage and shophouses would be conserved.

Mr Mak said developers will be interested, although a ‘balance of the old and new’ was important in retaining the character of the district.

 

Source: The Straits Times 5 Dec 07

Record price for coffee shop means higher rents

Stallholders living with lower margins as soaring rates, competition bite

THE record price recently fetched for a Jurong East coffee shop is putting pressure on its stallholders in the form of rocketing rents.

Since new owner Koufu paid $12 million for the large property two months ago, rents at the VariNice coffee shop at Jurong East Street 132 have shot up.

They are now close to those at food courts in glitzy malls, said property experts.

Stallholders grappling with higher rents also lost a week’s business when VariNice was closed for renovations following Koufu’s purchase.

The 4,700 sq ft coffee shop is now clean and sparkling, but tenants say the facelift has yet to generate more business.

Some have raised food prices to cover the rent hike, but others are afraid of driving customers to the competition. There are four other coffee shops in the vicinity.

VariNice has 13 lots. Some are taken up by a single stall paying about $6,000 a month. Other lots are split between two operators, each paying about $3,000. This gives Koufu an annual rental yield of 7 per cent to 8 per cent.

The rents compare with $5,000 to $8,000 for a typical food stall in a ‘good mall’ such as Marina Square, said Mr Ku Swee Yong, director of marketing and business development at Savills Singapore.

Madam Ren Huai Zhen, who runs a zi char – cooked food – stall at VariNice, is now paying $6,000 a month, $1,000 more than before.

‘Everything became more expensive, except the price of our food,’ she told The Straits Times yesterday. ‘We can survive, but our profit margins are low.’

Mr Xue Mingshou, who runs the Pin Wei Fishball Noodles stall, said he raised the prices of some dishes but had to lower them again when customers did not bite.

‘Competition here is very stiff,’ he said. ‘If I can break even, it’s very good already.’ His rent has gone up by $400 to $3,200 a month.

Mr Xue shares his lot with a duck rice stall, which pays $3,000 in rent and sells about $700 worth of dishes a day.

‘Your stall must sell really nice food in order to survive. There are at least 50 other stalls in the area,’ said the owner, who wanted to be known only as Mr Tan. But he called the rent ‘reasonable’.

Indeed, just next door to VariNice is an S-11 coffee shop, where rents are $7,000 to $8,000 a month.

Property agents say rents at prime coffee shops have escalated in recent months, and it is not uncommon for them to rival those in air-conditioned food courts.

‘In the prime areas such as Geylang, Toa Payoh, Bishan and Bukit Batok, fixed rents can go up to $6,000 or $7,000 a month,’ said Mr Eric Cheng of HSR property group.

Some coffee-shop chains even collect rent on a profitsharing

basis, which means base rents could be $1,000 a month but stallholders may end up paying five figures if sales are good, he added.

On average, however, monthly coffee-shop rents range from $4,500 to $7,500. In low-end properties in the outskirts, they can go as low as $1,200, said Mr Cheng.

Clearly, there are limits to how much coffee-shop rents can be raised before stallholders are forced to pack it in. This may be why more expensive coffee shops on the market – three, in Yishun, Tampines and Bukit Batok, are said to be going for $15 million each – have yet to find takers.

So for VariNice in Jurong East to charge $6,000 in rent ‘is not excessive’, said Mr Ku of Savills. ‘Foot traffic is very high, and it is near an interchange MRT station, a library and business parks.’

NOT STOPPING TO REST

‘Competition is very stiff. There are five coffee shops nearby. I don’t even dare to rest for a day because I would lose $400 in sales. At first, we thought there would be the same number of customers after the renovation. But instead, there are now fewer customers due to the higher prices of the food.’ – MR XUE MINGSHOU, who runs the Pin Wei Fishball Noodles stall

FEELING THE PINCH

‘Everything became more expensive, except the price of our food.’ – MADAM REN HUAI ZHEN, who runs a zi char stall

‘Your stall must sell really nice food in order to survive. There are at least 50 other stalls in this area.’ – MR TAN, who runs a duck rice stall

Source: The Straits Times 5 Dec 07

Three of Asia’s biggest deals done in S’pore

Value of the 3 total US$1.77b, or about 20% of the Top-10 transactions

(SINGAPORE) The Top-10 real estate investment deals in Asia in the third quarter of 2007 amounted to US$9.3 billion, and three of those deals concerned Singapore properties.

A report by CB Richard Ellis (CBRE) shows that two of the Singapore deals involved stakes in One Raffles Quay while the third involved the sale of Chevron House. The total value of these deals came to US$1.77 billion or about 20 per cent of the value of the Top-10 deals.

CBRE also said that foreign investors have shown no sign of scaling back Asian real estate investment activity, ‘especially given the relative scarcity of investment grade properties’.

As a general guide, investors will look at property yields when shopping for real estate and the 4.3 per cent yield for office property here is competitive with cities like Hong Kong where the yield is 4.5 per cent.

Cities like Manila and Jakarta do offer the potential of higher yields of around 11 per cent but as CBRE executive director Jeremy Lake notes: ‘Yields reflect many factors, including risks.’

Mr Lake explains that these ‘risks’ usually include aspects of a country’s legal, political and fiscal policies.

Singapore is more likely to attract investors seeking lower risk and and perhaps lower yields, Mr Lake added.

A low-risk/low-yield dictum may not be a bad thing in volatile times.

CBRE notes that some foreign capital is being redirected to Asian property markets, seeking to benefit not merely from the natural appreciation of real estate in dynamic economies, but also from appreciation of Asian currencies against the US dollar, particularly the Chinese renminbi.

Mr Lake also pointed out that investors are drawn to markets where the cost of borrowing is lower than the property yield, explaining why Tokyo saw the largest real estate investment deals in the quarter, with the Top-three commercial real estate deals totalling US$3.95 billion.

 

Source: Business Times 4 Dec 07

Office occupancy rates to stay in the 91-95% range

(SINGAPORE) Occupancy levels for office space in Singapore will remain in the 91-95 per cent range over the next five years, CB Richard Ellis (CBRE) said in a new report released yesterday.

At the end of August 2007, potential supply of office space – the total of known supply from the private sector and awarded government land sales (GLS) sites as well as potential supply from expected future land sales – stood at some 10.8 million sq ft for 2007-2012, the property firm said.

This reflects a 147 per cent increase from the potential supply of 4.4 million sq ft identified at the beginning of 2007.

The potential supply works out to an average annual supply of 1.8 million sq ft for the next six years, exceeding the average supply of 1.5 million sq ft a year seen over the past decade.

CBRE said that an estimated 788,000 sq ft will come on stream in 2008, while the majority of the new space will enter the market in 2010-2011.

And based on projected average annual take-up of 1.6 million sq ft for 2007- 2012, even if full potential supply materialises, ‘we anticipate relative equilibrium between supply and take-up over this period’, CBRE said.

It said occupancy levels for office spe will remain in the 91-95 per cent range over the next five years.

CBRE’s report comes as other experts predict that Singapore could see an oversupply of office space going forward.

Citigroup, for example, warned in a report last week that Singapore is in danger of seeing an oversupply of office space from 2010 onwards.

Based on the bank’s estimates, occupancy rates are likely to peak in 2008-09 and decline thereafter with the impending supply.

Prime office rents in Singapore averaged $12.60 per square foot per month (psf pm) in the third quarter of 2007, increasing 16.7 per cent quarter-on-quarter and 82.6 per cent year- on-year, CBRE’s data shows.

Rents now exceed the 1990 historical high of $11.50 psf pm.

While further rental increases are expected, the pace of growth should ease, CBRE said.

 

Source: Business Times 4 Dec 07

$12M: Coffee shop in Jurong fetches record price

A COFFEE shop in an HDB parking building has sold for a record-breaking $12 million.

The eatery called VariNice is just a stone’s throw from the Jurong East MRT and bus interchange.

Its huge catchment area of residential blocks and business parks nearby makes it a prize location, said property analysts.

The eatery – which boasts 12 stalls selling a variety of food from duck rice, to seafood and western food – has been going for about 20 years.

It was sold off by the Government in the 1990s and changed hands again in 2000 for about $10 million.

Its latest buyer is well-known foodcourt operator Koufu, which runs 37 food and beverage outlets across Singapore.

Lianhe Wanbao reported yesterday that Koufu was believed to have paid $13 million for the premises, and is collecting $12,000 a month in rent from each stall.

But Koufu founder and managing director Pang Lim told The Straits Times last night that the price tag and rental were less than that. The firm paid about $12 million and collects monthly rent of $6,000 from each stall.

The sale price works out to $2,553 per square foot for the 4,700 sq ft premises – well above the old reported record set by an 8,000 sq ft coffee shop in Ang Mo Kio which sold for $17.8 million, or $2,225 psf, in 2004.

The payback period for Koufu’s latest buy is about 13 to 14 years.

Mr Pang said the deal was its biggest purchase but added that it was a long-term investment.

‘It was a high price, but we need good locations and in the long term, it’ll be worth it,’ said Mr Pang.

PropNex chief executive Mohamed Ismail told The Straits Times that the value of coffee shops depends purely on traffic. ‘Good business locations will always command a premium,’ he said.

Mr Nicholas Mak, head of research and consultancy at Knight Frank, said bullish market expectations paved the way for the record deal.

This was especially so as the recent slowdown in residential property has not touched the retail and food and beverage scene.

‘This is likely to be few and far between, however,’ he added, ‘as few shops get transacted at such a high price.’

Earlier this year, a coffee shop in Block 501, Jurong West Street 51, sold for $9 million.

Three coffee shops – in Tampines, Yishun and Bukit Batok – are on the market for $15 million apiece with no takers to date.

 

Source: The Straits Times 4 Dec 07

Transformed Mt Faber eyes MICE business

It hopes to double capacity before Sentosa facilities come onstream

AFTER a major revamp in 2004 that saw Mount Faber transforming from a cable car station to Singapore’s second most visited paid tourist attraction, Mount Faber is now eyeing the meetings, incentives, conventions and exhibitions (MICE) business.

Before the MICE facilities in the integrated resort at Sentosa are up and running, Mount Faber hopes to double its own MICE capacity. Its facilities can currently hold 1,200 persons at any one time.

‘We have been working with the relevant authorities for land space,’ Mount Faber Leisure Group CEO Susan Teh told BT. ‘We are still in talks to see how we can expand.’

The existing MICE facilities are already fully utilised during peak season and 80 per cent booked during off-peak period, she said.

From a low base, revenue from the MICE segment has grown by a staggering 290 per cent since Ms Teh took office in 2004, and has become a significant growth driver for the group.

Ms Teh now hopes to position Mount Faber as a ‘total solutions’ for MICE events, given the unique offering of conference venue amid the lush flora and fauna, attractions, food and beverage (F&B), business centre service and coach transport that enables visitors to arrive in style.

Some major institutions and corporations that have already tapped Mount Faber’s MICE facilities include the International Monetary Fund, Citibank Singapore, UBS and Singapore Telecommunications.

Confident that Mount Faber offers a unique hilltop experience not seen in other parts of Singapore, Ms Teh reckoned that the MICE facilities at Resorts World at Sentosa would be complementary rather than competitive.

‘As the government is targeting 17 million (visitors by 2015), there will definitely be spillovers and everyone can have a piece of the pie,’ Ms Teh said.

With companies increasingly looking for unique places to hold corporate functions, Mount Faber now has an event management team that helps to plan corporate events such as dinner and dance parties and product launches.

Since Mount Faber’s revamp in 2004 that saw the group embark on a strategy of diversification, significant improvements have been seen not just in its facade, but also translating to headline numbers.

Its profit has doubled from 2004 while its revenue has tripled over the same period. The revenue mix has shifted from predominantly cable car receipts to an even contribution from F&B, MICE, cable car rides, attractions and wholesaling.

Mount Faber now serves a broad target group by providing casual to formal dining, family attractions to venues for corporate events, and has seen a mingling of tourists and locals.

The revamped Mount Faber also saw an increase in visitor arrivals from 1.2 million in 2004 to 1.8 million year-todate.

‘We are targeting two million visitors, an all-time high, and we are on track by the end of this year,’ Ms Teh said.

The icon of the revamped Mount Faber – Jewel Box – which houses its MICE facilities and F&B outlets, sits on the hilltop which was previously only used for the cable car station.

Other selling points of Mount Faber stem from its ‘four seasons’ campaign, which changes the design and colours of the facade at Jewel Box every quarter, including touch points like menu and cocktails, offering a different experience each time.

‘You can’t find another attraction in a hill environment. The Jewel Box itself has already started to benefit from the brand and this is what we will leverage on going forward,’ she added.

Ahead of the opening of the Sentosa IR, other non-MICE facilities at Mount Faber will also get a facelift to cater to the sophisticated and discerning visitors that the IR is expected to attract.

This would include upgrading the F&B area which comprises Altivo, Glass Bar, Faber Rock and Faber Hill Bistro, and increasing retail outlets, Ms Teh said.

‘We are working with the relevant authorities to improve the accessibility here,’ she added.

Without letting on whether a tram line is in the pipeline, Ms Teh said that the authorities will look at improving accessibility in the southern precinct in general and can be expected to talk to various stakeholders to achieve this.

 

Source: Business Times 3 Dec 07

October property loan growth hits 8-year high

Bank lending to sector reaches $105.7b, up 18%

(SINGAPORE) Bank lending to the property sector continued to accelerate in October, growing at the fastest annual pace in eight years, according to new data from the Singapore central bank yesterday.

Overall loans growth in the banking sector also picked up in October, the latest estimates from the Monetary Authority of Singapore (MAS) show.

Loans to the broad property sector, comprising consumer home loans and business loans to the building and construction industry, reached $105.7 billion at end-October – up 18.1 per cent from a year ago.

The year-on-year expansion was the fastest since October 1999, when property-related lending grew by 19.5 per cent.

Over the month, property-related loans grew 3.2 per cent from $102.4 billion at end-September, the fastest monthly pace since Nov 1998.

Consumer home loans, which include mortgages as well as short-term ‘bridging loans’ offered by banks to buyers of new homes who are waiting to receive the cash from selling another property, grew 14.3 per cent from a year ago to $71.8 billion, the fastest since October 2004. Over the month, the growth was 1.9 per cent, slightly slower than the 2 per cent growth in September.

Much of the period covered by latest data precedes the government’s withdrawal on Oct 26 of the deferred payment scheme for private property purchases, which was aimed at discouraging speculative buying.

David Conner, chief executive of OCBC Bank, said at the release of the group’s third-quarter results on Nov 6 that he expects to see an increase in demand for mortgages over the next two years, partly due to the withdrawal of the scheme, as buyers of new private homes will now have to pay a larger portion of the cost of a property while it is being built instead of deferring payments until the building is completed.

Meanwhile, loans to businesses in the building and construction sector rose 27.1 per cent over the year – the fastest since December 1996 – and 6 per cent over the month to $33.9 billion at end-October.

Total customer deposits grew 20.8 per cent over the year to $311.9 billion at end-October, while total loans grew just 15.5 per cent to $224.1 billion.

On a monthly basis, however, loans growth has outpaced growth in deposits since June. Over the month of October, loans grew 2.4 per cent compared to 1 per cent for deposits.

With the rapid expansion in loans, the ratio of loans to deposits in the banking system has recovered slightly to 71.8 per cent at the end of October, after falling as low as 67.1 per cent at end-May – the lowest in the published MAS data series, which started in Jan 1991.

Overall, loans to businesses grew at a faster pace than consumer loans, both on a monthly basis and when compared to a year ago.

Loans to businesses grew 18.5 per cent over the year and 2.6 per cent over the month to $120.1 billion. Other than the building and construction industry, the rapid growth in business loans was mainly due to expansion in loans to financial institutions and to the transport, storage and communications sector.

Meanwhile, consumer loans expanded 12.2 per cent over the year and 2.2 per cent over the month to $103.9 billion, driven mainly by the surge in home loans. Share financing and credit card lending also continued to grow, although these account for less than 8 per cent of total consumer loans.

The number of credit cards in circulation grew 15.3 per cent over the year and 2.4 per cent over the month to 4.45 million at end-October, excluding supplementary cards. But the total credit card rollover balance – that portion of the credit card debt that is subject to interest charges – dipped slightly over the month to $2.85 billion.

 

Source: Business Times 1 Dec 07

Plying the Capella resort – ultra-luxury on wheels

The hotel will be the first in S’pore to have the Phantoms

(SINGAPORE) The ultra-luxury Capella Singapore resort on Sentosa will have two ultra-luxury limousines to provide a bespoke chauffeur service to its well-heeled guests when it opens later next year.

The Pontiac Land Group hotel will be the first in Singapore to have a Rolls-Royce Phantom limousine in its fleet.

The standard-wheelbase model is priced at $1.5 million, and the Capella Singapore’s pair will be ordered with options specially designed for hotel use, such as a deeper boot to carry more luggage, and a cooler box under the rear seats to store cold towels.

It is not yet known what colours have been specified for the vehicles.

Stephanie Kwee-Ng, director of Pontiac’s associate company Millenia Hotel, explains that the Phantom was a natural choice for the Norman Foster-designed property.

‘As seen in the careful selection of our architect, interior designers, sculptors and artists, we share a common ethos with Rolls-Royce – uncompromising design,’ she says.

Ms Kwee-Ng reveals that the group expressed interest in the Phantoms at the early stages of the hotel development.

‘Our consideration to purchase two Phantoms began 12 months ago, and we are delighted to have just confirmed our order,’ she says, adding that there is an option to purchase two more.

‘We believe all our guests at Capella Singapore are VIPs. Each of them will have the opportunity to enjoy the Phantoms.’

The Phantom was introduced here in 2003 and today, there are a total of 20 privately owned Phantoms on the road.

The Phantom was the first Rolls-Royce model to be made by the firm under its new BMW owners after the

German carmaker bought over the hallowed British marque. The second Rolls-Royce model is a convertible, the $1.8 million Drophead Coupe. The first car was delivered here last week.

Until now, the most expensive car used by a hotel here has been a Bentley Flying Spur, which is slightly less than half the price of a standard-wheelbase Phantom. The Raffles Hotel ordered one in May 2006, to complement its classic Daimler and long-wheelbase BMW 7 Series models.

Beyond Singapore, the nearest hotels to use the imposing Phantom are in Hong Kong. The Peninsula Hong Kong has 14 of the extended-wheelbase version; the Island Shangri-La has one. Elsewhere in Asia, Chinese and Japanese hotels also deploy the Phantom.

The $400 million Capella Singapore is described as ‘nestled amidst 30 acres of verdant rolling hills’. It will offer 111 manors, villas and suites, and is expected to open its doors in the final quarter of next year. In the second phase of the development, the property will give new meaning to the term ‘long-staying guests’, when 60 people will get the option of living in the resort for up to 20 years.

Other properties which Pontiac also owns are the Ritz-Carlton Millenia Singapore, Conrad Centennial Singapore and The Regent Singapore.

 

Source: Business Times 1 Dec 07

Oversupply looms in S’pore office sector: Citigroup

It downgrades two stocks with key exposure to sector – KepLand, CityDev

SINGAPORE is in danger of seeing an oversupply of office space from 2010 onwards, Citigroup is warning.

The bank’s research unit has also downgraded two Singapore stocks with significant exposure to the office market here – Keppel Land and City Developments.

‘The market is underestimating the potential supply of new office space in 2010 and beyond, in our view,’ said Citigroup analyst Wendy Koh in research report dated Monday.

‘Based on our estimates, occupancy rates are likely to peak in 2008-09 and decline thereafter with the impending supply.’

Since May 2007, six new sites with a total gross floor area of 5 million sq ft have been awarded amidst fears of an office space crunch. These sites could add some 3 million sq ft of new office space in 2010-11, Citigroup estimates.

Altogether, on average, 3.2 million sq ft of new supply could hit the market from 2010-12, the bank said. This compares to a historical average demand of 1.5 million sq ft per year.

Supply estimates could rise even further with more government land sales in the first half of 2008, Citigroup said.

All this will mean that buildings in core Central Business District will be competing for tenants.

Key projects that are scheduled to be completed in 2010-12 include Marina Bay Financial Centre, the redeveloped Ocean Building One Financial Centre and the South Beach Road and Marina View land parcels.

In response, Citigroup downgraded its ratings on office landlords Keppel Land and City Developments.

Keppel Land was downgraded to a ’sell’ from a ‘hold’, while CityDev was rated a ‘hold’, from a ‘buy’ previously.

‘Going forward, we expect Keppel Land to face keen competition while marketing the remaining space at the Marina Bay Finance Centre and One Financial Centre,’ Ms Koh said. She cut KepLand’s revalued net asset value (RNAV) estimate to $7.83 (from $8.85) and target price to $6.26 (from $8.97).

For CityDev, Citigroup cut its RNAV estimate to $14.47 from $15.28 and target price to $15.90 from $18.00 to reflect lower capital values of office buildings.

Other analysts however said that all the new projects coming onstream will not cause an oversupply – rather, they will ensure that supply catches up with demand.

‘I think that there will be significant pent-up demand for office space that will only be satisfied when supply hits the market in 2010-11,’ said Moray Armstrong, CB Richard Ellis’ executive director for office services.

This pent-up demand means that demand in 2010-11 will be significantly higher than the historical average, Mr Armstrong said.

 

Source: Business Times 28 Nov 07

Yishun industrial site up for sale

A SITE at Yishun Avenue 6 has been put up for sale for industrial development.

The land parcel is one of the four new industrial sites that were scheduled for release on the reserve list under the Government Industrial Land Sale Programme for the second half of 2007.

The 1.43-hectare site has a plot ratio of 2.5 with a lease period of 60 years. It is zoned for a Business 1 development and can be developed for a range of clean and light industrial and warehouse use, the Urban Redevelopment Authority said.

Savills Singapore director of industrial business space Dominic Peters said that he believes the site could attract bids of about $30 per square foot per plot ratio (psf ppr). ‘Demand is still likely to be strong,’ he said.

In October, an industrial site at Sin Ming Lane was sold for $68.9 million, or about $50 psf ppr. The site was more centrally located and larger.

Mr Peters said that potential bidders could be interested in developing strata-titled units on the Yishun site for sale. Real estate investment trusts (Reits) or developers targeting Reits may be less keen.

According to a Savills report on the industrial sector, Reits were the major players in the industrial market in the third quarter.

Mapletree Logistics Trust acquired six properties for a total of $62.4 million, Cambridge Industrial Trust purchased three properties for $108.5 million and the recently listed MacArthurCook Industrial Reit added two properties worth $109.3 million to its portfolio.

In the first nine months of this year, more than 25 acquisitions were made by Reits, taking the total transaction value to $503 million, up 27.3 per cent year-on-year.

 

Source: Business Times 28 Nov 07

Citi sees likely office space glut by 2010

Other analysts argue that pent-up demand will soak up excess supply

OFFICE space may be in severe short supply now, but Citigroup predicts the tables will be turned by 2010 with even a glut possible.

‘The market is underestimating the potential supply of new office space in 2010 and beyond, in our view,’ said the banking group in a report on Monday.

While rents and prices of offices are skyrocketing due to the supply crunch, Citigroup said the situation is set to change in a few years, because of the slew of commercial sites sold by the Government in recent months.

It noted that since May, six new sites have been awarded that could yield three million sq ft of offices in 2010 and 2011. This is in addition to projects already under way.

It means that in those years, potential new supply could be 3.2 million to 3.5 million sq ft a year, according to Citigroup’s estimates.

Demand over the last few years has averaged only 1.5 million sq ft per year, the report added.

All eyes are now on the Government Land Sales programme for next year, which is due to be announced next month. If more office sites are released, even more supply can be expected.

Recent bids for office sites have already come in below market expectations, reflecting a more cautious longterm outlook among developers.

A Marina View site earlier this month attracted bids 35 per cent lower than those drawn by an adjacent plot just two months before. The site has yet to be awarded to a bidder even though the tender closed two weeks ago.

The Citigroup report also predicted that landlords of the new offices – most will be in the Central Business District – will face keen competition for tenants. Occupancy rates will peak next year or in 2009 and decline after that, it said.

This has led Citigroup to downgrade the shares of two major office owners: Keppel Land to ’sell’ and City Developments to ‘hold’.

But other analysts are sceptical of Citigroup’s forecasts of an oversupply. They say that for now and next year at least, demand for office space will still far outstrip supply.

When the new offices are opened from 2010 onwards, enough pent-up demand will have been built to soak up all the space, said Mr Wilson Liew, an investment analyst at Kim Eng Research.

‘Judging from the current demand, if this trend continues, there shouldn’t be much of an oversupply,’ he said.

‘These two, three years or so, the supply that is coming on stream is way below the average rate, so there will be a lot of pent-up demand.’

Mr Soong Tuck Yin of Macquarie Securities said the average supply of offices between next year and 2012 comes to only 1.7 million sq ft a year.

This drops to 1.4 million sq ft if space that has already been pre-committed – leased by companies even before being built – is excluded.

Another analyst added that in three to five years’ time, Singapore’s two casinos will have been built. And with the Government promoting Singapore as a financial hub, banks will still expand and be in need of prime space.

There may also be a delay in some of the new office space coming on stream, given the current shortage of contractors, he added.’It’s a bit soon to be making these sorts of predictions,’ the analyst said of the Citigroup report.

In the end, it boils down to whether the economy keeps growing, said Mr Winston Liew, senior investment analyst at OCBC Investment Research. ‘The office market is mainly driven by GDP growth. If our GDP continues to grow, demand should not be an issue.’

 

Source: The Straits Times 28 Nov 07

Two more transitional sites up for tender

Mountbatten and Aljunied sites follow those at Scotts Rd and Tampines

(SINGAPORE) The Urban Redevelopment Authority has launched two transitional office sites at Mountbatten Road and Aljunied Road/Geylang East Avenue 1 for sale by tender.

This follows the recent sale of two transitional office sites at Scotts Road and Tampines for $219 per square foot per plot ratio (psf ppr) and $80.65 psf ppr respectively.

The land parcel at Mountbatten Road has a site area of about 2.12 hectares and can yield a maximum gross floor area (GFA) of 20,000 square metres. It is also next to the future Mountbatten MRT station.

The Aljunied Road/Geylang East Avenue 1 land parcel has a site area of about 1.88 ha and a maximum permissible GFA of 18,885 sq m. The site is adjacent to the Aljunied MRT station. Both sites will be sold on short-term leases of 15 years and are expected to be low-rise developments of about three storeys.

On estimated land prices, Cushman & Wakefield managing director Donald Han said: ‘We are likely to see developers taking a defensive play in terms of pricing.’

He added that this strategy was adopted by developers resulting in lower than expected prices for Tampines Concourse transitional site and the Marina View parcel B tender plot.

Given the Mountbatten site’s attributes, including a regular shape and the prospect of the future Sports Hub nearby, Mr Han expects bids to fall in the range of $140-150 psf ppr.

The Aljunied site is next to the MRT but the site is elongated and Mr Han believes this could be a constraint in terms of building design.

Noting that the neighbourhood is also relatively mixed, he said that bids for the Aljunied site could come to $120-130 psf ppr.

On likely bidders, CBRE Research executive director Li Hiaw Ho said: ‘Given the short tenure and rapidly rising construction costs today, such parcels would appeal to owner occupiers or a tie-up between an investor and an enduser.’

He also pointed out that there could be keen interest in the Aljunied Road/Geylang East Ave 1 parcel due to the existing MRT station and offices in the Paya Lebar micro-market.

Knight Frank director (research and consultancy) Nicholas Mak also highlighted that although the Mountbatten site was closer to the city, the Mountbatten MRT station may only be open between 2010 and 2012.

Adding that there is lack of amenities such as F&B premises, he estimates that the site could attract bids of about $27-28 million while the Aljunied Road site, which is in a relatively more established residential and light industrial area, could attract bids of $30.5-32.5 million.

 

Source: Business Times 27 Nov 07

Short-term office sites put up for sale to ease crunch

Plots in Aljunied and Mountbatten roads come with 15-year leases

GOOD news for office tenants struggling to find affordable office space in the Central Business District (CBD).

The Government yesterday launched for sale two short-term office sites along Aljunied and Mountbatten roads to ease the office space crunch.

Both plots come with 15-year leases and can house developments of up to three storeys.

The first plot – a 2.12ha site along Mountbatten Road next to the Singapore Association for the Deaf – can take up to 215,278 sq ft of office space.

The other – a 1.89ha site along Aljunied Road just behind the Aljunied MRT station – can house up to 203,276 sq ft of office space.

Consultants expect both sites to draw a good response.

Savills Singapore’s director of marketing and business development, Mr Ku Swee Yong, said the sites would appeal to firms keen to move back-room operations to cheaper spots outside the CBD.

Prime office rents have grown faster in Singapore than anywhere else in the world over the past year, according to a recent report by CB Richard Ellis.

Monthly prime office rental and associated costs shot up 82.6 per cent to $12.60 per sq ft in the 12 months ended Sept 30, it said.

Reacting to the crunch, the Government earlier released two short-term sites along Scotts Road and in Tampines. The first tender was hotly contested, but the other drew just one bid.

Mr Ku blamed the cool response to the Tampines plot on its distance from the CBD.

The two latest sites should get at least five bids each, he predicted.

The tender for the Mountbatten site will close on Jan 9; the Aljunied site, on Jan 16.

Mr Ku estimated the Mountbatten plot could fetch $28 million to $33 million, while the Aljunied site could net $25 million to $28 million.

Mr Nicholas Mak, the head of research and consultancy at Knight Frank, put his estimates at $27 million to $28 million for the Mountbatten plot and $30.5 million to $32.5 million for the Aljunied site.

Meanwhile, mixed development The Riverwalk in the CBD area has been put up for collective sale by tender.

The 0.76ha site, which houses 181 commercial units and 118 apartments, can be redeveloped into a commercial building with a gross floor area of about 403,351 sq ft, said its marketing agent, Jones Lang LaSalle.

This is subject to the authorities’ approval and payment of a development charge – estimated at $3 million – as well as a premium to top up its lease from the existing 72 years to 99 years. This may cost $60 million to $75 million.

 

Source: The Straits Times 27 Nov 07

Firm to sell Malacca Centre retail space

A RETAIL podium at Malacca Centre in Raffles Place has been put up for sale.

The 999-year leasehold property comprises of ground and basement floors and has direct frontages to the main road. The sellers are an investment holding company, said property firm Cushman & Wakefield, which is marketing the property.

The property has a strata titled area of about 5,000 sq ft, said Cushman & Wakefield managing director Donald Han. Market watchers estimate that it could fetch about $24 million, which works out to some $4,800 per square foot (psf).

‘There are a dearth of good retail space and a lack of retail premises for sale in Raffles Place and none offers as prime a retail road frontage or location as this,’ said Mr Han.

Malacca Centre retail podium presents the investor with an attractive cash-on-cash yield potentially in excess of 5 per cent per annum, he said.

The property is sold subject to existing tenancies.

A recent study done by Cushman & Wakefield showed that prime ground and basement retail retail rents and capital values are on the rise in Raffles Place due to the lack of supply.

For strata titled retail units, capital values have risen by 23 per cent since 12 months ago, Mr Han said.

At the nearby The Arcade – which is also strata titled – retail space recently transacted for between $4,900-$5,300 psf, Mr Han said.

Ground floor rents in Raffles Place have risen by 20 per cent in the past 12 months. Average gross rents for Raffles Place ground floor retail is now between $20 to $30 psf, while basement space is fetching between $15-25 psf.

 

Source: Business Times 26 Nov 07

4 office floors at The Arcade put up for sale

ALMOST 18 per cent of The Arcade at Raffles Place comprising four floors have been put up for sale through an expression of interest exercise, and the indicative price range is between $80 million and $90 million.

Based on the indicative price, the unit price for the 32,120 sq ft of space is between $2,500-$2,800 psf.

CB Richard Ellis (CBRE) and Jones Lang LaSalle are advising the owners jointly on the divestment.

CBRE added that the owners are Singaporean.

CBRE director (Investment Properties) Charles Hoon also said that the four strata-titled floors for sale represent a rare opportunity to own commercial space at Raffles Place because most of the office buildings in the area have single owners.

Mr Hoon did say that the original developer of The Arcade still owns about 30 per cent of the building so there is a potential to redevelop the site through a collective sale especially as the existing built-up gross floor plot reflects a plot ratio of about 8 but can be maximised to about 14.

The Arcade is a 20-storey mixed commercial and retail building comprising an office tower and a three-storey retail podium with a total net lettable area of about 118,317 sq ft.

The property is held on a mixture of 999-year and 99-year leasehold interests.

The current yield is about 2 per cent but Mr Hoon said that with leases expiring next year, rental appreciation can be expected.

The lease profile shows that 60 per cent of the current leases will expire in 2008 and the yield can be expected to increase to around 5 per cent.

Existing leases are tenanted out at around $9.20 psf.

Gains from capital appreciation are likely to be higher.

In Q3 2007, CBRE noted that average capital value for prime offices was estimated at $2,900 psf, reflecting an increase of 16 per cent quarter-on-quarter (QOQ) and 114.8 per cent year-on-year, while prime office yields were at 4.32 per cent, up slightly from 4.23 per cent QOQ.

The office sector is still seeing buoyant investment sales. In October, 12 floors at Springleaf Tower (near Tanjong Pagar MRT station) were sold for $225 million representing a unit price of around $2,000 psf.

In August, the entire Chevron House at Raffles Place was sold for $730 million or a record $2,780 psf of net lettable area.

 

Source: Business Times 23 Nov 07)

Koh Brothers buys 2 Shell kiosks for $19.6m

It aims to use one site for condo, other for hotel project

KOH Brothers has bought two petrol kiosks from Shell – one in Bukit Timah and the other in Changi – for close to $19.6 million.

The first site, at 383 Bukit Timah Road, is next to Koh Brothers’ freehold serviced apartment complex, Alocassia Apartment. The site has a strata land area of 13,500 square feet and cost Koh Brothers $13.3 million.

Singapore-listed Koh Brothers bought Alocassia Apartment – a residential and commercial site – in May last year for $30 million.

The company intends to convert the whole site to full residential use and launch a luxury condominium with about 50 units in the third quarter of next year, chief executive Francis Koh told BT.

With the new acquisition, the entire freehold site covers 44,900 sq ft and has a 1.4 plot ratio. The latest purchase brings the price paid by Koh Brothers for the site to $799 per square foot (psf) per plot ratio, including an estimated development charge of $6.9 million.

Mr Koh estimates the project could break-even around $1,250 psf since the company does not plan to tear down the whole building. Luxury apartments in the Bukit Timah area now go for about $1,800-$2,000 psf.

‘Given its prime location, freehold status, proximity to reputable schools and easy accessibility to the city centre, we are confident the site will appeal to home buyers who appreciate the exclusivity and prestige,’ Mr Koh said.

The second site bought by the company – at 80 Changi Road – adjoins its freehold Changi Hotel.

Bought for $6.3 million, the site has a strata area of 8,000 sq ft. The entire freehold Changi Road site now has a total area of 26,400 sq ft.

Mr Koh said the company will look to build a newer, larger hotel on the combined site. Changi Hotel is now a three-storey, 61-room hotel.

Shell’s general manager for retail, Henry Chu, said such sales allow the company to capitalise on the hot property market.

‘The timing of closure and sale of these sites is a commercial decision and is to allow us to take advantage of the buoyant property market to maximise our returns,’ he said.

 

Source: Business Times 23 Nov 07

Jack Investment raises Iluma project cost

Entertainment, retail mall bill to soar to $160m from $100m

JACK Investment, which won the tender to build a retail and entertainment mall on a site opposite Bugis Junction in 2005, has revised its projected total investment cost from $100 million to $160 million.

Project director Lim Swee Teck said that Jack Investment intends to ‘ensure that the final finished product will be of an iconic stature’. The development is now called Iluma.

Mr Lim said that the mall, designed by award-winning architectural firm WOHA, will have high-tech features like a light and media facade and a 27,000 sq ft column-free space on the rooftop dedicated to theme restaurants and concept dining.

Other features will include exhibition and promotional spaces within the mall, as well as a flexible performing space which can seat up to 400 people.

Also confirmed is the vital link-bridge across Victoria Street to Bugis Junction.

Jack Investment also owns Leisure Park Kallang, West Coast Recreation Centre, Woodlands Point and 600@ToaPayoh.

One of the main entertainment attractions at Iluma will be a cineplex, with a capacity for 1,400 seats, which will be run by Jack Investment. This will be a new business for company that will begin with the recently announced sixhall, 830-seat cineplex next to Leisure Park Kallang.

Iluma will be 10 storeys high. Up to 60 per cent of the gross floor area will be dedicated to entertainment uses.

There will be 191,580 sq ft of net lettable area with a total of 150 retail units.

Iluma’s marketing consultant Knight Frank said that the primary target market will be fashion conscious 20 to 30- year-olds.

Knight Frank head of retail Sherene Sng added that entertainment attractions could also include brand-name dance clubs similar to the Ministry of Sound.

She said that rents at Iluma can be expected to range between $10 and $30 per square foot (psf). Currently, top rents at neighbouring Bugis Junction are said to be in the region of $40 psf.

The mall is currently under construction and is expected to be completed in the final quarter of next year.

 

Source: Business Times 22 Nov 07

S’pore has fastest-growing prime office rents in the world: Report

It outpaces Mumbai as rents, occupancy costs rise 83% to $12.60 psf a month

PRIME office rents have grown faster in Singapore than anywhere else in the world over the past year, a new report has found.

The rate of increase beat even that in Mumbai, now the world’s second most expensive office market, after London’s West End, according to CB Richard Ellis (CBRE).

But overall, Singapore ranks 11th on the list of worldwide office rentals, which are generally rising quickly.

Rental levels plus other associated costs for Singapore prime office space shot up 82.6 per cent in the 12 months ended Sept 30 to $12.60 per sq ft (psf) a month, said the CBRE’s Global Market Rents report. Apart from lease rates, occupancy costs include expenses for management and basic building maintenance.

In terms of occupancy costs, Moscow posted the second-fastest growth, of 65.4 per cent. Third in line was Mumbai, where occupancy costs grew 55 per cent.

The booming economics of the Asia-Pacific region continue to support strong demand for office space and to drive occupancy costs at a faster rate than in any other region, said CBRE in the report.

In comparing the costs, it looked at the typical achievable rent for a 10,000 sq ft unit in a top-quality building in a prime location.

Of the 171 markets it monitored, 85 per cent recorded growth in occupancy costs.

London’s West End – which registered 41.9 per cent growth – still has the most expensive office space, at US $328.91 (S$476.76) psf a year.

Mumbai came in a distant second, at US$189.51 psf a year. But it is already 5 per cent more expensive than London City, where occupancy costs came to US$180.80 psf a year.

Moscow is ranked fourth most expensive, at US$180.78 psf a year.

To facilitate comparisons across markets, the report based the most expensive rents on US dollars while rental growth was measured in local currency terms.

Singapore is ranked 11th on the world’s most expensive list, at US$102.37 (S$148.39) psf a year.

It came just after Hong Kong, where costs were at US$106.31 psf a year.

At $100.79 psf a year, rents for prime office space in New York’s Midtown have come down. Costs in Tokyo ranged from US$154.56 to US$178.61 psf a year.

As was the case with other key Asian financial centres such as Tokyo and Hong Kong, office vacancy rates remained low in Singapore at 5 per cent or less, said CBRE.

It noted that the uncertainty in global financial markets has had no discernible impact on demand for office space in Singapore.

The companies in Singapore that require larger spaces are largely from the fast-growing financial and insurance sectors. And before year-end, several sizeable bookings by companies in these two sectors are expected, CBRE said.

The report also echoed comments by property consultants about rising tenant resistance to rental hikes as rents are at record-high levels.

Companies are now more prepared to move to cheaper space further out of town to avoid paying high rents.

 

Source: The Straits Times 22 Nov 07

Orchard Road prime rents 4th highest in Asia

ORCHARD Road prime rents have hit US$325 psf per year, making it the world’s 14th most expensive area for shopkeepers. By contrast, annual prime rents for sites on New York’s Fifth Avenue are US$1,500 psf, or US$922 for sites on the Avenue des Champs Elysees, in Paris.

Orchard Road is also the fourth most expensive shopping location in this region – after those in Hong Kong (Causeway Bay – US$1,213 psf/year), Tokyo (Ginza – US$683 psf/year) and Seoul (Gangnam Station – US$431 psf/year).

A report by Cushman & Wakefield (C&W) shows that Singapore’s busiest shopping street did slip one place from its previous 13th position last year but attributed this to the strength of the euro over the Singapore dollar.

C&W’s report tracks retail rents in the world’s top 231 shopping locations across 44 countries. Its data show that annual prime rents increased by 11.3 per cent for Orchard Road while in the top three most expensive locations in New York’s Fifth Avenue, Hong Kong’s Causeway Bay and Paris’s Avenue des Champs Elysees, rents increased by 11.1, 6.97 and 14.5 per cent respectively.

At the fourth and fifth most expensive locations – London’s New Bond Street (US$814 psf/year) and Tokyo’s Ginza – annual rents increased by 20.95 and 4.8 per cent respectively.

Although C&W expects retail rents in Singapore to continue their upward trend, it noted that rents in other cities have increased faster, notably in India. It believes that this will help make Singapore more competitive and maintain its attractiveness as a retail destination in the region.

Rental growth across Asia as a whole increased by 23.8 per cent. C&W head of retail services (Asia Pacific) Sebastian Skiff said: ‘Of particular note is the robust performance in Tokyo driven largely by lack of supply. India saw particularly strong growth, with rents nationally up 53.5 per cent.’

He also noted that Australia, Korea, Singapore‚ and Hong Kong saw solid growth from already relatively high bases.

On the demand for prime retail space, C&W’s global head of retail, John Strachan, said: ‘We are seeing the emergence of a line-up of global shopping destinations, whether Fifth Avenue in New York, Causeway Bay in Hong Kong or Avenue des Champs Elysees in Paris, where retailers are using flagship stores in prestige locations to leverage the value of their brands.’

Globally, Chicago’s Oak Street was the location with the biggest rental increases in local currency. Rents for prime properties doubled in one year.

This was followed by rents in New Delhi’s Ansal Plaza and Connaught Place which saw annual increases of 87.5 per cent while rents in St Petersburg’s Nevsky Prospekt increase by 81.8 per cent.

 

Source: Business Times 20 Nov 07

Ginza Plaza to get $26m facelift

It will be redesigned by DP Architects and renamed West Coast Plaza

FAR East Organization will spend $26 million updating the 16-year old Ginza Plaza shopping mall.

The mall, which will be renamed West Coast Plaza, is expected to be ready for business in the third quarter of 2008.

Vivienne Tan, president of Far East Retail Consultancy, said changing demographics in the West were a key factor in the decision to refurbish the mall.

‘As its original name suggests, Ginza Plaza used to cater to the Japanese expatriate community that lived in the area,’ Mrs Tan said.

‘But now we’re seeing a good number of other nationalities moving in. There is also a growing private residential population,’ she said.

Danny Yeo, director of retail at Knight Frank, which is marketing the mall, said rents at West Coast Plaza will range from $8 to $25 per sq ft per month (psf pm). Before Ginza Plaza was vacated, average rentals were $5-$6 psf pm, Mrs Tan said.

Billed as ‘An Oasis in the West’, West Coast Plaza, which has a net lettable area of 160,000 sq ft, hopes to capture the ‘breezy, easy-going spirit of the West Coast’. The mall has been redesigned by DP Architects.

Far East hopes to attract residents living in the West, who are generally thought to have higher disposable incomes than residents in other parts of Singapore.

A study by Knight Frank showed the West has a higher proportion of private housing (about 30 per cent) than the island-wide residential mix (about 18 per cent). Also, nine or more new private residential developments within 2km of West Coast Plaza are expected to be completed around the same time as the mall, Far East said.

Increased demand for private property and the presence of a more varied expatriate community are thought to be due to a growing number of professionals working in the area, in places such as science hub one-north.

Far East also hopes to attract students from more than 27 educational institutions within 3km of the mall, including students from the National University of Singapore.

 

Source: Business Times 20 Nov 07

Banyan Tree to sell hotel suites

SINGAPORE is expected to show strong demand when Banyan Tree Residences holds a launch here this weekend for its branded hotel residences.

Banyan Tree Residences – one of the business segments of mainboard-listed Banyan Tree Holdings – offers the sale of hotel villas or suites to investors under a leaseback scheme.

Investors can choose to receive a fixed return of 6 per cent of the purchase price for six years or one-third of the net room revenue for the same period of time. After six years, investors have the option to renew their decision.

Owners will also be entitled to 60 days of use of their residence a year as well as discounts and privileges at Banyan Tree, Angsana and Colours of Angsana resorts.

Depending on which returns option the investor picks, the 60 days may be subject to black-out periods.

Banyan Tree currently has residences in Phuket, Bangkok, the Seychelles, Lijiang and Bintan.

While Banyan Tree has been selling residences since 2002, the concept and brand of Banyan Tree Residences was only launched this year.

The Banyan Tree Phuket residences – which has seen the strongest demand – start at US$1.5 million, while Banyan Tree Bintan begins at a more affordable US$440,000.

The Banyan Tree Phuket currently has 16 of the 43 residences still available. Twenty have been sold, while seven have been reserved.

The majority of the customers for Banyan Tree Lijiang were mainland Chinese, said Richard Skene, assistant vice-president (property) for Banyan Tree Residences.

The recent launch in Hong Kong saw a lot of people reserving units. This would mean putting down a reservation deposit but investors still have a month to decide.

Hong Kong was the major market for Phuket, and as Singapore has similar characteristics and a thriving property market, he reckons that the response here will be good.

‘The feedback so far leads us to believe it will be successful. Singapore should be a close second to Hong Kong, and maybe one day take over,’ he said.

He also pointed out that demand is not likely to be drastically affected by changes in the property market as their target customers would probably be less sensitive to normal market circumstances. ‘We’re not selling mass market properties,’ he added.

For the third quarter of this year, Banyan Tree Residences contributed about $3.6 million to revenues, down from $9.1 million in the corresponding quarter last year.

Revenues for Banyan Tree Holdings for Q307 overall was $82.5 million.

However, the group said the drop in revenue for residences in Q307 was due to revenues that could not be recognised for units sold, as construction had yet to begin.

The launch for Banyan Tree Residences is being held today and tomorrow at The Fullerton Hotel.

 

Source: Business Times 17 Nov 07

S’pore home price gains set to slow

Buyers holding back purchases on US sub-prime fears, says Frasers CEO

(SINGAPORE) Singapore’s home prices will probably increase at a slower pace as buyers hold back their purchases amid the US subprime crisis, said Lim Ee Seng, chief executive officer of Frasers Centrepoint Group.

Losses related to US housing mortgages have sapped consumer confidence, Mr Lim said. Some buyers returned apartment units bought at the Singapore-based company’s new project, Soleil@Sinaran near the city’s downtown, forfeiting initial deposits, he said in an interview late on Tuesday.

The outlook among homebuyers may also slow land purchases by developers including Frasers, one of the biggest buyers of older apartments in the city-state’s downtown, where they’re torn down for new home developments through so-called en bloc sales.

The developer is a unit of Fraser & Neave Ltd, the city’s biggest beverage maker.

‘The sub-prime crisis has shaken investors’ confidence,’ he said. ‘We are still looking to boost our land bank, but we are opportunistic and won’t pay current values because our costs would be too high,’ he added, referring to the purchase of existing apartment buildings to increase its land holdings.

Singapore’s home prices have climbed 14 consecutive quarters since 2004, soaring to a 10-year high this year as the island- state’s economy posted its longest economic expansion since 1991. The developer’s outlook for property sales also indicates its appetite may ease for new land purchases.

The price gain has helped the developer on earlier purchases of existing apartments, which are sold at a profit.

An example is the St Thomas Suites development in the city’s downtown, where apartments were recently sold at $2,189 a square foot.

For a 2,605-square-foot apartment, the latest sale recorded by the government, the price was $5.7 million.

‘We bought the site of St. Thomas Suites at $600 per square foot,’ Lim said. ‘But nearby properties put up for en bloc sales are asking over $1,800, and a developer has to sell at at least $2,500 to cover costs.’

‘The sub-prime crisis has shaken investors’ confidence. We are still looking to boost our land bank, but we are opportunistic and won’t pay current values because our costs would be too high.’ – Mr Lim

 

Source: Business Times 15 Nov 07

Soilbuild bags industrial site for $12.2m

JTC Corporation has awarded a 21,871 square metre (235,417 sq ft) industrial site at L7 Pioneer Road/Tuas Avenue 11 to property-based Soilbuild Group Holdings for $12.2 million.

Based on the maximum plot ratio of 1.4, the cost for the site works out to be $398 per sq metre/gross plot ratio. The industrial site is on a 30-year lease and development of the site is expected to take place in 2008-09.

Soilbuild said in a statement yesterday that its subsidiary SB (Westcove) Investment will act as a single purpose vehicle to hold and develop the factories. Total development cost, including the land, is estimated at about $43 million. The project will be funded by the group’s internal resources and bank borrowings.

With this latest acquisition, Soilbuild has a total of more than 1.4 million sq ft of business space properties for development over the next two years.

Its other projects in the pipeline include the logistics and warehousing development at Penjuru Lane with gross floor area of about 410,000 sq ft and a development at Tuas Crescent (gross floor area of about 740,000 sq ft) for engineering companies and supporting industries in the oil and gas, and marine clusters.

Both projects are slated for completion in 2008 or 2009.

The listed group’s completed projects include its flagship 8-storey Eightrium @ Changi Business Park for MNCs, the 12-unit Kranji Linc for light industries, the 15-unit Senoko Food Connection for food industries, and 33-unit Pioneer Lot for light industries.

 

Source: Business Times 13 Nov 07

Raffles Place retailers face space crunch, soaring rents

Rent may double for some, with near full occupancy and no fresh supply of space in the short term

SOARING rents for retail office space at Raffles Place have stunned Ms Yeap Cheng Guat, the executive director of Cedele By Bakery Depot, which has two outlets in the major office hub.

‘Rents have gone up by 100 per cent. It’s that crazy,’ she said.

The bakery cafe chain has operated at Republic Plaza for about eight years now and has a newer outlet at One Raffles Quay.

Singapore’s office space crunch is spilling over to tenants like Cedele in office districts such as Raffles Place.

‘When they told me about the increase, I nearly fell off my chair,’ Ms Yeap said.

‘If my rentals rise by 100 per cent, can my food price increase by the same?

‘Then the tenant can sell only bird’s nest and abalone,’ she said, referring to expensive delicacies.

Occupancy levels for retail space such as cafes and fashion outlets in Raffles Place are close to 100 per cent.

A recent study by property consultant Cushman & Wakefield found rent rises of up to 24 per cent over the past two years in the area.

Supply of shop space is tight with no major new retail space expected for the financial district in the short term.

That means retail rents there will keep rising by another 10 to 15 per cent in the year ahead, the firm’s managing director here, Mr Donald Han, told The Straits Times. This is up from about 14 per cent in the last 12 months, he said.

The rise is relatively high, considering that rentals in the traditional shopping belt of Orchard Road have experienced single- digit rises in recent years.

Overall, rentals for prime retail space are expected to climb by 15 to 20 per cent year on year, with capital values up by 10 to 15 per cent, according to Knight Frank.

Ms Maye Kwok, 32, who sells bags and shoes from a ground-level shop at The Arcade, is convinced she will soon be paying higher rent.

‘Across the board, rents have gone up. My neighbours here have paid higher rents. I am 100 per cent sure they will raise the rent when my lease is up for revision.’

Mr Han said the office space crunch was affecting nearby retail space.

‘Most developers within the financial district prefer to maximise office use rather than retail,’ he said.

‘The irony is that when more offices are built, retail demand from the office population will grow in tandem.’

Most retail centres in Raffles Place such as OUB Centre, Raffles Xchange, One Fullerton and Republic Plaza are enjoying full occupancy.

Average gross rent for Raffles Place ground-level shops is between $18 and $35 per sq ft (psf) a month – well up from $13 to $25 psf two years ago.

Basement level space is between $12 and $25 psf a month, again well up from $9 to $18 psf two years back.

On the upper floors, which have less pedestrian traffic, rents hover between $8 and $14 psf a month, up from $6 to $9 psf a month two years ago.

As Raffles Place’s retail rents rise, several landlords have already started to either reposition their retail developments or add new retail supply, said Cushman & Wakefield.

Sino Land, the Hong Kong-based sister firm of property developer Far East Organization, recently announced plans to revamp a 26,000 sq ft retail and entertainment complex at Clifford Pier, a site that it had obtained late last year.

At OUB Centre, an additional 32,000 sq ft of retail space will be added, said Cushman & Wakefield.

It noted that newly retrofitted projects like the Market Street carpark have done well, with space nearly fully leased out at $10 to $25 psf a month.

‘The retail market situation in Raffles Place is coming to a level where nothing is available. This sub-market is being ignored when there is demand,’ said Mr Han.

 

Source: The Straits Times 8 Nov 07

Chinatown shophouse put up for auction at $3m

Price for the leasehold property works out to $4,274 psf

(SINGAPORE) A restored three-storey shophouse at the corner of Trengganu and Temple streets, often featured as an icon of Singapore’s Chinatown area, has been put up for auction.

The owner’s indicative price is $3 million for the property, which is on a site with a remaining lease of 65 years.

This works out to $4,274 per square foot based on the property’s 702 sq ft land area.

That sounds steep, considering that No 20 Trengganu Street nearby, comprising seven shophouses also with a remaining lease of 65 years, was sold earlier this year for $18 million, or $1,722 psf of land area, to Asok Kumar of Royal Brothers Group.

That property has a total land area of about 10,450 sq ft and a total lettable area of nearly 24,000 sq ft.

However, Knight Frank’s auctions director Mary Sai, whose firm is offering 15 Trengganu Street at its auction at Carlton Hotel on Nov 22, points to the property’s aesthetic appeal, with intricate arches and columns, and its historical background – it was an opera house in the 1930s/1940s.

‘It also has dual frontage along Trengganu Street and Temple Street,’ Ms Sai says.

The property is being put up for sale by its owner, a local businessman active in the Chinatown circle.

He occupies the building’s upper floors, according to Ms Sai. He will vacate the property for the new owner, although he has leased out the ground floor to a tenant until September 2008.

The property has about 2,200 sq ft of floor area.

Knight Frank is also offering at the same auction a two-storey pre-war intermediate terrace house at Lorong 40 Geylang. The freehold property has been put up for auction by the Inland Revenue Authority of Singapore to recover outstanding property taxes.

The property has the address Nos 17 and 17A Lorong 40 Geylang. No 17A is the second storey, which is served by a separate external staircase.

The property’s land area is 1,392 sq ft.

Knight Frank, which points out that the property is not part of the Geylang red light district, says the indicative price is $700,000 to $750,000. Surrounding uses include residential and associations.

IRAS auctions off properties only as a last resort to recover property tax – after the owner repeatedly fails to pay or defaults on his payment despite many reminders. IRAS will return any balance on the sum received to the owner, after recovering outstanding tax, penalty payment, interest, and the cost of recovery.

 

Source: Business Times 6 Nov 07

Hoteliers targeting US$115b Asian market

Global operators on building spree to lure free-spending Asians abroad

(HONG KONG/MUMBAI) Global hoteliers are riding a building boom in Asia, and using plush new hotels as giant advertisements to lure newly rich Chinese and Indians to their US and European properties.

Operators such as InterContinental Hotels Group and Hilton Hotels Corp are growing fast in an Asian market worth US$115 billion a year, spurred on by a regional travel craze.

But they also hope to lodge their brands in local minds. That’s because despite a reputation for cramming into cheap package tours, Chinese tourists spend an average US$3,786 on trips to the United States and US$5,253 in Europe.

The number of Chinese travelling to the US has jumped 44 per cent in four years to 320,000 last year, and Indian visitors increased nearly 60 per cent to 406,000, according to the Pacific Asia Travel Association.

InterContinental’s acting Asia head, Anthony South, said the chance to capture the outbound market was a motive in a deal to buy a controlling stake in the hotel management unit of Japan’s All Nippon Airways Co (ANA) last year.

ANA later sold its 13 hotels, jointly branded with InterContinental, to US investment bank Morgan Stanley.

‘Through good times and bad, the Japanese go to all corners of the globe and are very well-heeled,’ Mr South said.

‘The same applies to China, where the outbound market is growing off a small base very rapidly. If they identify with our brand at home, it’s good for our business.’

InterContinental, which like most hotel firms has eschewed ownership to only operate hotels, aims to add 130 new properties to its 190 in Asia over three years. And at its Holiday Inns outside China, the firm is starting to stock hard pillows popular with the Chinese and installing water boilers for instant noodles.

Asia’s hotel market is far from a sure bet, with the 1997 economic crisis and an outbreak of the Sars respiratory disease in 2003 each causing a 20 per cent drop in visitor arrivals. But the travel industry has a knack for bouncing back quickly so hotels are taking long-term views, focusing on the economic growth rates of around 10 per cent in India and China.

‘As the wealth in both countries increases, the first thing people want to do is travel,’ said Gerald Lawless, chief executive of Jumeirah, a hotel firm owned by the ruler of Dubai. Jumeirah aims to operate 60 hotels by 2011, with three or four each in India and China.

The company now runs 11 luxury hotels, including the sail-shaped Burj al-Arab in Dubai and the Jumeirah Essex House in New York. ‘The outbound market is vital for us,’ Mr Lawless said. ‘There’s been a surge in Chinese visitors at the Burj.’

China’s US$16 billion hotel market, growing at 15 per cent a year, is the main focus in Asia for most operators and investors.

The number of domestic trips per year has doubled since 2001, and domestic tourism is expected to rise to 8 per cent of gross domestic product within a decade, from 5.4 per cent in 2002.

And with the 2008 Olympic Games expected to put China on the world travel map, Hilton has clinched a deal to manage around 20 new hotels being built by Deutsche Bank’s property arm RREEF and private equity firm H&Q Asia Pacific.

Hilton, now with six hotels in China, has tied its loyalty programme to Air China and China Eastern Airlines to hook Chinese on its brand when they travel abroad.

India’s hotel market is even more lucrative, with US$300 room rates common because of a massive shortage. The country has only 110,000 hotel rooms, with internationally branded rooms making up less than 40,000 of the total – less than half on offer in tiny Singapore.

But the inflated prices could hurt the industry. Average room rates have risen 30 per cent in the last year. ‘Inflated room rates will have a severe negative effect on potential demand, especially in leisure destinations,’ said Manav Thadani, managing director of consultants HVS International.

Investors are keen to build more – Citigroup, for example, is building a luxury hotel in Bangalore with developer Nitesh Estates.

Around 100,000 rooms are forecast to enter the market over the next five years, but India’s creaking infrastructure could stall the plans. ‘Unless the airport situation is addressed and new ones opened, it’s going to be a barrier,’ said InterContinental’s Mr South. ‘Hotel development will be in a stop-start manner.’

 

Source: Reuters (Business Times 6 Nov 07)

Broad-based demand for ready-built space

JTC says net allocation rises 29% q-o-q in Q3

JTC’s ready-built facilities are proving particularly popular, with net allocation up by 29 per cent quarter-onquarter to hit 75,100 sq m in the third quarter of this year.

Occupancy rates were in turn pushed up to 91 per cent from 89 per cent in the previous quarter.

JTC says: ‘Growth was broad-based, with flatted factory, stack-up factory and business park space all experiencing positive growth in net allocations.’

Commenting, Savills Singapore’s director of industrial business space Dominic Peters said demand for business park space will continue to be strong. ‘Rents could increase another 10 per cent in the next quarter to about $3.50 to $3.80 psf on average,’ he said.

Net allocation for JTC’s business park space increased 157 per cent to 1,800 sq m, with occupancy reaching 94 per cent.

Net allocation for flatted factory space was 54,000 sq m, an increase of 94 per cent over the previous quarter. The bulk of the gross allocation of flatted factory space came from the services industry, followed by general manufacturing industry and precision engineering industry.

Net allocation for stack-up factory space increased 62 per cent to 9,700 sq m.

In the same segment, net allocation in technopreneur space and standard factory space fell 88 per cent and 55 per cent respectively.

Net allocation for JTC’s prepared industrial land fell 13 per cent to 55.9 ha quarter-on-quarter.

The logistics sector share of gross allocation was up 37 per cent to 24.4 ha, with the precision engineering sector increasing 16 per cent to take 10.8 ha.

Demand for logistics space could see rents increase by 10 per cent in the next quarter, noted Mr Peters. Supply in the East is particularly tight, he added.

Net allocation for generic land remained at 22.3 ha. Local establishments formed the bulk of gross allocation of generic land at 19.1 ha (or 78 per cent). Foreign firms’ take-up of generic land increased by 11 percentage points to 5.5 ha in Q3.

Net allocation for specialised parks was 33.6 ha and accounted for 60 per cent of the total net take-up for prepared industrial land. This is a 3.4-fold increase over the 9.9 ha registered in the same period last year. Specialised parks achieved 41.6 ha in gross allocation. Of this, logistics parks contributed 43 per cent of total land take-up for specialised parks.

 

Source: Business Times 3 Nov 07

Take-up of JTC ready-built space rises to 2-year high

Strong demand for factory, business park premises in third quarter

THE take-up among businesses for JTC Corp’s ready-built facilities is at a two-year high.

Net allocation of such industrial space stood at 75,100 sq m in the July to September quarter – 29 per cent more than in the previous quarter and the highest since the third quarter of 2005.

This increase in take-up from the industrial landlord was due mainly to good demand for factory space and business park space.

Gross allocation of ready- built space in JTC’s business parks almost doubled to 5,300 sq m in the third quarter.

If the amount of space given up is taken into account, the net amount of business park space taken up stood at 1,800 sq m for the third quarter, more than double the figure achieved from April to June.

Occupancy of JTC’s business parks was 94 per cent as at the end of September.

The net take-up of JTC’s prepared industrial land stood at 55.9ha in the quarter.

This is 13 per cent down from the previous quarter but still more than twice the figure achieved in the third quarter of last year.

Such land – which has road access, drains, water and sewer mains so companies can develop their own facilities – is provided both inside and outside specialised parks such as Changi Business Park, International Business Park in Jurong East and Biopolis at one-north in Buona Vista.

JTC said demand came mostly from companies dealing in logistics, precision engineering and services.

Meanwhile, consultants expect more companies to consider moving operations from the Central Business District (CBD) as office rentals soar.

Rents grew 14.8 per cent in the third quarter and have shot up more than 40 per cent since the end of last year.

The director of research and consultancy at Colliers International, Ms Tay Huey Ying, said: ‘We are seeing firms that are more prepared to consider alternative business premises other than office space within the CBD.’

Companies providing management services or those in the insurance, design or aviation sectors, for example, have already made the move out or are preparing to do so, she said.

Ms Tay expects the trend to continue until more prime office space is added from 2010, mainly at Marina Bay.

Meanwhile, JTC said that the first phase of its research and development complex, Fusionopolis in one-north, is expected to be completed by the end of this year. It will offer about 120,730 sq m of business park space.

 

Source: The Straits Times 3 Nov 07

Confirmed: Atrium @ Orchard for sale

THE Singapore Land Authority has confirmed a BT report yesterday that it plans to sell The Atrium @ Orchard – the first state sale of a Grade A prime commercial building.

‘The government does not own other commercial buildings of the same grade and category as The Atrium,’ an SLA spokeswoman said. ‘It is not in the government’s strategic interest to continue to own a well-developed and pure commercial asset like The Atrium @ Orchard.

‘It is best to let the private sector take over its commercial utilisation. Given the buoyant market conditions, the government has decided that now is a good time to divest it with best value for the state.’

SLA has appointed CB Richard Ellis (CBRE) sole marketing consultant to advise on the planned sale.

CBRE was chosen from a short list of five firms, SLA said. It clinched the job based on its competitive bid and strong track record under a two-stage selection process, SLA said without elaborating.

Market watchers suggest the other contenders were likely to have been Colliers, DTZ Debenham Tie Leung, Jones Lang LaSalle and Knight Frank.

‘On the mode of sale, the government expects CBRE to recommend a sale strategy that is consistent with the prevailing best market practices for selling large commercial buildings, to enable the state to obtain the best price for the property in a level playing field for all interested buyers,’ SLA said.

The Atrium @ Orchard, next to Plaza Singapore and above the Dhoby Ghaut MRT Station, comprises two towers of seven and 10 storeys with a total net lettable area of about 375,000 sq ft. The building’s basement carpark has 100 lots. The project received Temporary Occupation Permit in April 2002.

SLA did not indicate how much the property is worth, but in yesterday’s BT report a market observer suggested a range of $2,500 to $3,000 psf of net lettable area, which would work out to $937.5 million to $1.13 billion.

A plus point is that SLA is expected to sell The Atrium on a fresh 99-year lease.

 

Source: Business Times 2 Nov 07

Citi in $220m move to Changi Business Park

New premises will house back-office operations; can take up to 4,000 staff

SOARING rents downtown are pushing multinationals to house their back-office support operations away from central areas.

And Citi is spending $220 million to consolidate its back-office operations at Changi Business Park – the first bank to do so at this location.

Previously the bank’s support functions were spread over its locations at Tampines, downtown Millennia and Centennial towers and Capital Square.

Citi said it is giving up its space at Tampines and consolidating all support services at Changi. Without divulging the rent, it said the investment includes capital, relocation, rental and operating costs.

‘We’re scaling out,’ Citi’s Singapore country officer and head of Asean markets & banking Piyush Gupta said yesterday.

‘Instead of paying $15 per sq ft in the central area, we build scale without having to pay costs in the Central Business District.’

Office rents have surged 40.7 per cent so far this year, rising 14.8 per cent in the third quarter alone.

In the Urban Redevelopment Authority’s prime office category – which includes Raffles Place and Marina Centre and Orchard Planning Area – the median rent for new leases was $11.89 per sq ft (psf) per month in Q3, up from $10.33 in Q2. In the general category, which makes up 80 per cent of office space, the median rent for Q3 was $5.29 psf a month, up from $4.60 in Q2.

The support units of the local banks are also located out of town. OCBC and United Overseas Bank are at Tampines and DBS is at Chai Chee.

Citi’s new premises at Changi – two built-to-suit office buildings with a total of 400,000 sq feet – can house 4,000 employees, representing almost half of Citi’s total staff strength of 8,500 in Singapore. About 1,100 staff will move to Changi in Q1 2009 and 2,000 more in Q4 2010.

Citi will locate its International Technology Office, Markets & Banking Asia-Pacific Operations & Technology and Asia Pacific Technology Infrastructure divisions at Changi.

These divisions are responsible for activities like transaction services, funds administration and technology functions. These divisions support not just Citi’s Singapore business but that in the region and globally, Mr Gupta said.

For example, the technology division supports international consumer business in more than 40 countries, with Singapore serving as global headquarters.

The transaction services processing division serves corporate clients in 16 countries. And the technology infrastructure division provides desktop, voice and network services to the region.

‘The move will allow us to consolidate our operations, technology and support services under one roof, providing for greater synergies, as well as catering for future business growth,’ Mr Gupta said.

 

Source: Business Times 2 Nov 07

Far East opening $8m outpatient clinic at Novena

Project expected to break even within a year

FAR East Organization and a group of doctors are investing $8 million to set up a clinic called Novena Surgery, in response to what they say is an increasing need for outpatient surgery for Singaporeans and international patients.

Lim Beng Hai, director and senior consultant hand surgeon for the Centre for Hand and Reconstructive Microsurgery, Singapore, who is chairman of Novena Surgery, said that many local patients were opting for surgery as outpatients.

‘This demand is augmented by the rising number of international patients seeking treatment in Singapore,’ he said.

Novena Surgery, which takes up 8,000 sq ft, will be located on the eighth floor of the $257 million Novena Medical Center. It is expected to open its doors on March 1 next year.

It will be used by doctors practising at the centre and those from other hospitals, medical centres and clinics in the area.

Novena Surgery, which aims to provide ambulatory care and surgery facilities, will have three operating theatres and two endoscopy suites, with private rooms and common areas for patients to recover after surgery.

The facility will offer surgical specialties including eye surgery, ear-nose- throat and obstetrics and gynaecology.

Surgeons can look forward to a concierge service, which will arrange for patients to be picked up and arrive on time for surgery.

Patients will be able to use touch-screen monitors in the wards to make requests from nurses, to access the Internet and to send e-mail.

The board of directors is expecting Novena Surgery to break even in the space of a year, and bring in annual revenues of more than $10 million after three years.

The number of cases per day could reach a maximum of 100, they said at a press conference.

Heah Sieu Min, who is on the board of directors, described Novena Surgery as a ’seamless, convenient service which will be value for money’.

GL Yap, executive director of Far East Organization, said that Far East would be interested in tendering a bid for the hospital site at Novena Terrace/Ir- rawaddy Road launched this week by the Urban Redevelopment Authority.

 

Source: 2 Nov 07

Life after deferred payments starts with just 2 bids for site behind Icon

Developers could be turning cautious, say analysts

(SINGAPORE) In a sign that developers are turning cautious after the withdrawal of the deferred payment scheme, a state tender for a 99-year residential site at Enggor Street behind the Icon development drew just two bids yesterday.

The higher bid by Far East Organization was 55 per cent above the only other offer by GuocoLand.

Far East offered $233.8 million or about $852 per square foot of potential gross floor area for the 32,681 sq ft plot near Tanjong Pagar MRT Station. GuocoLand’s $150.98 million bid works out to around $550 psf per plot ratio.

All eyes are now on a tender for the residential site next-door closing on November 15.

Far East’s breakeven cost for a new condo project is understood to be in the $1,340 to $1,400 psf range. That still leaves it with a profit margin based on current prices being achieved at Icon.

Caveats show that mid-level units (on the 20th to 22nd levels) of Icon have been changing hands in recent months in the $1,500 to $1,600 psf range in the subsale market, although units above the 40th storey have been sold by Far East at above $2,000 psf.

The property giant is understood to have sold a penthouse on the 46th floor recently for about $2,300 psf. It is now left with about 30 units in the 646-unit project, and its prices range from $2,000 to $2,400 psf.

For the latest site, called Land Parcel A at Enggor Street, BT understands Far East’s scheme is for a 62-storey tower with about 200 apartments – likely to be a spread of unit types like Icon – and is targeting to launch the project around end-2008 or early 2009.

Far East will develop retail space on the project’s ground level to be linked to Icon Village, the street-level retail component of its earlier project.

While property market watchers attributed the thin participation at yesterday’s tender to developers turning cautious following the withdrawal of the DPS scheme, some were puzzled by the disparity between the two bids.

‘Far East has crunched their numbers and know what they are in for, based on their experience with selling Icon units,’ a seasoned property consultant said.

However, some analysts could not help but suggest that Far East’s significantly higher offer may also have been partly motivated by a need to support property prices, including the values of sites it bid earlier. In September, the property giant clinched a prime condo plot next to Ang Mo Kio Hub for $601 psf per plot ratio – a record for suburban 99-year leasehold condo land. That tender attracted a whopping 14 bids. Another state tender for a condo site next to Kovan MRT Station that closed in early October drew six bids.

‘Developers are a bit concerned after the DPS withdrawal. It looks like they’ve chickened out of this tender,’ a seasoned property consultant said, when explaining yesterday’s thin bidding.

However, another property consultant, CB Richard Ellis executive director Li Hiaw Ho suggested that another reason for the lukewarm response yesterday could be due to the site’s location.

‘It is behind Icon and is sandwiched between a commercial site that has been awarded and another residential site (Parcel B) whose tender will close on Nov 15. Nevertheless, the site is about five minutes’ walk from Tanjong Pagar MRT Station,’ he added.

 

Source: Business Times 2 Nov 07

Enggor St tender attracts only two bids

It is the first public tender to close since the deferred payment scheme was scrapped

A WEAK response to the tender for a residential site in Enggor Street suggests market sentiment might have turned cautious, analysts say.

The 99-year leasehold site at Tanjong Pagar had attracted only two bids by the time it closed yesterday, said the Urban Redevelopment Authority.

The top bid for the site was put in by Far East Organization’s Bishan Properties at $233.8 million, or $852 per sq ft per plot ratio (psf ppr).

The only other bid was almost half that – $151 million, or $550 psf ppr – and was tendered by First Capital Holdings.

This is the first public tender to close since the Government announced last week that it was scrapping the deferred payment scheme with immediate effect.

The scheme allowed buyers to fork out a down payment of only 10 or 20 per cent when purchasing a new home; the rest came due upon completion, which could sometimes be as long as three years later.

Analysts that The Straits Times spoke to said the Enggor Street bids reflected a more cautious attitude among developers.

Singapore’s spectacular property bull-run has, in recent times, seen up to 10 or more bids for public tenders.

‘The mood has turned cautious and the bids reflect this,’ said Chesterton International’s head of research and consultancy, Mr Colin Tan.

CB Richard Ellis (CBRE) Research executive director Li Hiaw Ho said this change could be due to the DPS announcement.

Mr Nicholas Mak, the director of research and consultancy at Knight Frank, agreed.

He pointed to uncertainty in the market, and added that developers are monitoring the behaviour of homebuyers before committing to buying more government land.

However, another reason for the weak response could be the location.

The site, with a gross floor area of 274,522 sq ft, is behind Far East’s Icon condo, and is sandwiched between a commercial site and another residential site whose tender closes on Nov 15.

But as it is only a five-minute walk from the Tanjong Pagar MRT station – at the heart of the Central Business District – the site remains attractive, say analysts.

Estimates for the project, launched for sale on Sept 4, indicate that it could provide 330 to 360 small units and a handful of large four-bedroom units, said Mr Mak.

CBRE’s Mr Li said the top bid was ‘reasonable’ and should translate into a break-even price of $1,300 psf for the future project.

Its units are likely to be priced at $1,500 to $2,100 psf when launched for sale – similar to the prices fetched at Icon recently.

 

Source: The Straits Times 2 Nov 07

Atrium @ Orchard could fetch over $1b: analysts

Govt expected to put property up for sale with fresh 99-year lease

SINGAPORE Land Authority is putting up The Atrium @ Orchard for sale, BT understands.

Market watchers say the property is expected to fetch over $1 billion. They reckon the Orchard Road property, which will be sold with a fresh 99-year lease, could fetch up to $3,000 psf of net lettable area (NLA).

At $1 billion, the price works out to $2,667 psf based on the building’s NLA of about 375,000 sq ft. ‘I think it can fetch anything from $2,500 to $3,000 psf. The building has big-name tenants like Temasek, HSBC, Barclays and MTV, good-sized floor plates plus a prime location above Dhoby Ghaut MRT Station,’ one market observer said.

BT understands that agents were recently approached by SLA to handle the sale of the property, and it is believed that CB Richard Ellis has been selected for the job.

Most of the space in the building, which has two blocks, of 10 storeys and six storeys, is for offices but there is also some retail space. The building was completed in 2002 when Singapore was still experiencing a glut in office space.

The Atrium @ Orchard was built by the Land Transport Authority as a model planning project integrating land use and town and transport planning, and handed to SLA for management on behalf of the state.

The development has about 359,000 sq ft of office space and 16,000 sq ft of retail space, according to an earlier report in The Straits Times.

Market watchers expect The Atrium to attract strong demand from overseas as well as local real estate investors.

Interest in Singapore’s office market, which is currently experiencing a supply crunch and soaring rents, has been sizzling.

In August, a Goldman Sachs real estate fund bought the leasehold Chevron House at Raffles Place for $730 million or a record $2,780 psf of NLA. Goldman Sachs group is also said to be finalising a deal to buy the next door Hitachi Tower, a 37-storey office tower on a 999-year leasehold site facing Collyer Quay, at about $3,000 psf.

Another major overseas investor in the local office market is Macquarie Global Property Advisors (MGPA). In September, it put in a record bid of $2.02 billion, or $1,409 psf of potential gross floor area, for a 99-year leasehold site slated for a mostly-office development behind the One Shenton project.

In March, an MGPA fund bought Temasek Tower in the Anson Road area for $1.04 billion or $1,550 psf of NLA.

Later, MGPA sold 12 floors at Springleaf Tower, also in the Anson Road area, for $225 million to a unit of German pension fund manager SEB, making a neat profit as it had bought the floors for $134 million only in January.

SEB also bought SIA Building in April for about $526 million or $1,783 psf from TSO Investment, a fully-owned subsidiary of a property fund managed by CLSA Capital Partners. TSO had purchased the office block from Singapore Airlines in June last year for $343.88 million or about $1,165 psf.

 

Source: Business Times 1 Nov 07

CapitaMall to raise $500m in share sale

CAPITAMALL Trust, Singapore’s largest real estate investment trust (Reit), may raise as much as $500 million in a share sale to pay debt and fund acquisitions.

CapitaMall will sell as many as 137.7 million new shares to institutional investors at between $3.63 and $3.70 apiece, it said in a statement late on Monday, representing a discount of as much as 3.5 per cent from Monday’s closing price of $3.76.

The trust will reduce its debt to 33 per cent of assets from 41 per cent, allowing it to borrow more as it seeks out acquisitions in the city’s shopping mall industry.

Singapore’s central bank allows Reits with a credit rating to raise debt to 60 per cent of assets.

The funds ‘provide greater financial flexibility to pursue yield accretive acquisition opportunities in Singapore’, Pua Seck Guan, chief executive officer at the trust’s management company, said in the statement.

The trust said that it will repay its debt of $453.6 million, which it took to buy bonds for three Singapore malls and a 20 per cent share of CapitaRetail China Trust, a property trust that owns shopping centres in China.

CapitaMall plans to raise $350 million in the initial sale, and may issue a further $150 million of shares ‘in the event of a favourable response’, it said in the statement.

‘It’s getting quite challenging to buy good shopping malls in Singapore,’ said Nicholas Mak, Singapore-based research director at Knight Frank, a property consulting company. ‘Most of them have already been acquired. Others are owned by listed property funds or the owners are simply not that keen to sell.’

The stock has risen 29 per cent this year, the second-best performing Reit among 17 trusts traded on the Singapore exchange, which have an average return of 6.8 per cent this year.

CapitaMall is ‘refinancing its higher-cost debt due to still-strong demand for the shares’, said David Lum, an analyst at Daiwa Institute of Research Singapore. He does not expect the trust to pursue acquisitions ‘in the immediate future’.

CapitaMall’s shares were suspended from trading for the announcement. The share sale is being managed by DBS Group Holdings and UBS, CapitaMall said.

 

Source: Bloomberg (31 Oct 07)

Analysts see no property bubble

They’re mum on whether it’s a good time to buy, but agree S’pore fundamentals are pretty robust.

PROPERTY: boom or bust? This was the intriguing question to which a capacity turnout of about 170 investors recently sought answers, at a dinner hosted by financial advisory firm ipac. The good news is that the experts at the evening’s panel do not foresee a bubble in the offing, based on three presentations – albeit with some concern expressed by Jones Lang LaSalle’s head of research, Chua Yang Liang.

The not-so-good news is that the experts shied away from the multi-million-dollar question of whether this was a good time to buy. What is more, over the past weekend, the surprise news of a halt to  the popular deferred payment scheme for uncompleted properties appears to have cast a cloud over residential property’s upward trajectory.

In a deferred payment scheme, developers effectively extend free financing to buyers of uncompleted properties.

Buyers need only pay an initial deposit of 10 to 20 per cent, with the balance due when the property is completed in a couple of years.

Thanks to this form of free credit, a sizeable number of speculators have rushed in to new home launches, as a rising market gives them a window to sell their units at a substantial profit in a short period.

The base case of one panellist, HSBC senior Asian economist Robert Prior-Wandesforde, is that there are few obvious triggers for a sharp deceleration in prices.

‘If we’re in a bubble, we’re in the early stages. The fundamentals are pretty robust. The mass market is just starting to see a recovery and that’s probably the safest area for investment,’ he told the audience. The supportive factors include the expected growth in employment and personal incomes. 

The cost of servicing mortgage debt also remains relatively low at just about 14 per cent of household income, compared to 50 per cent in mature markets like London.

Contacted yesterday, he said: ‘I think the measure (to halt deferred pricing) will take a little bit of froth out of the market, but with employment booming, wages soaring and the real mortgage rate at its lowest level since 1990, the outlook still looks very promising.

‘We should also bear in mind that valuations are still way below the levels of the previous boom. When adjusted for the growth in incomes, the private residential property price index is little more than half of what it was in 1996.’

At the discussion, Dr Chua of JLL expressed concern over the price gap between new and resale homes in the prime districts. The gap has widened sharply this year, reaching a peak of 60 per cent, against a medium to longterm premium gap of 32 to 38 per cent. The resale market, he says, reflects true demand better, as deferred payment schemes in the new home market have inflated prices.

In terms of rental yields, rentals in the luxury prime segment have edged below the 10-year Singapore bond yield.

The clampdown on deferred payment schemes should remove the speculative froth, he says. ‘Generally prices will take a breather in the next two to three years with the sheer volume of (new) stocks coming on stream. We expect some kind of softening, not a correction, but a softening.’

Sing Tien Foo, deputy head of the National University of Singapore’s department of real estate, pointed to property’s ability to help diversify a portfolio, thanks to a low correlation with stocks and bonds.

Prof Sing’s research has shown that property provided a positive hedge against inflation between 1992 and 2007, a period in which stocks and bonds did not provide such a hedge.

While all types of property offered a more-than perfect hedge against inflation, the best hedge was that offered by detached housing, followed by semi-detached homes.

Meanwhile, advisers are sounding caution. Roy Varghese of ipac says: ‘If you’re looking to invest, be very careful.

You need to have an investment objective and that includes looking into the IRR (internal rate of return). You should be able to hold it for seven to 10 years. If you bought your property at a peak, your IRR will be low.’

Joseph Chong of New Independent expects the price gap between new uncompleted homes and resale homes to narrow. ‘The market should see a more moderate ascent in prices – instead of 20 per cent, perhaps 10 per cent in line with nominal GDP.

‘You should see more upside…But if your portfolio is not big enough, I don’t think you should bet on investment property in Singapore.’

Those with modest resources are better off investing in a global property fund or Reit, he adds.

Analysts, however, remained mostly sanguine over the medium-term outlook. Merrill Lynch’s property team wrote in a paper market that sentiment will be weak over one to two months. ‘However, we are of the view that genuine buyers do not buy houses on innovative purchase schemes by developers alone. We believe the more important considerations will be where Singapore is heading, will they be able to keep their jobs or businesses and will their salaries/profits increase.’

The firm’s economics team recently wrote that Asian property prices were not high relative to per-capita income, and advances have been modest compared to those in the UK, the US and Australia. The drivers include low real interest rates and positive demographics.

Citigroup analyst Wendy Koh said that while sentiment will weaken in the short term, residential prices are supported by strong fundamentals. In a note on Friday, she said: ‘We believe the current price increase is well supported by strong fundamentals such as the extremely tight physical supply and economic and wage growth.

‘We maintain our view that rental rates for residential units will continue to climb on the back of the relative net increase in housing stock due to low completion and relatively high demolition due to en blocs. The rise in rental rates will likely continue to support further price appreciation.’

 

Source: Business Times 31 Oct 07

Acer Building in Jurong for sale

ACER Computer International is selling its building at International Business Park in Jurong East.

The property is said to be worth about $75-80 million, or $337 to $360 psf of existing net lettable area (NLA).

The property, a high- tech business park development, was completed about 10 years ago on a site leased from JTC Corp for 30 years with an option to renew for a further 30 years.

Acer is paying JTC an annual land rent of $715,469, with an escalation of 4 per cent a year (as at Q3 2007). Acer Building’s new owner will likely pay JTC a slightly higher land rent each year.

Acer Computer (Singapore) will lease back 51,548 sq ft in the building – about 23 per cent of the property’s 222,510 sq ft NLA – from the new owner.

BT understands that the net property yield to the new owner can work out to around 6 to 7 per cent, based on a $75-80 million price.

DTZ Debenham Tie Leung is marketing Acer Building through an expression of interest exercise.

 

Source: Business Times 31 Oct 07

Q4 distributable income for Suntec Reit up 22%

SUNTEC Reit has reported fourth-quarter income available for distribution of $30.4 million, an increase of 22.2 per cent from $24.8 million a year ago.

For the same July 1-Sept 30 period, Suntec Reit recorded gross revenue of $51.1 million, an increase of 13.7 per cent year-on-year. Net property income was up 12 per cent up at $36.6 million while distribution per unit (DPU) was 2.122 cents, up 11.3 per cent.

The Reit’s stake in Suntec City Mall and Office Towers contributes 87.4 per cent of its net property income (NPI) and it reported that Suntec office leases were secured at higher rental rates of between $11 and $13 per square foot (psf) per month, and the committed office occupancy at Suntec City is at 99.8 per cent.

Suntec Reit also reported that the committed retail passing rent at Suntec City Mall hit a new high of $10.46 psf per month.

The Reit, which also owns Park Mall and Chijmes, reported that the passing rents there rose to $6.60 psf per month and $10.68 psf per month respectively.

Suntec Reit also recognised a revaluation surplus of $677.5 million for the quarter after independent valuations of its porfolio was valued at $4.57 billion (as at Sept 30).

On a full-year basis (Oct 1, 2006 to Sept 30, 2007), income available for distribution was $115.4 million, up 21.6 per cent from $94.9 million in the corresponding period a year ago. Net property income was up 11.8 per cent at $140.6 million and DPU was up 11.8 per cent at 8.15 cents.

Based on the closing price of $1.84 on Oct 26, Suntec Reit’s distribution yield was 4.4 per cent, up 11.8 per cent compared to the previous year.

Yeo See Kiat, CEO of Reit manager ARA Trust Management said: ‘On the acquisition front, we have entered into an agreement to acquire one-third interest in One Raffles Quay which will be completed shortly.’

Suntec Reit’s other income revenue from A&P, pushcarts and kiosks for FY07 grew 10.2 per cent year-onyear, surpassing the $6 million mark.

For its current office portfolio, 26.8 per cent of leases are expected to expire next year, with 42.6 per cent expiring the following year.

For its retail portfolio, 30.4 per cent of the leases are expected to expire next year, with 23.4 per cent expiring the following year.

Suntec Reit ended the trading day yesterday at $1.84 per share, unchanged.

 

Source: Business Times 30 Oct 07

URA releases Novena site for private hospital

1.7ha plot of land is part of govt plan to meet patients’ future needs

A 1.7HA site in Novena to build a private hospital was yesterday released for tender by the Urban Redevelopment Authority (URA).

It is the first time in 31 years such a site has been put on the market, since the site of Mount Elizabeth Hospital was sold in 1976.

The move is part of the Government’s plan to release more land for medical facilities, to meet both the needs of the population here, and rising demand for medical services by foreigners.

More than 410,000 foreign patients were treated here last year, a 15 per cent jump over the previous year.

The Novena site, along Irrawaddy Road and opposite Tan Tock Seng Hospital (TTSH), will be leased out for 99 years.

The URA said in a statement yesterday that the new hospital’s total floor area cannot exceed 7.2ha, and that at least 35 per cent of the area must be used for inpatient wards.

Its retail element, such as its gift shops and food & beverage outlets, can occupy up to 5 per cent of the area, while the remaining space has to be used for facilities like operating theatres and medical suites.

The tender will close on Feb 15, with the hospital expected to be completed by 2015.

The hospital will seal Novena’s reputation as a medical hub, given that the neighbourhood includes TTSH, the National Neuroscience Institute, National Skin Centre, upcoming Renci Hospital and Novena Medical Centre.

Mr Nicholas Mak, director of research and consultancy at Knight Frank, put the price of the site at between $600 million and $670 million.

As its stated use is very specific, he expects few bids to come in, and bidders will probably be hospital operators.

Raffles Medical Group, which runs Raffles Hospital, indicated interest, but said it needs to review the documents.

A spokesman for Parkway Group Healthcare, which runs Gleneagles, Mount Elizabeth and East Shore hospitals, said the group is ‘thrilled’ by the news because of the demand for more local and foreign patient beds.

Parkway already runs a day-surgery centre in nearby Martaban Road. It will open a 465 sq m radiology clinic at Novena Medical Centre next month, and a laboratory in the same centre later.

A site at one-north in Buona Vista, also slated for a private hospital, has not been put up for tender yet. And earlier this month, the URA awarded a Race Course Road site to Singapore Health-partners, but it is for a hotel-cum-hospital project.

 

Source: The Straits Times 30 Oct 07

Specialists’ Centre project gets the green light

Go-ahead for several projects to ease space crunch

(SINGAPORE) OCBC Bank and its insurance subsidiary Great Eastern Holdings are poised to redevelop the Specialists’ Shopping Centre and Hotel Phoenix complex, together with shopping mall Orchard Emerald just across the road.

And when works are complete, the new project could have some 314,000 square feet of retail space, 66,000 sq ft of office space and 684 hotel rooms, judging by the two companies’ submissions to the Urban Redevelopment Authority (URA).

URA said that provisional permission for the development of the two properties was given in August this year.

OCBC owns the Specialists’ Shopping Centre and Hotel Phoenix complex, while Great Eastern owns Orchard Emerald.

When contacted, OCBC said that it has ‘made certain submissions to the relevant authorities and received provisional approvals with regard to the possibility of redevelopment of the property’.

‘We are currently exploring several possibilities with regard to working with other developers in redeveloping the property,’ said Koh Ching Ching, head of group corporate communications at OCBC.

Market watchers said that there could be some sort of an underground link between the Specialists’ Shopping Centre and Hotel Phoenix complex and Orchard Emerald – beneath Orchard Road – in a bid to maximise the plot ratio.

URA’s quarterly update on projects under development also showed that there are extension works planned for OUB Centre at Raffles Place.

Provisional permission has been given for the addition of 301,000 sq ft of office space and 32,000 sq ft of retail space. The extension is expected to be up in 2011.

Approval was also given for the redevelopment of the former Robinson Towers and former International Factors Building on Robinson Road. Owned by Tuan Sing, the project will offer some 258,000 sq ft of gross floor area (GFA) for office use once it is completed in 2010.

JTC Corporation has also received permission for an office development at Fusionopolis Phase 2A at science hub one-north, which will have 161,000 sq ft of office space when it is up in 2010.

The new developments are expected to ease the current shortage of office space.

Rentals for office space in Singapore increased by 14.8 per cent in the third quarter of 2007, compared to 11 per cent in the second quarter, URA’s data shows. Rents have climbed some 40.7 per cent since the start of the year.

As at the end of the third quarter of 2007, there was a total supply of 6.6 million sq ft of GFA of office space from projects in the pipeline – from both government and private land sources – which are expected to be completed between the fourth quarter of 2007 and 2010, URA said.

‘More supply will also come from the government land sales sites which were recently awarded or launched for sale,’ URA said.

There was also a total supply of some 4.1 million sq ft of business park space from projects in the pipeline as at end-September 2007, which will be completed by 2010, URA said.

URA’s data also showed that it has given provisional permission for a 352-room hotel development at Telok Blangah Road to Fiesta Development Pte Ltd. The site, which previously housed Citiport Centre, was sold in a collective sale.

 

Source: Business Times 27 Oct 07

Office rents still up, rising 15% in 3rd quarter

OFFICE rentals, a major business cost, continued their relentless rise – up nearly 15 per cent in the third quarter – as the official vacancy rate for prime office space fell to just 2.8 per cent.

Recent uncertainty in global financial markets has had no discernible impact on office space demand, said property agency CB Richard Ellis (CBRE).

It cited figures from the Urban Redevelopment Authority (URA), which also showed that occupied office space rose by 645,840 sq ft in the third quarter, up nearly 54 per cent from 419,796 sq ft in the second quarter.

Overall, office rents rose by 14.8 per cent in the third quarter, compared with 11 per cent in the second quarter. And from the end of last year to Sept 30, office rentals have risen by 40.7 per cent.

These government figures confirmed industry statistics, which have showed a persistent climb in rents, particularly for quality space in the Central Business District, amid tight supply.

It has come to the point where some tenants are showing resistance to the rapid increases in rents, consultants said.

In URA’s prime office category, median rents of new leases reached $11.89 per sq ft (psf) per month in the third quarter, up from $10.33 psf per month in the earlier quarter.

In URA’s general category, accounting for 80 per cent of office space, median rent for contracts signed in the third quarter was $5.29 psf a month, up from $4.60 psf a month in the second quarter.

The growth in the prices of office space slowed a little to 8.1 per cent in the third quarter, from 8.9 per cent in the previous quarter.

In the past three quarters, prices of office space have risen by 22.7 per cent.

Vacancy for office space continues to fall as expected, with the rate for URA’s prime office space down to 2.8 per cent, from 5 per cent at the end of the second quarter.

The Government has said it will make more space available and has introduced transitional office sites for quick occupation.

Rentals could ease from 2010 onwards when more office buildings are ready, said Cushman & Wakefield’s managing director in Singapore, Mr Donald Han.

 

Source: The Straits Times 27 Oct 07

Office rentals main concern for Norway firms here

RISING office rentals is the biggest concern among Norwegian-owned businesses operating in Singapore.

While 88 per cent of these firms expect to expand in the next 12 months, many are increasingly concerned about spiralling business and manpower costs.

The findings came from a recent survey conducted by the Norwegian Business Association in Singapore over the past six weeks.

The respondents were from 60 Norwegian companies, with more than half having an annual turnover of over $50 million.

A total of 24.4 per cent of the respondents said office rentals were their main concern, while 22.6 per cent cited rising wage bills.

A further 20.2 per cent said they were worried about the recent steep rises in living costs.

The survey findings – which were presented at the Norway Asia Business Conference held in Singapore yesterday – echoed those of a poll released by the American Chamber of Commerce in June.

This showed that rising rents and housing costs are becoming more of a worry for senior executives at American firms in the Republic.

Economic Development Board (EDB) managing director Ko Kheng Hwa addressed the rents issue at the conference, saying the EDB and the Government are ‘very concerned’ about business competitiveness and are working to increase the supply of commercial and residential space.

Mr Ko, the conference’s keynote speaker, added: ‘When supply and demand are better matched in the next couple of years, the cost escalation should be moderated.’

Norway is the sixth-largest foreign investor in Singapore, with a total foreign direct investment of $7.9 billion in 2005 – the latest year for which figures are available.

It is the fourth-largest European investor in Singapore behind Britain, the Netherlands and Switzerland.

There are more than 150 Norwegian business entities in the Republic.

 

Source: The Straits Times 26 Oct 07

Paragon bags 2 industry awards

PARAGON Shopping Centre has clinched two awards in Shopping Centre Scorecard, an annual national industry rating scheme which recognises well-run malls in Singapore.

Paragon, which is fully owned by Singapore Press Holdings Ltd (SPH), emerged tops in two of the three categories – best efforts in advertising & promotions and tenant relationships.

The results were based on votes by retailers. The contest is organised by the Singapore Retailers Association.

This is the second year the mall has won the Shopping Centre Scorecard. Last year, it won for best efforts in maintaining its premises, the third category.

Paragon, which now enjoys full occupancy, is positioned as an upscale fashion and accessories mall. The mall is home to many international fashion designer names such as Prada, Gucci, Burberry and Versace.

‘Good mall management is a synergy of getting the right tenant mix and increasing shopper traffic, apart from handling ongoing building maintenance,’ said Linda Kwan, the mall’s general manager . ‘Cultivating a good working relationship with our tenants is a big factor in our success. Coupled with strong brand building and proactive A&P programmes, our efforts in mall management would further boost shopper traffic and sales for the mutual benefit of all.’

 

Source: Business Times 25 Oct 07

S’pore hotel tax hike won’t apply to service flats

(SINGAPORE) Singapore’s hike in property tax on hotels next year will not apply to service residences, the Inland Revenue Authority of Singapore (IRAS) said yesterday.

Service residences, many of which provide food and cleaning services, have emerged as an alternative to hotels in recent years for business travellers on longer stays.

Singapore-listed Ascott Group, the largest service residence operator in Europe and Asia, has about 600 units for rent in Singapore.

The annual value of a hotel next year will be calculated based on 20 per cent of gross room receipts in the preceding year, and at 25 per cent in 2009, up from the current 15 per cent, according to the IRAS. Hotel owners have to pay 10 per cent of the annual value to IRAS as property tax.

 

Source: Reuters (Business Times 25 Oct 07)

MV Land’s $68.9m bid the highest for Sin Ming site

Unit price of industrial parcel works out to about $50 psf ppr

THE public tender for an industrial site at Sin Ming Lane has closed with the top bid of $68.9 million put in by MV Land Pte Ltd.

Based on land area of about 5.13 ha and a plot ratio of 2.5, the unit price of the parcel works out to about $50 per square foot per plot ratio (psf ppr).

The parcel was the first of the two industrial sites tendered under the confirmed list for the second-half 2007 Government Industrial Land Sales programme. The other site on the confirmed list is at Jalan Tepong.

The tender for the Sin Ming Lane site closed yesterday with five bids received by the Urban Redevelopment Authority.

The second highest bid of $65.4 million – about 5 per cent lower than MV Land’s bid – came from Soon Lee Land Pte Ltd.

This should come as some relief for MV Land, which through associate company Eastpoint Development, recently outbid EL Development for an industrial site at Kaki Bukit Road 3 by 58 per cent to pay $72 psf ppr – the highestever unit land price for a 30-year leasehold industrial plot.

Eastpoint Development is controlled by Lim Kim Hong and Lim Huixing.

The top bid of $50 psf ppr for the Sing Ming Lane site is ‘reasonable’, said Savills Singapore’s director of industrial business space Dominic Peters. ‘The market for such properties has gone up about 15 per cent in the last six months.’

The site is zoned Business 1 and can be used for clean and light industrial use. Mr Peters expects that the developer will want to build a ramp-up facility. A possible use could be a service centre, he said.

The breakeven price for a project could be around $220 psf, which would mean it could be sold for $250-$280 psf, he reckons. ‘Similar developments are already selling for between $260-$280 psf.’

A decision on the award of the tender will be made after the bids have been evaluated by URA.

MV Land and Eastpoint Development have been hot on the acquisition trail this year, bidding for – though not clinching – a commercial site next to HDB Hub in Toa Payoh, a residential site near Potong Pasir MRT Station and the maiden transitional office site next to Newton MRT Station.

 

Source: Business Times 25 Oct 07

Reserve site up for sale, sparked by $7.8m bid

Committed sum for 17conservation shophouses comes to just $460K each

With property prices hitting new peaks in recent times, it is rare to see a committed bid of just $7.8 million for a 15,200 sq ft site near the city centre.

Based on the committed bid received by the Urban Redevelopment Authority (URA), each of the 17 two-storey shophouses on this Jalan Sultan site could, theoretically, go for as little as $460,000 a unit.

The committed bid is not the transacted price for the reserve list site as it will now be put up for public tender. Still, it gives an indication of the range of bids that could eventually come in.

The 17 shophouses have been gazetted for conservation and the successful tenderer is required to restore and reconstruct these conservation shophouses in accordance with the tender conditions and the Urban Redevelopment Authority’s Conservation Guidelines for Historic District.

Zoned for commercial use, the shophouses could be used for office or even as hotels.

Colliers International executive director (investment sales) Ho Eng Joo believes the winning bid could be around $14 million or roughly $800,000 a unit. Add to this renovation and restoration costs of about $300,000 per unit and the potential winning bidder could be looking at spending about $1.1 million per unit.

But as Mr Ho notes: ‘The area is changing.’ Highlighting that KeyPoint, formerly known as Jalan Sultan Centre, was sold recently for $1,186 psf of net lettable area, Mr Ho believes the 17 shophouses could give an investor a yield of over 5 per cent if each unit is rented out for at least $5,000 a month.

‘Only the lack of carparking could be an issue,’ he added.

Over in Woodlands, the Singapore Land Authority has released a 172,223 sq ft residential development site at Woodlands Avenue 2/Rosewood Drive and developers could also be looking at a bargain.

Mr Ho reckons the site, which is on the confirmed list of the Government Land Sales programme, could go for between $250 – $280 psf ppr. With a plot ratio of 1.4, the gross floor area could be up to 241,112 sq ft, giving the site a price tag of between $60.2 million and $67.5 million.

The site may not be directly next to an MRT station but Mr Ho believes a future development would have good rental potential as it is close to the Singapore American School.

 

Source: Business Times 24 Oct 07

FCT to pay up to $170.5m for Northpoint 2

It will acquire the upcoming shopping mall from its parent firm in Q4 2008

FRASERS Centrepoint Trust (FCT) has entered into a put and call option agreement to acquire the upcoming shopping mall Northpoint 2 for between $139.5 million and $170.5 million, it said yesterday.

The mall, which is being developed by Frasers Centrepoint, will be completed by August 2008. FCT will then acquire it from its parent company in the fourth quarter of 2008.

‘We are doing this (entering the put and call option agreement) now so that we can get a certainty of ownership,’ said Christopher Tang, chief executive of FCT’s manager.

FCT has plans to integrate the upcoming mall with Northpoint, which is already part of its portfolio.

The $30 million asset enhancement programme is expected to be completed by end-June 2009. Together, the two malls will have a combined net lettable area (NLA) of some 232,000 sq ft, an increase of some 56 per cent over Northpoint’s current NLA.

FCT said that the mid-point of the agreed price range for Northpoint 2 – $155 million – is based on an open market valuation. The actual purchase price will be determined by taking the average of two valuations – one each by FCT and Frasers Centrepoint – nearer to the time of the transaction.

FCT also reported its financial results for the fourth quarter ended September 30, 2007 yesterday.

The trust said that distributable income for the three months came to $10.3 million, 13.5 per cent higher than the forecast of $9.1 million as new and renewed leases as well as higher occupancy rates in its malls contributed to increased revenues.

Distribution per unit (DPU) for the quarter came to 1.67 cents, up 13.6 per cent from forecast of 1.47 cents.

Net property income came to $12.8 million, some 2.6 per cent higher than the forecast of $12.5 million.

For its full financial year, FCT reported distributable income of $40.4 million, 11.1 per cent higher than its forecast. DPU came to 6.55 cents, 12.0 per cent higher than forecast. And full-year net property income came to $51.7 million, 3.2 per cent higher than its forecast.

There are no comparable figures for the previous corresponding periods as FCT was only listed on July 5 last year.

FCT has three more Singapore malls awaiting injection into the Reit – Yew Tee Point, Bedok Mall and The Centrepoint.

Yew Tee Point will be injected in early 2009 and Bedok Mall in 2010, Mr Tang said. He added that there is no timeline at present for Centrepoint’s injection. The four malls together will double the trust’s current portfolio.

The trust will also look at China and Australia for growth together with Malaysia, where it already has a presence through its stake in Hektar Reit, Mr Tang said.

FCT’s shares closed unchanged at $1.50 yesterday.

 

Source: Business Times 23 Oct 07

Mandarin Oriental benefits from upgrading

THE Mandarin Oriental hotel here has enjoyed a significant increase in the number of international corporate and free and independent travellers (FITs) since it was upgraded and rebranded as a member of the worldwide Mandarin Oriental Hotel Group.

‘After the hotel was relaunched in 2005 we saw a two to three-fold increase in the number of business travellers in 2006, compared with 2004 and 2005,’ says Rajesh Jhingon, general manager of the Mandarin Oriental, Singapore.

‘Demand for rooms will continue to increase as the hotel is constantly upgrading its facilities and service.’ Guests have responded positively to the transformation of the hotel and the improved facilities, he said.

The hotel, previously The Oriental, Singapore, was renamed Mandarin Oriental, Singapore on Sept 25 to align it with the Mandarin Oriental Hotel Group, which is in the process of developing 17 new hotels worldwide.

The multi-million-dollar upgrade of the Singapore hotel – which included all rooms and suites, dining and meeting facilities, public areas and the fitness studio – is one of the most significant since the hotel opened in 1987.

The hotel was closed for refurbishment for three months from end-August 2004 until December 2004, when it reopened softly.

‘However, renovation works were still going on and we relaunched the hotel in May 2005,’ says Mr Jhingon. Upgrading of facilities continued after that, the latest being the renovation of the fitness studio, which was completed in June this year.

There will be further renovations in 2008 to the hotel’s rooms, including new furniture and the latest audio visual facilities in every room.

 

Source: Business Times 23 Oct 07

Yishun mall to get bigger, better with new Northpoint 2

Extension is one of three malls Frasers Centrepoint will inject into its trust

YISHUN residents, who for years managed with only Northpoint to meet their shopping needs, will get a retail shot in the arm next year.

Frasers Centrepoint Trust (FCT), a real estate investment trust (Reit) that owns retail malls including Northpoint, plans to integrate the mall with upcoming Northpoint 2.

Northpoint 2 is set to be completed next year. Once it is fully integrated with Northpoint, it will create a single shopping mall with a total net lettable area of 232,000 sq ft.

FCT says the enlarged mall will be the ‘heartbeat of the north, infusing new life and vibrancy into the community that the mall has been serving over the past 14 years’.

The trust yesterday turned in a bumper maiden set of full-year financial results. Its distributable income for the year ended Sept 30 was $40.4 million, a hefty 11.1 per cent above forecast.

For the full year, distribution per unit came to 6.55 cents representing a yield of 4.4 per cent, based on yesterday’s closing price of $1.50.

For the quarter, distributable income was $10.3 million, while distribution per unit was 1.67 cents.

As the economy keeps thriving, new and renewed leases at malls such as Causeway Point, Northpoint and Anchorpoint have been sealed at 12 per cent above previous rates.

The trust’s growth strategy includes enlarging its portfolios. Three malls have been acquired by Frasers Centrepoint and are ready to be injected into the trust: Northpoint 2 in the fourth quarter of next year, Yew Tee Point and Bedok Mall.

These three new malls, together with Centrepoint shopping centre, will double the trust’s portfolio.

FCT will enhance its malls ‘to benefit tenants and pave the way for further rental growth’, said Mr Christopher Tang, chief executive of the trust’s manager.

One example is Northpoint. There is also Anchorpoint’s makeover into a village mall concept that is due to be completed next month.

Other than new food and beverage tenants such as a new Tung Lok concept Zhou’s Kitchen, Anchorpoint will feature a cluster of factory outlets from Charles & Keith and G2000 for example.

Yesterday, health-care Reit, First Reit, reported its third-quarter results.

Its distributable income was $4.61 million for the third quarter ended Sept 30. With distribution per unit of 1.72 cents , the annualised figure of 6.7 cents gives a distribution yield of about 8.65 per cent based on last Friday’s close of 77.5 cents.

The distribution per unit for the quarter exceeded its forecast by 7.5 per cent.

First Reit has four health-care facilities in Singapore.

Dr Ronnie Tan, chief executive of the trust’s manager, said: ‘Leveraging on the buoyant regional health-care markets, coupled with our strong acquisition pipeline, we are confident of raising our asset portfolio to $500 million before the end of 2009.’

 

Source: The Straits Times 23 Oct 07

70% of Jurong Point’s uncompleted wing leased out

JURONG Point, which is set to be Singapore’s largest suburban mall, says its new extension is already 70 per cent taken up more than a year ahead of the wing’s completion.

One of the main tenants, supermarket retailer NTUC FairPrice, will open a FairPrice Xtra, its hypermarket brand.

It will take up more than 70,000 sq ft on the third floor of the new wing, said the mall’s development and marketing manager, Starmall Property Management.

The first FairPrice Xtra – a 77,000 sq ft outlet – opened late last year in Ang Mo Kio Hub. The second one is in Hougang Point.

Another anchor tenant is Popular Book Company, an existing tenant which has agreed to double its retail space and relocate to a unit of about 18,000 sq ft. It will also open a Harris bookstore of more than 8,000 sqft in the new wing.

Department store Yue Hwa Chinese Products, which has three outlets in Hong Kong, will set up a 5,000 sq ft shop in the mall. It now has one store in Singapore, in Chinatown.

Property consultancy Knight Frank’s deputy managing director, Mr Danny Yeo, said the good take-up is expected as there is a dearth of good-quality suburban malls. ‘There is very strong interest in suburban malls, particularly large ones near MRT stations, where there is a lot of transient traffic.’

Analysts say rents at Jurong Point could be $11.50 to $12 per sq ft on average.

Opened in 1995, Jurong Point in Jurong West has 220 tenants occupying 410,000 sq ft of lettable area. The new wing – slated to be opened before Christmas next year – has 290,000 sq ft, of which 70 per cent has been leased out.

The combined 700,000 sq ft enlarged mall will be the largest suburban shopping centre in Singapore. It is part of a $720 million integrated project, which includes an air-conditioned bus interchange and a 610-unit condominium above the new wing.

The 99-year leasehold The Centris was released in late September last year and was fully sold by May.

Jurong Point will also have about 43,000 sq ft of non-profit space for charities and other similar bodies, which will pay a service charge, instead of market rents.

Under a government scheme, Jurong Point is granted extra lettable space – which it will use for a 24-hour eatery and a medical centre – in return for the donation of non-profit space.

 

Source: The Straits Times 23 Oct 07

Equation Corp wins Bukit Ho Swee bid

EQUATION Corp has clinched a state property at Bukit Ho Swee for the stately rent of $90,000 a month.

The Singapore Land Authority (SLA), which manages the property, said that this is twice the guide rent when the former community centre was put up for tender in June.

The building is on 40,892 sq ft of land and has a gross floor area of 27,361 sq ft. At $90,000 a month, the rent works out to $3.30 per sq ft (psf) per month. Deloitte & Touche Management Services put in the second highest bid of $54,700 a month.

Equation Corp – formerly Heshe Holdings – could not be reached for comment. But another company that clinched two other state buildings – a former childcare centre in Balestier and a former school at Toa Payoh – said that it is likely to offer these as office space.

Vita Holdings chief financial officer Kwek Siew Hwee said that her company has leased about a dozen state buildings and rented out 80 per cent of the space to tenants. Vita, through its subsidiary Whitehouse Holdings, bid $101,788 a month for the former school at Toa Payoh. After refurbishing the building, it hopes to achieve rent of $5-6 psf per month. ‘We expect to recover our cost in about six years,’ Ms Kwek said.

Whether Equation Corp plans to rent out the former community centre at Bukit Ho Swee is not known, but Savills Singapore director (commercial) June Chua reckoned that the space could fetch $8-9 psf a month after it is refurbished. Proximity to Tiong Bahru MRT station is its main attribute, she said, adding: ‘This site could fetch a premium because it’s an established office location.’

The rent may seem high considering that average prime office rent is $12-13 psf a month. But the supply crunch is exerting increasing upward pressure on rents, Ms Chua said.

Rents for some prime buildings in Raffles Place have now hit a record $18 psf per month. ‘It would not be impossible for some of these prime properties in Raffles Place to cross the $20 psf a month barrier next year,’ she said.

Other bids received by SLA include $288,999 a month or $1.30 psf per month from RichZone Properties for a former school in Alexandra Road, and $200,000 a month or $1.25 psf per month from Hean Nerng Investments for the former Gan Eng Seng School at Raeburn Park.

 

Source: Business Times 20 Oct 07

Property booms, busts make economy vulnerable

SINGAPORE ECONOMIC POLICY CONFERENCE

Bubble cuts private spending, raises reliance on volatile foreign demand

PROPERTY price booms and busts make Singapore’s economic growth more vulnerable to volatile factors and should be prevented, an economist at a think-tank said here yesterday.

While the impact of a spike in property prices on overall GDP growth is ‘quite subdued’, a property price bubble causes private consumption expenditure to shrink, making the economy more dependent on foreign demand and business spending which are much more volatile, said Tilak Abeysinghe.

The deputy director of the Singapore Centre for Applied and Policy Economics (Scape) at the National University of Singapore, was speaking at the inaugural Singapore Economic Policy Conference organised by Scape at Four Seasons Hotel.

His team’s research found that while higher property prices spur construction investment, an accompanying dip in private consumption means overall economic growth does not change much as a direct result of property price inflation.

But the overall effect is still undesirable as it makes the economy far more dependent on business spending and foreign demand for its exports, both of which are more volatile than domestic consumption, he said.

The consumption expenditure share of Singapore’s GDP has fallen from more than two-thirds in 1997 to about 40 per cent today. ‘If consumption expenditure in Singapore falls further, GDP growth will be very vulnerable to external demand and investment demand,’ he said.

Research found that in contrast with economies such as the US, higher housing prices here do not seem to encourage more personal spending.

In Singapore, ‘housing wealth is relatively illiquid,’ he said. ‘You just can’t sell your house and move to a suburban house.’ This means the ‘wealth effect’ of housing price inflation seen in countries such as the US – when people spend more as the value of their homes rise – is much less noticeable in Singapore.

Also, ‘when housing prices go up, mortgage payments also increase, so people have less to spend on consumption,’ he said.

He believes policymakers here should ‘do their best’ to prevent a property price bubble because of its effect on private consumption spending and its tendency to widen the income gap between the rich and poor.

‘It should be possible’ to prevent another bubble from building by identifying the main cause of the recent run-up in property prices – likely to be people buying properties for investment rather than owner-occupiers – and introducing measures to dampen demand from this source, he said.

But he also cautioned against flooding the market with a vast supply of new homes, which could trigger a price crash and set the conditions for a new bubble.

 

Source: Business Times 19 Oct 07

No bubble in property market: NUS study

DESPITE Singapore’s red-hot property prices, no bubble is forming in the property market here, according to a study by National University of Singapore (NUS) economists.

In fact, the rise in home prices is below the market’s long-run ‘equilibrium’ level, based on factors such as income and property supply, preliminary findings of the ongoing study show.

In other words, the pace of housing price rises is still below the level that would be expected based on market fundamentals, according to the study conducted by a team led by Associate Professor Tilak Abeysinghe.

This is unlike the case in the early 1980s and mid-1990s, when property price inflation shot up above its longterm equilibrium levels, the study noted.

Early findings from the study, still a work-in-progress, was presented to a small audience at the Singapore Economic Policy conference yesterday.

House-price inflation is expected to hit 18 per cent this year, before easing to 13.7 per cent next year, and then to 3.2 per cent in 2009 and 3.4 per cent in 2010, the NUS team’s model predicted.

Factors used to determine the equilibrium price level include disposable income per person, housing stock and the new supply of property.

The study also found that it takes a long time for property price inflation to adjust to its long-run equilibrium.

And a rise in property price inflation would lead to a spike in construction investment a year or so down the road, but its effect fades after that.

The study concluded that price bubbles should be avoided, as they affect private consumption as well as income redistribution, among other things.

Prof Abeysinghe is the deputy director of the Singapore Centre for Applied and Policy Economics at the NUS, which organised yesterday’s meet.

The one-day conference also saw speakers examine issues ranging from fertility, migration and labour market trends, to CPF savings and the elderly.

The paper, entitled Singapore’s Property Market And The Macroeconomy, can be viewed at http://nt2.fas.nus.edu.sg/ecs/cent/ESU/conference.htm

 

Source: The Straits Times 19 Oct 07

Marina Bay’s key selling points

Its ‘live-work-play’ concept makes it an attractive location for home-buyers.

MARINA Bay is not just well on the way to becoming Singapore’s new financial hub, it is also shaping up as an attractive location for home-buyers.

Property analysts say that since the first residential project there – City Developments’ The Sail – was launched in late 2004, interest in the area has spiked, sending prices climbing.

Prices at The Sail averaged $970 per sq foot in 2004 after the project was launched in November that year.

But since then the average price – taking into account new sales, resales and sub-sales – climbed to $1,060 psf in 2005 and $1,300 psf in 2006, says Knight Frank’s director of research and consultancy Nicholas Mak.

And for the first nine months of 2007, units at The Sail went for an average of about $1,600 psf, he says.

He reckons prices could hit $1,800-$1,900 in about two years. The 1,111-unit development is fully sold.

‘The project was launched in 2004, which means it was just in time to rise on the property market upturn,’ he said.

Analysts say the upside for other residential projects in the area may not be as great because they were launched at higher prices. But they could still benefit from the ‘buzz’ now associated with the area.

Two projects have been launched since The Sail – Marina Bay Residences and One Shenton.

Marina Bay’s biggest selling point, analysts and developers agree, is its ‘live-work-play’ concept.

For one, office space there has been a huge hit with banking and financial institutions.

The top office draw at the moment is the massive Marina Bay Financial Centre (MBFC).

Two office towers in MBFC’s first phase will add about 1.7 million sq ft of lettable area when they come up in 2010. And the office tower in the second phase is expected to offer a further one million-plus sq ft of space.

Nearby One Raffles Quay, completed last year, has slightly over 1.3 million sq ft of office space.

In addition to this, the government has indicated that it intends to progressively release plots in the area.

Two parcels – known as Land Parcel A at Marina View and Land Parcel B at Marina View – will add at least 1.7 million sq ft of office space. Parcel A has been awarded, while the tender for Parcel B closes on Nov 13.

The authorities are also moving to increase the area’s vibrancy. And one eagerly anticipated project is Gardens by the Bay.

The waterfront is set to be home to three distinct gardens, each with its a unique look, the National Parks Board revealed last year.

The gardens will range in size from 10 to 54 hectares. It is estimated that $300 million-$400 million could be spent on them.

Perhaps most significantly, the $5.2 billion Marina Bay Sands integrated resort (IR) will come up in 2010 – significantly changing the look and feel of the place.

Besides drawing more tourists, the retail and F&B facilities at the IR could attract home buyers, market watchers say. All these goings-on have translated into greater local and foreign interest in homes in the area, analysts and developers point out.

‘We are seeing a keen appetite among investors confident in Singapore and interested in the live-work-play destination of Marina Bay,’ said Kan Kum Wah, head of residential marketing for Marina Bay Suites.

More residential projects are likely to be launched in the coming months.

For a start, Land Parcel A and Land Parcel B are ‘white’ sites, which means the successful bidders can use some of the gross floor area to build homes.

The Urban Redevelopment Authority is also setting aside some 60ha of land at Marina South for a landmark residential district.

Some 11,000 housing units are planned, with a mix of commercial, hotel and community facilities.

URA expects to start launching sites in the residential district within the next year, and interest is expected to be keen.

But the next project in the area to hit the market is likely to be Marina Bay Suites.

The 223-unit development, which is the second and last residential block at MBFC, will be launched early next year.

MBFC’s developers – Keppel Land, Cheung Kong Holdings/Hutchison Whampoa and Hongkong Land – expect strong interest in the project, as well as high prices, on the back of then-record prices achieved by Marina Bay Residences.

Last December, when Marina Bay Residences was launched, all 428 units were snapped up within days, with one penthouse fetching $3,450 per square foot (psf) – a record for private homes prices at the time.

‘Marina Bay Suites will be a fitting, even more upscale, sister development to the 428-unit Marina Bay Residences,’ said Mr Kan.

However, homes in the area still have some catching up to do before they reach the prices fetched by residential units in the traditional prime districts 9 and 10.

At Orchard Residences, CapitaLand and Sun Hung Kai Properties are said to have sold a penthouse on the 53rd storey for about $5,600 psf. In contrast, prices at Marina Bay have only hit $3,450 psf.

But home prices in the area could hit $3,500-$4,000, said Ku Swee Yong, Savills Singapore’s director of marketing and business development.

‘Once the casino is up – and perhaps with more traffic congestion due to the vibrant economy – younger high-flying execs in financial services, legal services, etc will come to appreciate inner-city living,’ Mr Ku said.

 

Source: Business Times 18 Oct 07

SingPower Building on sale for expected $990m

Market watchers say leasehold property likely to fetch $1,800 psf

THE office market can be expected to continue teeming with deals, with the latest offering said to be the Singapore Power Building behind Somerset MRT Station. The 30-year-old building, once known as PUB Building, is being marketed through an expression-of-interest exercise, BT understands.

Market watchers expect the leasehold property to fetch about $1,800 per sq ft of net lettable area (NLA), which works out to $990 million based on the 17-storey building’s NLA of around 550,000 sq ft.

SingPower Building, completed in 1977 and refurbished last year, is on a site with a remaining lease of 67 years.

The building is being put up for sale by owners SingPower and Public Utilities Board. The latter moved out earlier this year. SingPower occupies some 200,000 sq ft, while the rest of the space is leased to other tenants.

SingPower is expected to structure a deal to lease back the space it occupies from the new buyer Industry sources say SingPower Building’s existing gross floor area reflects a 7.0 plot ratio – the ratio of maximum potential gross floor area to land area. This exceeds the 4.9 plot ratio indicated in Master Plan 2003. The site area is about 110,000 sq ft.

However, there may be a possibility of redeveloping the property in the medium term by building a more efficient modern structure, after existing leases expire.

SingPower Building has two basements with a total of 530 parking lots. There is also an auditorium for public use.

The building was originally developed for $32 million. It was clad in silvery metal when refurbished last year.

The building was described as a ‘ground-scraper’ – two parallel slab blocks facing north and south connected by a lift and stair core – in an article in The Straits Times in August this year. Between the two blocks is a landscaped court.

If SingPower Building changes hands for around $990 million, it will be one of the biggest office deals so far this year, along with the $1.04 billion sale of Temasek Tower to a fund managed by Macquarie Global Property Advisors in March, and the sales of separate one-third stakes in One Raffles Quay to K-Reit Asia and Suntec Reit for $941.5 million each.

In late August, CapitaLand, IP Property Fund Asia and NTUC Income Insurance Co-op sold the leasehold Chevron House, formerly Caltex House, at Raffles Place, for $730 million or a record $2,780 psf of NLA. The buyer is understood to be a Goldman Sachs-linked fund.

The Goldman Sachs group is also understood to be finalising a deal to buy the next-door Hitachi Tower, a 37- storey office tower on a 999-year leasehold site facing Collyer Quay.

The price is expected to be around $3,000 psf.

Hitachi Tower is 50:50 owned by CapitaLand and National University of Singapore.

 

Source: Business Times 18 Oct 07

Sim Lian top bidder for Toa Payoh site

Its $38.23m bid for 99-year leasehold commercial site beats eight others

SIM Lian Development Pte Ltd yesterday put in the top bid of $38.23 million, or $847.54 per square foot per plot ratio (psf ppr), for a 99-year leasehold commercial site next to HDB Hub in Toa Payoh.

The company, which is not part of the listed Sim Lian Group, plans to develop a largely office project with groundfloor retail space, Sim Lian Development director Ken Kuik said when contacted by BT yesterday.

‘Our all-in investment could come in at about $55-57 million, with a breakeven cost of about $1,500 psf of net lettable area. We’re looking at a net yield of over 5 per cent when the project is completed in, say, two years’ time,’ Mr Kuik said.

‘That’s on the assumption that the average gross monthly office rent in the location could climb to about $8 psf by the time the project is completed. The retail space may fetch around $15 to $20 psf a month,’ he added.

The development, which could be around 10 to 15 storeys, will have about 37,000 square feet net lettable area.

Sim Lian Development plans to hold the development for long-term investment. The company is a private vehicle of the Kuik family that controls listed Sim Lian Group.

The tender for the 15,035-sq-ft site at Lorong 6 Toa Payoh attracted nine bids. Sim Lian pipped the second-highest offer of $37.34 million by Hersing Corporation by just 2.4 per cent. The other bidders were United Engineers Developments ($36.10 million), HSR International Realtors ($35.54 million), Evan Lim & Co unit EL Development ($23 million), Mr Sia Kong Wah ($20 million), Superbowl F&B Pte Ltd ($19.3 million), MV Land ($18.18 million) and Eng Wah Organisation unit Wah Pho with a bid of just $1.29 million, or $28.70 psf ppr.

Hersing Corporation, which narrowly missed out being the top bidder, had a scheme for an eight-storey complex for the site, not unlike Sim Lian’s, comprising ground-floor retail and offices above. ‘The offices might have been partly for our own use with the rest, along with the retail space, to be rented out,’ Hersing director Janice Chng said.

Hersing holds the master franchise for ERA for 18 countries in Asia-Pacific. The group’s other businesses include providing self-storage facilities in Singapore under the Storhub banner.

 

Source: Business Times 17 Oct 07

Hotel site at Sturdee Road put on reserve list

0.61 hectare plot can yield an estimated 430 hotel rooms

A HOTEL development site at Sturdee Road has been put on the reserve list of the Government Land Sales (GLS) programme.

The site is one of the four new hotel sites on the GLS programme for the second half of this year.

There are already five hotel sites on the reserve list, with two more expected by the end of the year.

The 0.61 ha site could go for between $430-$450 per square foot per plot ratio (psf ppr), it is reckoned by Donald Han, managing director at Cushman & Wakefield.

Mr Han noted that a white site at Race Course Road recently sold for $430 psf ppr in September. He said: ‘The Race Course Road hotel site may be located nearer to the MRT station than the Sturdee Road site, but hotel market sentiment is increasingly more optimistic now, judging from higher than expected bid prices for the Upper Pickering Street site.’

The site mentioned went to Hotel Plaza for $253.2 million or $805 psf ppr.

Other recent successful hotel site tenders include one on Tanjong Pagar Road/Gopeng Street awarded to Carlton Properties for $123 million, or $573 psf ppr in June. In July, a site at Tras Street went to businessman Chng Gim Huat of the CGH Group for $97.1 million, or $562 psf ppr.

The Sturdee Road site has maximum permissible gross floor area (GFA) of 18,334 sq m and can yield an estimated 430 hotel rooms.

A minimum of 60 per cent of the total GFA must be used for hotel rooms or hotel-related uses. The rest can be for commercial, and/or residential uses.

So far, the other hotel site put on the reserve list for H2′07 is at Jalan Bukit Merah/Alexandra Road.

The Urban Redevelopment Authority withdrew a hotel site at Balestier Road/Ah Hood Road from the reserve list this month.

About 9,100 new hotel rooms are expected to be completed from the second half of 2007 to 2010. This includes the supply of new hotel rooms from the two integrated resorts, Marina Bay Sands and Resorts World at Sentosa, which are expected to be completed in 2009 and 2010.

 

Source: Business Times 17 Oct 07

Keen interest in Toa Payoh commercial site

Plot in Lorong 6 draws nine offers; Sim Lian puts in highest bid of $38m

A SMALL commercial site in Toa Payoh has reaped an offer of $38.2 million after ‘aggressive’ bids by nine companies.

Sim Lian Development lodged the top bid for the 99-year leasehold plot in Lorong 6 but it was only a whisker ahead of its next closest rival.

Hersing offered $37.34 million for the 1,396.8 sq m plot, United Engineers Developments bid $36.1 million while HSR International Realtors came in with $35.5 million.

‘The bids are aggressive, which is reflective of current market conditions,’ said Mr Donald Han, managing director of Cushman & Wakefield.

Sim Lian’s bid works out to $847.5 per sq ft (psf) of potential gross floor area. It plans to build an office block to ride on the red-hot office market, which is seeing rising rents amid an acute shortage.

If it is awarded the site by the HDB, the firm – wholly owned by privately held Sim Lian Holdings – will proceed quickly.

Sim Lian Holdings director Ken Kuik said the company hopes to complete construction in two years, before more supply comes on stream elsewhere in Singapore. The first phase of the mega Marina Bay Financial Centre will be ready around 2010.

The block, which can be built up to a gross floor area of 4,190.4 sq m, could be 10 to 13 storeys with some retail shops on the ground floor, said Mr Kuik.

Office space will be aimed at smaller firms, particularly those forced out of the Central Business District (CBD), he said.

CBD buildings have been registering record rents and the sharpest increases recently.

‘It’s for long-term investment,’ said Mr Kuik. ‘We should be able to achieve rents of $7 to $7.50 psf on average.’ That is the level HDB Hub offices are commanding, he added.

Mr Han said: ‘If Sim Lian can rent out the space at about $7 psf, it would justify a net yield of about 4.5 per cent, which is the prevailing market yield for suburban offices.’ He added that further upside is likely.

Rental hikes in the office market have prompted more firms to consider cheaper locations further from town, in business parks or in other industrial space.

‘Suburban offices will continue to enjoy spillover demand,’ said Mr Han.

TPY Commerical Site 

 

Source: The Straits Times 17 Oct 07

Finance sector: future demand trends

The office space needs of financial institutions are changing globally. CHRIS ARCHIBOLD discusses how Singapore is rising to the challenge

THE financial services sector has seen unprecedented growth in Singapore over the last two or three years, both as a result of domestic growth and the influx of regional and global jobs into the market.

The accelerated growth, supply pressure and innovation in terms of workplace strategies are having a fundamental impact on the type, location and nature of property required by these financial institutions.

Jones Lang LaSalle’s Banking and Finance Industry Group has done much work studying the drivers behind the occupational strategies of this sector, some of which will be covered here. Additionally, we have looked at the pivotal role that the city’s office stock will play in maintaining the inflow of investment in this sector.

In the last 20 years, the defining trends in financial markets have been globalisation in the wake of deregulation and liberalisation; growth of markets resulting from demand due to greater securitisation, privatisation policies and developments in emerging markets; and the impact of technology. These trends, in turn, have led to innovation in products and services and to intense competition between financial centres – and firms within those centres – to capture cross-border trade.

Deregulation: The sector has experienced unprecedented levels of change in the last decade. Historically, it could be characterised as a series of highly regulated government monopolies. While this is changing, deregulation is happening faster in the West than the East. In addition to deregulation, which has resulted in increased competition (foreign and domestic), changing consumer demands and improvements in technology have been the key drivers of change.

Globalisation: The sector is going through a spate of mergers and acquisitions (M&A) as banks build global platforms critical to the success of organisations wanting to compete in the global marketplace.

Technology: The technology revolution has enabled the e-banking age, resulting in significant changes in retail banking. This impacts the need for physical branch space (auto lobbies, etc) and associated staff. Technology has also changed bank processing, enabling many tasks to be executed electronically and, often, remotely in a different part of the world where costs are lower.

Within office accommodation and portfolios, economies are being sought through:

• The consolidation of functions to decentralised locations

• Selection of cost-efficient locations

• Appropriate adjacencies

• Improved technical reliability/performance.

  Corporate banking has high margins and is a client- driven business. It therefore prefers proximity to its client base and is likely to retain its core CBD presence. Exceptions to this may occur where high-specification buildings are available at a rental discount to the traditional city core.

Front office presence

As cost becomes a stronger driver, particularly in the current economic environment, banks are challenging how much corporate and investment banking needs a front office presence.

In recent years, there has been an increasing trend globally to decrease the percentage of ‘front office’ accommodation situated in expensive downtown locations. Many traditional non-client-facing functions have been relocated to the city fringe or decentralised locations for a number of reasons:

• Lower cost

• Control of dedicated facilities and consolidation into one ‘campus’-style location (hence promoting synergies between business units)

• Convenience and amenities for staff.

  The relative split between front and back office accommodation varies significantly depending on the bank involved although current ‘best practice’ is considered to be 60 per cent back and 40 per cent front office. This split often varies more towards the front office in the case of a global or regional headquarters.

  Our benchmarking analysis undertaken on some 40 banks and financial services companies globally indicated the following trends in respect of front and back office splits:

• North American and European-based companies traditionally have a higher decentralised component.

• The impetus to move was primarily due to availability of better-quality buildings with cost savings being ranked second.

• Staff amenities and facilities were a major issue.

  Providing a higher percentage of decentralised facilities is becoming a major priority for Asian-based banks as infrastructure and technology improve.

  Recent technology and globalisation trends have impacted the real estate requirements of large banks (and other corporations). In general terms, the requirements are grouped into a range of location, design, occupancy and tenure considerations. A number of core objectives of large banks include:

• Flexibility and ability to accommodate rapid growth

• Building design that promotes workplace flexibility, efficiency and interaction between employees

• Cost-effectiveness and cost certainty

• Security.

  Flexibility has become a key issue for large financial institutions, particularly in the last five years, as market cycles, economic conditions and M&A activity demand industry participants to be quick in reacting to change.

Flexibility

One of the greatest challenges is the rate of change, the unpredictability of space requirements and the ongoing need to manage costs. As a result, the emphasis in planning administrative office portfolios has shifted to a need to plan for flexibility. This is manifested in a number of ways:

• Standardising modules of space, providing structured IT and services infrastructure that allow the relocation of ‘people, not desks’.

• Providing exit strategies for buildings, whether owned or leased as well as considering both local market leasing practices and financial considerations, and also depending on the nature and criticality of the functions housed therein.

• Providing strategy for rapid growth, especially in supporting unpredictable but rapid growth of new delivery channels.

  The style and design of accommodation has over the last 5-10 years has become increasingly important, as occupants realise the impact it has on staff retention, a cooperative working environment and flexibility.

  Workplace planning and strategy is a huge topic and issue in its own right. Recent trends and design consideration will likely be investigated during an exploration of occupier objectives.

  Singapore has some of the most reliable infrastructure within Asia and is fully able to support centralised facilities.

  This benefit of putting this infrastructure in place has been demonstrated by the massive influx of investment by financial institutions over the last two years.

  The latest Grade A office development, One Raffles Quay, serves as a excellent barometer of this expansion activity. Analysis of the occupancy of this development shows that over 80 per cent of the space is leased to financial institutions and over 60 per cent of this take-up is expansion space.

  To date, much of the activity has been centred in the core CBD area and while we expect to see more of this over the next 12-18 months we are also predicting that many of the major financial institutions will turn their attention to splitting their operations and growing their back office operations. The reasoning behind this prediction is as follows:

• We now have significant real estate cost differentials between the CBD and decentralised locations. In some locations, rents are only 25 per cent of Grade A CBD core rents.

• Rental fluctuations in many back office locations are very low (in dollar terms) compared to CBD locations and therefore afford the occupiers more cost certainty, which aids business planning.

• Many of the banks have reached critical mass (in terms of area occupied) making a front office/back office split a viable option.

• Some locations afford the occupier the opportunity to enter into a build-to-suit, giving total control over the type of environment created.

• Current island-wide supply is limited. Build-to-suit back office premises can be constructed within tight timelines, some as short as 18 months.

  There are a number of companies currently looking at their back office portfolio and while they are considering a number of potential locations, many are focusing their attention on Changi Business Park and the HarbourFront/Alexandra area.

  Banks appear to be moving to more ‘campus’-style buildings for their back offices with larger floor plates that encourage business unit interaction. The real drivers in location selection are expected to be the quality of specification, design of available floor plates/buildings, and the ability to attract and retain quality staff at competitive salaries.

   

  Source: Business Times 16 Oct 07

Six Prudential Tower floors sold for $141m

Owner Prudential to be paid in units of property fund

PRUDENTIAL Assurance Company Singapore is said to have sold six of the seven office floors it owned at Prudential Tower to a property fund for $141 million in exchange for units in the fund. The transacted price works out to just under $2,100 per square foot based on a net lettable area of about 67,000 square feet.

However, based on a total floor area of about 72,200 sq ft, the $141 million price works out to a lower $1,952 psf.

Prudential Assurance bought seven floors in the development in early 1996 for $183 million, or $2,200 psf, but according to media reports at the time, the psf price was based on a total floor space of 83,000 sq ft. The net lettable area was not reported.

Nevertheless, the price at which Prudential has sold the six floors (the 20th to 25th levels of Prudential Tower) appears to be lower than its 1996 acquisition price, which set a benchmark for office space which held until this June, when 1 Finlayson Green was sold for around $2,650 psf of net lettable area.

Prudential Assurance Co Singapore is said to have sold the six floors to the fund in exchange for units in the fund.

After the latest transaction of the six floors at Prudential Tower, Prudential Assurance is said to be left with the 30th floor of the building.

The buyer of the six floors in the transaction, concluded this August, was the open-ended Asia Property Fund, sponsored by LaSalle Investment Management and PruPIM. Prudential Assurance Co Singapore and PruPIM are part of the Prudential UK group.

‘In terms of a conflict of interest arising from a related-party transaction, LaSalle Investment Management conducted the acquisition process and PruPIM abstained from any voting on the acquisition,’ LaSalle regional director Marc Montanus said when contacted by BT. ‘The pricing was also supported by third-party valuation.’

Discussion on the acquisition is said to have begun 11/2-years ago.

LaSalle and PruPIM yesterday announced the completion of three acquisitions totalling a gross investment of over US$1.4 billion by the Asia Property Fund, including the six floors at Prudential Tower, although the quantum of the Singapore deal was not specified. ‘There is significant potential for the fund to realise immediate value by increasing the existing rents to much higher market levels,’ LaSalle and PruPIM said in their news release.

The other two assets bought were a 50 per cent interest in Westfield Doncaster mall being redeveloped in Melbourne by Westfield Group, and Tennoz First Tower, an A-Grade office block in Tokyo’s Shinagawa ward.

 

Source: Business Times 16 Oct 07

DBS weighing up mega lease deal at posh new address

Bank eyeing phase 2 of Marina Bay Financial Centre

(SINGAPORE) It could be Singapore’s biggest office leasing deal ever – if it gets sealed. DBS is said to be in advanced stages of negotiating to lease up to one million sq ft at Marina Bay Financial Centre’s (MBFC’s) phase 2.

If concluded, this could put into the shade the deal for 508,298 sq ft that Standard Chartered Bank signed in April for MBFC’s phase one, which will be ready in the first quarter of 2010.

The second phase of the project, slated for completion in late 2011, includes a high-rise tower that will have around 1.4 million sq ft of office space. DBS is expected to pay a gross monthly rental of around $10 per square foot, according to industry players.

Stanchart’s lease inked earlier this year reflects an effective rent of about $8 psf, they added.

BT understands that the exact quantum of space that DBS will take at MBFC’s second phase has not been finalised and it may well be less than one million sq ft if the bank decides that it makes more economic sense to find some cheaper space elsewhere. One million sq ft is roughly three quarters of the office space at One Raffles Quay, which was completed last year.

Sources say that in addition to MBFC’s phase 2, DBS is scouting for around 300,000 sq ft of space for backroom operations. Sources tipped Changi Business Park as being the most likely candidate, although Alexandra Distripark, which is being transformed into a business park, may also be a contender.

Currently, some of the bank’s backroom operations are housed at a building within the Alexandra Distripark complex, called The Comtech, where DBS occupies about 100,000 sq ft. The bank also leases more than 100,000 sq ft for backoffice functions at Technopark @ Chai Chee.

In the Central Business District, DBS’s operations are housed primarily in leased premises at DBS Building Towers One and Two on Shenton Way, and at PWC Building at Cross Street. The bank owns a stake in the latter property and is said to occupy about 100,000 sq ft there for its asset management and stockbroking businesses. It is believed to occupy about 600,000 to 700,000 sq ft at DBS Building Towers One and Two. The bank used to own the towers until it sold them to a Goldman Sachs real estate fund in late 2005 and leased back the space it occupied for an initial eight-year term with options for renewal.

The initial lease term will expire around late 2013 which suggests a period of overlap with the lease the bank is negotiating for MBFC phase 2. ‘It makes sense for DBS to move to MBFC in the more prestigious Marina Bay location as this will be Singapore’s new financial district and where many major foreign banks will have a presence,’ an industry observer noted.

MBFC’s Phase 2 will comprise the Marina Bay Suites residential project, slated for launch early next year, and the high-rise office tower where DBS is negotiating to be anchor tenant and which is expected to have about 1.4 million sq ft of offices.

The project’s first phase comprises the Marina Bay Residences and two office towers, 33 storeys and 50 storeys high with about 1.6 million sq ft of net lettable area.

 

Source: Business Times 16 Oct 07

URA to woo Mid-East investors at int’l event

It will sell S’pore as destination for real estate investments at Cityscape Dubai

THE Urban Redevelopment Authority (URA) will sell Singapore as a destination for real estate investments to Middle East investors at Cityscape Dubai, an international property event.

URA director of land administration Choy Chan Pong said that it was important for Singapore to participate in such events. As an example, Mr Choy highlighted the recent sale of a development site at Beach Road to a consortium which included Middle East-based Istithmar Group.

‘URA had met with Istithmar at last year’s Cityscape Dubai and presented them with the exciting investment opportunities we have in Singapore including the prominent Beach Road site,’ Mr Choy said.

The site in question was sold to Istithmar Group, El-Ad Group and City Developments Ltd for $1.7 billion last month.

Mr Choy said: ‘Singapore’s participation in Cityscape Dubai, hence, allows us to meet with potential investors and developers face-to-face, enabling them to better understand what Singapore has to offer.’

A Singapore Pavilion has been set up at the event for the first time.

The public and private sector organisations exhibiting in the Singapore Pavilion include the URA, Singapore Tourism Board (STB), Building and Construction Authority (BCA), Marina Bay Financial Centre, Lend Lease Retail, Ong & Ong Architects and the Singapore Institute of Architects (SIA).

The URA will showcase Marina Bay, an area which has already attracted around $15 billion worth of investments from international developers including the Marina Bay Sands Integrated Resort, prime commercial developments such as One Raffles Quay, Marina Bay Financial Centre as well as high-quality residential developments.

The STB will be showcasing some of the changes and transformation to the tourism landscape, highlighting tourism zones including Orchard Road and the Southern Waterfront.

BCA will exhibit its mission to develop a quality built environment in Singapore. BCA International, a consultancy company by BCA, will also be present to provide multi-disciplinary construction related consultancy to both public and private agencies in the Middle East.

Cityscape Dubai is being held from today to Thursday.

 

Source: Business Times 16 Oct 07

Tanglin Village proves hot property for businesses

Offers flood in for two recently released plots, with top rental offer at five times the guide rent

TANGLIN Village, the latest lifestyle hot spot in town, is drawing massive crowds to its range of newly opened shops and restaurants.

And where consumers and foodies flock, so do business people. They have descended on the prime Dempsey Road enclave in a bid to clinch the remaining pieces of land.

Tanglin Village’s short-term leases – usually for three years, as the land is slated for residential use after 2015 – have not deterred tenants, said the Singapore Land Authority (SLA). It said businesses are confident of reaping most of their investments in the first three years.

Offers have poured in for two Tanglin Village plots released recently, said the SLA, which is managing the development.

A former chapel site at 39C Harding Road drew a record 23 bids when its tender closed last month. The top rental offer was $56,000 a month – five times the guide rent, SLA said.

It was put in by Ponte & Partners, the Singapore-based firm that brought in German brewery Paulaner Brauhaus at Millenia Walk.

The Harding Road property, which has a gross floor area of 4,456 sq ft, is safeguarded for conservation. It sits on a 43,172 sq ft plot.

Most of the other bidders for the site were also from the food and beverage industry, including Da Paolo Ristorante Italiano, Palm Beach Seafood and Select Catering Services.

A second site, at 45 Minden Road, was similarly popular with 15 bidders lodging offers. The highest was $51,000 a month, or more than double the $22,000 guide rent.

It came from the Siam Silk Company, a unit of Thailand’s Thai Silk Company, which was founded by the renowned Jim Thompson.

If it is awarded the 30,631 sq ft property – which has 10,156 sq ft of gross floor area – the firm plans to open a Jim Thompson Thai restaurant and wine bar, said Mr Steve Benhar, corporate counsel for the Thai Silk Company. The eatery will feature private indoor dining and a garden bar.

The strong response to the two sites is testament to how hot Tanglin Village has become in recent months.

A year ago, a building with 13,000 sq ft of gross floor area drew only 11 rental bids – the highest just $23,000 a month. Oosh, an alfresco bar and restaurant, is now operating at the site.

Earlier this year, some 27 sub-tenant businesses faced the prospect of being evicted when their master tenant, Tanglin Warehouse, fell behind in its rental payments to the SLA.

This was averted after Tanglin Warehouse settled the arrears in full.

And things have picked up quickly since then. In the last six months, 25 firms have set up shop in the area, according to the SLA.

Their offerings run a wide gamut, from restaurants and shops to education and entertainment centres. Some tenants even use the space for offices.

The burst of activity has brought occupancy at Tanglin Village to more than 70 per cent, said the SLA’s chief executive, Brigadier-General (NS) Lam Joon Khoi.

‘Tanglin Village tenders so far have attracted a number of entrepreneurs to build their dream businesses,’ he told The Straits Times.

To better serve these tenants and their customers, the SLA intends to review ‘basic infrastructural improvements’, such as road paving, lighting and utilities, BG Lam added.

More tenants, including an international school, are also expected to make their homes in the area soon.

It is also understood that a brewery will open, as well as an Italian restaurant and an outlet for the Long Beach Seafood restaurant chain.

Tanglin Village’s success has spurred the SLA to examine uses for other enclaves such as Keat Hong camp in Choa Chu Kang – a former Singapore Armed Forces camp – and Phoenix Park in Tanglin Road, the former headquarters of the Home Affairs Ministry.

Tanglin Village

Source: The Straits Times 13 Oct 07

Investment property sales jump 94% to $15.7b

INVESTMENT property sales nearly doubled, touching $15.69 billion, in the third quarter, reflecting buoyant investor sentiment.

This was 93.9 per cent higher than the $8.09 billion recorded in the same period last year, a new report by property consultancy CB Richard Ellis (CBRE) showed yesterday.

Most investment sales – 64.3 per cent, or $10.1 billion – came from the private sector, while public sector land sales made up 35.7 per cent, or $5.6 billion.

For the first nine months, major property deals worth $40.95 billion already exceed last year’s full-year value by 34 per cent, said CBRE.

In the third quarter, the office sector was the top performer, accounting for 43.5 per cent, or $6.83 billion, of major property deals – more than quadruple the $1.37 billion in the previous quarter.

Prime office rents also topped the 1990 historical peak of $11.50 per sq ft (psf) per month to hit $12.60 psf per month, up 82.6 per cent year-on-year.

CBRE expects occupancy levels to stay in the range of 91 per cent to 95 per cent for the next five years, even as more office space is built.

The third quarter also saw a rise in industrial property rents, except for warehouses.

The office space crunch has led to more demand for high-tech space, which has risen 8.5 per cent to $2.55 psf, and is set to reach $2.75 psf by year- end, said CBRE.

Its rental statistics are based on a selected basket of prime office buildings.

The Urban Redevelopment Authority said yesterday that its third-quarter statistics will be released by monthend, and will be more comprehensive as it is based on the tax records of all rental transactions in the quarter.

CBRE has also forecast that a record $50 billion in investment property sales would be completed by year-end.

 

Source: The Straits Times 12 Oct 07

Sing Holdings sells EastGate units for $63m

A DECISION to focus on the booming residential property market has seen Sing Holdings sell off 48 commercial units in its EastGate building for $63 million.

The 10-storey EastGate, developed by Sing Holdings, received temporary occupation permit (TOP) status in 1998 and is located along East Coast Road and near Marine Parade Central.

Of its 52 units, four were sold before TOP. Sing Holdings said yesterday that it had decided to sell off its remaining units to focus on residential property.

Managing director Lee Sze Hao said in a statement: ‘The divestment of EastGate is in tandem with the company’s current business model of focusing on residential property development.

‘With the appreciation in values of commercial space, we believe that it is now an opportune time to unlock the value of EastGate.’

The units are being sold to Develica Asia Pacific, a wholly owned unit of Develica Asia Pacific Management, which invests in regional commercial real estate.

Develica chief executive officer Chris Brown said: ‘This is an excellent acquisition as it allows us to tap into the decentralisation of office operations out of the central business district due to the rise in rentals there.’

The sale price works out to about $1,059 per sq ft based on a net saleable area of 59,491 sq ft.

Sing Holdings will reap a net gain of some $15.9 million from the sale, which is expected to completed on Dec 13.

It intends to use the proceeds to pursue opportunities to expand its land bank for residential property development projects. The sale was brokered by Savills Singapore.

 

Source: The Straits Times 12 Oct 07

UOL unit is top bidder for hotel site

It bids $253m for Upper Pickering plot with plan including Soho units

UOL Group subsidiary Hotel Plaza plans to develop small office, home office (Soho) units as well as a 350-400 room hotel on a choice plot at Upper Pickering Street, for which it emerged as the top bidder at a tender yesterday, UOL Group chief operating officer Liam Wee Sin said yesterday.

Hotel Plaza’s top bid of $253.2 million or $805 per square foot of potential gross floor area was 21 per cent higher than the next highest offer of $209 million ($664 psf per plot ratio) from a unit of Park Hotel Group.

The highest of the nine bids at yesterday’s state tender for the hotel site was also at least 40 per cent higher than the prices paid for two hotel sites along Tanjong Pagar Road awarded recently, CB Richard Ellis noted.

Market watchers suggest UOL/Hotel Plaza’s scheme to include Soho units may have given it the edge in outbidding the other contenders at yesterday’s tender. Besides Park Hotel unit Park Plaza, other bidders were:

• City Developments’ unit Glades Properties ($201.8 million);

• Hiap Hoe Superbowl JV ($185 million);

• Hotel Properties’ unit Op Investments ($161.08 million);

• Ho Bee Investment & Multi Wealth Singapore ($153.53 million);

• Amara Holdings & Garden City Hotel Holdings ($151.89 million);

• AAPC Hotels Singapore ($150 million);

• and Soilbuild Group Holdings ($128.82 million).

  Analysts estimate that UOL/Hotel Plaza’s all-in investment in the project (including land and construction) may be around $400 million. The longish plot, with a frontage of about 200 metres along Upper Pickering Street, is right across the road from Hong Lim Park and diagonally opposite One George Street.

  ‘We’re likely to build the hotel on the side closer to One George Street while the Soho tower will be on the other stretch of the plot facing Chinatown Point and Furama,’ Mr Liam said yesterday evening when contacted by BT.

‘The Soho tower may be about 16 to 20 storeys high and will have about 120-150 units, mostly studio units of about 60-80 sq metres (646 to 861 sq ft) each. We may sell the Soho units or just decide to keep them for lease.

‘The hotel is likely to be 16 storeys high and will have about 350-400 rooms. Hotel Plaza will most likely flag it as a Parkroyal. In fact, this will be the flagship Parkroyal hotel in Singapore when it is completed around 2011,’ Mr Liam said.

However, hotel industry watchers pointed to the possibility that the group has the option of targeting a higher tier of the market and flagging the new property as a Pan Pacific hotel, since UOL recently bought this brand.

Industry observers said the Upper Pickering Street site is probably one of the choicest plots allowed for hotel development to have been released by Urban Redevelopment Authority in recent years other than the former NCO Club site in Beach Road.

Hotel Plaza owns two other hotels in Singapore – Parkroyal hotels at Beach Road and Kitchener Road – while UOL directly owns 100 per cent of The Negara on Claymore and has an interest of about 30 per cent in Marina Centre

Holdings, which has stakes in the Pan Pacific, Oriental and Marina Mandarin hotels here.

 

Source: Business Times 11 Oct 07

Office block flipped 3rd time over past year

Dapenso Building sold for $120m, double December’s price tag of $58m

(SINGAPORE) The Dapenso Building, a nine-storey office block in Cecil Street, seems to have changed hands three times in the past year, with ownership recently passing to home- grown property outfit KOP Capital under a deal said to have valued the building at just below $120 million.

This is about double the $58 million the property was sold for in December last year, which itself was more than twice the sum it sold for previously.

KOP Capital declined to confirm the cost of its recent acquisition, which it said it effected by purchasing shares in East Coast (Cecil) Investment Pte Ltd, which took control of Dapenso Building in June this year.

KOP managing director Ong Chih Ching told BT her company plans to spend about $80 million on additions and alteration works at Dapenso Building, adding about four-and-a-half storeys that will result in a 14-storey building with a roof terrace, two basement carparks and a net lettable area of about 113,000 sq ft, which KOP will lease out.

‘This will be a stylish office development, inspired by the Louis Vuitton outlet in Omote-Sando in Tokyo,’ she said.

The plot is zoned for commercial use with an 11.2 plot ratio.

KOP’s all-up investment of about $200 million works out to almost $1,770 psf based on the proposed net lettable area of 113,000 sq ft. Work will start in Q1 next year and is expected to take about 15 months.

Ms Ong, a lawyer by training, runs KOP with her fellow shareholder and executive director Leny Suparman. A third shareholder, another lawyer, is a silent partner.

In August, a KOP Capital-Hwa Hong joint-venture bagged URA’s maiden transitional office site next to Newton MRT Station. Since then, Dubai Investment Group has joined the consortium, taking a 45 per cent stake, leaving Hwa Hong and KOP with 50 and 5 per cent stakes respectively, according to an announcement by Hwa Hong last week.

The all-up investment in the project is expected to be about $90 million and the four-storey office development, with about 150,000 sq ft net lettable area, is expected to be ready in the second half of next year.

KOP also has an equal joint venture with Emirates Tarian Capital, a unit of Emirates Investment Group, which is developing two luxury residential projects in Singapore – the 58-unit Ritz Carlton Residences in Cairnhill on the former Horizon View site, and a 56-unit project on the former Hotel Asia site in Scotts Road. The latter project will feature two carpark lots housed within each apartment.

Ritz Carlton Residences is slated for launch next month while the Scotts Road project will come on the market early next year.

Ms Ong says KOP is keen on more projects in the residential and office sectors in Singapore. ‘We shall continue to look for more office blocks that we can upgrade to trendy, boutique offices, but we’re also interested in investing in bigger office towers in the CBD that may not require much sprucing up,’ she said.

Earlier this month, KOP bought East Coast (Cecil) Investment Pte Ltd, a company formed in June this year by Alvin Ng and Kim Seng Holdings to purchase Dapenso Building, for $96 million from Remarkable Investment.

Remarkable, believed to be linked to Hong Kong investors, bought the building in December last year for $58.4 million from Hotel Royal, which bought it in 2004 for $27 million from Bank Negara Indonesia.

 

Source: Business Times 11 Oct 07

Rising rents are now a business challenge

Demand and supply mismatch has caused office rentals in the CBD to skyrocket

OFFICE rentals in the Central Business District (CBD) have been climbing relentlessly as a result of the demand and supply mismatch. Conversion of buildings for residential use and the redevelopment of ageing office blocks such as Ocean Building and Overseas Union House further exacerbate the office supply crunch.

The high demand for office space, which is propelled by financial institutions and business services, continues to drastically outpace new supply. During the first half of this year, supply of office space decreased by about 290,000 sq ft due to the conversion of office space for other use. As a result, the market could not keep up with the 1.29 million sq ft of new demand.

The islandwide occupancy rate for office space rose to a 10-year high of 92 per cent, while Grade A office space in the CBD stood at an almost full occupancy rate of 99 per cent.

In a bid to ease the current office supply crunch, the government has came up with ’stop-gap supply-side’ measures such as disallowing the conversion of office space for other uses until the end of 2009, releasing more land for office development under the Government Land Sales programme, as well as offering vacant government buildings for lease as offices.

As most of the major office developments such as Marina Bay Financial Centre (MBFC) will only be ready from 2009 onward, the demand-supply imbalance will continue for the time being. Rental hikes for better quality office space are expected.

Those that are feeling the heat are the smaller and medium-sized companies – both local and multinational corporations (MNCs). They have been leasing prime office space in the CBD area and are caught out by the spike in rentals. To them, coping with rising rentals represents a genuine business challenge.

Despite escalating rentals, foreign investment banks continue to snap up large office floor plates for expansion or relocation of their global operations hub. These financial institutions are eager to set up new offices in Singapore to meet the demands of Asia’s unprecedented growth in wealth management. One example is Standard Chartered Bank, which signed one of Singapore’s largest office-leasing deals in April. It leased about half a million sq ft of office space, equivalent to 24 floors at MBFC that is slated for completion in 2010.

Major office projects under development and expected to be up in the market in 2007 and 2008 include VisionCrest, Wilkie Edge, 200 Newton and Merrill Lynch Harbourfront, which is already fully leased.

Amid the current office property boom, one can still find cost-effective commercial rental options.

The Singapore Land Authority (SLA) has been releasing vacant state properties and putting them up for lease as offices. A few successful bidders have refurbished the existing sites for renting out to corporate office users. The current rental for these space ranges between $4.00 and $8.50 per sq ft (psf).

Closer to the CBD, 150 Cantonment Road and 341 River Valley Road are expected to be ready for occupation in the final quarter of this year. 150 Cantonment Road has a smaller floor plate of about 6,800 sq ft per floor, while 341 River Valley can cater to tenants which need floor plates of about 50,000 sq ft.

Another spot of interest is the former ITE Pasir Panjang site at 991 Alexandra Road. This site, largest of all the properties released by SLA, can be converted into eight modern low-rise office blocks ranging from one to four storeys and offices ranging from 5,000 sq ft to 41,000 sq ft. Capitalising on the size, the successful bidder, Richzone, plans to create a self-sufficient office environment, complete with cafe and gym, decorated with a lush landscape that is different from a typical city office. This property will be ready for occupation in the first quarter of 2008.

On the other hand, some companies have decided to renew their contracts at higher rents. To cope with expansion, they have to rearrange their office space by reducing the size of workstations and/or decreasing filing space.

Others opt for relocation, even though it is a less preferred choice, in which a number of them split their operations - the main office remains in the CBD while operation personnel are relocated to the fringe areas or regional centres.

Wrapping up, rising office rental is a by-product of a buoyant economy. Operating costs are certainly higher as a consequence but so are more opportunities to generate revenue. At the end of the day, the effects of the existing office supply crunch are only short-term and they will ease as developments begin to come on stream. In the meantime, companies can help themselves by exploring all possibilities, and the good news is that cost-effective rental options are not lacking.

 

Source: Business Times 11 Oct 07

Upper Pickering hotel site attracts record bid

A HOTEL site at Upper Pickering Street has drawn strong interest from developers, with the highest bid being a record one for such a property.

Nine bids had been submitted when the tender closed yesterday.

The top bidder – mainboard-listed Hotel Plaza – put in a price of $253.2 million for the 6,959 sq m site. Given the gross floor area of 29,227 sq m, this works out to about $805 per sq ft per plot ratio (psf ppr).

Hotel Plaza is developer United Overseas Land’s hotel arm.

Hotel Plaza’s bid was 21 per cent higher than the second-highest bid of $209 million, or $664 psf ppr, placed by Park Plaza.

The record bid is at least 40 per cent higher than the prices paid for two hotel sites on Tanjong Pagar Road that were awarded recently, said CBRE Research’s executive director, Mr Li Hiaw Ho.

In June, a hotel site on Tanjong Pagar Road and Gopeng Street was awarded to Carlton Properties for $123 million, or $573 psf ppr.

A month later, the Urban Redevelopment Authority (URA) awarded a hotel plot on Tras Street to businessman Chng Gim Huat of the CGH Group for $97.1 million, or $562 psf ppr.

‘The prevailing optimistic mood in the hotel and tourism markets could account for the record-high prices submitted for the Upper Pickering Street site,’ said CBRE’s Mr Li.

The 99-year leasehold site, launched for sale by the URA on July 18, is located in an ideal spot – at the junction of New Bridge Road and Upper Pickering Street and at the edge of the Central Business District – to cater to business travellers, said Mr Li.

Besides Hotel Plaza and Park Plaza, there were seven other bidders, including Hiap Hoe Superbowl and Ho Bee Investment.

Hotel Plaza currently owns and operates the 350-room Plaza Parkroyal, the adjoining The Plaza and the 337-room Grand Plaza Parkroyal Hotel, among others.

The group also has interests in hotels overseas.

The URA said yesterday that the bids will be evaluated and that the decision on the award will be made later.

 

Source: The Straits Times 11 Oct 07

Reality bites Resorts World at Sentosa

MARK Burnett – creator of reality TV shows like Survivor and The Apprentice – has tied up with Genting International to produce TV and game shows for the region.

Speaking at a tele-conference yesterday, US- based Mr Burnett, president and founder of Mark Burnett Productions, said that filming for the first show could begin as early as next year.

Based at Resorts World at Sentosa, the firm will use the resort’s attractions and facilities for some of its productions.

A joint-venture company called Mark Burnett Productions Asia (MBPA) will be formed, with the two partners holding equal equity and investing up to US$20 million together.

The two partners were brought together in June by the Singapore Economic Development Board (EDB).

Manohar Khiatani, assistant managing director of EDB, said: ‘This decision underscores the attractiveness of Singapore as a location where leading media content owners create and manage their intellectual property assets.’

He said MBPA would reinforce the government’s efforts to build Singapore into an international media hub.

Mark Burnett International and Genting International will team up on a 10-year exclusive partnership to develop, produce and distribute reality TV series and game shows for the region. The partnership covers all of Asia except Japan and the Middle East.

Mr Burnett said: ‘We’ve been doing business in and around Asia since our company was founded and we’ve been looking at ways to do more in this massive market.’

Besides producing TV for Asia, MBPA will hold an exclusive licence to produce and distribute these programmes to multiple media platforms that range from broadcast, the Internet and mobile television.

The company will also develop original TV shows for Asia that will be licensed for format productions worldwide.

Mark Burnett Productions has already made forays into other markets. Scot Cru, executive (international), Mark Burnett Productions, said: ‘Having recently launched Mark Burnett Productions France, this is a natural evolution of our worldwide brand.’

He added: ‘The fact that this deal was fast-tracked and took a very short time to negotiate is evidence of both companies’ recognition that it is a partnership that both companies felt was a no-brainer.’

 

Source: Business Times 10 Oct 07

Shophouses in the CBD for sale

A BLOCK of 13 conservation shophouses in Telok Ayer and Boon Tat streets is for sale through an expression-of-interest exercise at an indicative price of $67 million.

This works out to about $1,200 per square foot based on the gross floor area of some 56,000 square feet.

The shophouses are on land that totals 16,987 sq ft and have 999-year leasehold tenure from 1884.

They are zoned for ‘commercial’ use, but Ho Eng Joo, executive director (investment sales) at marketing agent Colliers International, believes that the buyer could amalgamate the interiors into a single large floor plate to achieve greater space efficiency. This would make the property suitable for creative companies such as advertising or design agencies or for financial and professional services firms.

‘The tight office supply and the surge in office rents have resulted in an increasing number of tenants seeking alternative commercial space such as shophouse units, as well as investors looking for well-located shophouse units for investment,’ Mr Ho said.

He estimates the current yield to be around 2.5 per cent. The first storey of the shophouses is now used mainly by food and beverage outlets, while the upper storey is occupied by office tenants.

Mr Ho reckons the potential yield could be 5-5.5 per cent based on rent of about $5.50 psf per month.

It is rare for so many shophouses to be offered in one transaction. The recent sale of three shophouses in Ann Siang Road for $28.8 million worked out to $1,519 psf over their floor area.

Mr Ho said that most shophouse transactions involve individual units. A shophouse in Amoy Street was recently sold for about $1,100 psf, he said.

 

Source: Business Times 10 Oct 07

Retail rents rise in Q3 but retail sales at a high

Some shops expand even as rents rise, others more sensitive to psf sales

(SINGAPORE) Rents for shops on Orchard Road may have increased by another 12 per cent in the third quarter to $44.30 per square foot (psf) per month, but retailers are unfazed, especially as the latest figures show that the second quarter of this year saw the strongest sales for 10 years.

According to a report by property consultancy Knight Frank, retail sales value (excluding motor vehicle sales) in the second quarter hit a 10-year high of $8.15 billion.

The figure for the quarter was also an improvement on the previous interim high of $7.8 billion seen in the final quarter of last year.

Not surprisingly then, rising rents in the Orchard Road vicinity as well as the Marina area, where rents increased by 3.7 per cent quarter-on-quarter (q-o-q) to an average $28.90 psf per month, are not upsetting retailers too much.

Knight Frank director (research and consultancy) Nicholas Mak says: ‘With the planned revitalisation of the Orchard area, retailers are optimistic that their retail sales figures are able to offset the increase in rentals.’

Knight Frank also expects full year figures to hit a record high, pointing out that at end-July 2007, total sales figures already stand at $18.4 billion compared to $29.5 billion for the full year of 2006.

Nash Benjamin, the CEO of FJ Benjamin, which owns Guess, Gap and Celine here, has noticed that rents have been rising but he says: ‘The bottom line is whatever rental you pay must finally be relative to the business, otherwise tenants will not be able to invest. We are fortunate that most malls we work with have a good understanding of this principle.’

With space getting more expensive, retailers are becoming more sensitive to rentals on a per square foot basis too.

Steven Goh, spokesman for the Orchard Road Business Association, believes the situation is not so much that retailers are prepared to pay higher rents for a prime space but more that they have become more savvy in measuring how ‘productive’ their businesses are.

‘For instance, a restaurant that was 2,500 sq ft before may streamline its operations to 2,000 sq ft because it gives the optimum return of $100 worth of sales on a per square foot basis, which can justify the rental,’ he explains.

Another example Mr Goh gives is that of fashion boutiques, which on average, must make between $120-$150 psf in sales. And the concern is not so much about rent. ‘The pressure is actually to find new concepts,’ he says.

Perhaps a sure sign that retailers and their landlords are doing well is when a shop decides to expand, even when rents keep rising.

High-end leather goods retailer Tod’s, in the equally high-end mall Paragon, has just moved into bigger and better premises with frontage on Orchard Road, increasing its store size by about 50 per cent.

Patrina Tan, deputy general manager of marketing at Paragon, says it does not discuss rents but does concede that all landlords do see the expiry of an existing lease as an opportunity to review rent levels. ‘Rentals are always relative,’ she adds.

She also reports that the sentiment among the tenants at Paragon is definitely ‘positive’.

The outlook for the future remains good too despite close to 2 million sq ft of retail space scheduled to be completed by next year. And at Knight Frank, Mr Mak says he does not expect demand to decrease either.

For the rest of the year, Knight Frank expects occupancy to increase by about one percentage point q-o-q. This will bring islandwide occupancy to between 93 and 94 per cent and Orchard Road occupancy to about 95.8-96.5 per cent.

Knight Frank also expects rentals for prime retail space to increase 15-20 per cent year on year, with capital values rising by 10-15 per cent.

 

 

Source: Business Times 9 Oct 07

S’pore still hot despite office space crunch

Its overall value proposition is what counts ultimately, not just rental costs

ASIA today is different from what it was 10 years ago – all the countries have undergone changes politically, economically and socially. Likewise, Singapore has emerged stronger fundamentally and is now one of Asia’s most conducive environments for business and investment, earning accolades for its many endeavours to transform the island state into a bustling metropolis not just for business but also for entertainment, the arts, and other lifestyle attractions.

In 2008, Singapore will host the Formula One race, while in 2009 and 2010, world-class integrated resort developments like the Marina Bay Sands and Resorts World Sentosa will open their doors. By 2012, the historic City Hall and the former Supreme Court buildings will become the National Art Gallery.

The Asian office property sector enjoyed strong growth underpinned by the robust economic performance in the region. A high correlation between the economic and office market cycles is evident. Singapore’s economy grew by 7.9 per cent in 2006 and is forecast to grow between 5 per cent and 7 per cent in 2007, with the FIRE (Financial, Insurance, Real Estate) sectors being the major growth contributors.

According to Russell Reynolds Associates, 50 per cent and 40 per cent respectively of Europe-based and US-based technology companies locate their Asia-Pacific headquarters here – more so than in any other Asian country.

Due to strong leasing demand, office occupancy continued to soar and in H107, the Singapore office rental index increased by 22.5 per cent, while the office price index grew by 13.5 per cent.

The financial services sector was a key driver for this demand growth, as evidenced by the increased space taken up in the last 18 months by Barclays, Credit Suisse, Merrill Lynch, Scotiabank, Societe Generale, Standard Chartered Bank, and The Royal Bank of Scotland.

In addition to a wave of M&A activity, the increase in demand for finance and business services was also driven by the emerging markets of countries in the region such as China, India and Vietnam, where progressive deregulation of these banking markets opened up new opportunities. As a result, mortgage lending, consumer credit and wealth management activities flourished.

Singapore’s office take-up escalated and the market attained a high occupancy of 97 per cent in the Central Business District (CBD). The unrelenting race for space continued to drive rents up in all micro-markets to historic highs. The financial hub of Raffles Place led the rental hikes with a 54 per cent increase in H107 to average $13.10 per square foot per month from $8.50 at end-2006, surpassing the previous peak of $11.25 psf recorded in 1990.

For the same period, average monthly rents in Marina Centre increased 48 per cent to $11.80 psf from $8 psf.

Many tenants found their renewal rents had increased by at least two to as much as three times their previous rents.

Some professional services groups opted for less costly fringe city locations while those companies that do not require a presence in the city decided it was timely to decentralise. Many industrial and technology-based companies that used to occupy office buildings were also compelled to take the logical step of substituting business park/high-tech industrial options for office space as the rental gap widened.

We also saw an increasing trend of financial institutions separating and locating their backroom operations away from their city offices, a rational strategy given the cost efficiencies and for ‘business continuity’ reasons.

A number of the banks we spoke to were rather sanguine about the rental hikes as comparatively, prime rents in other Asian financial centres like Tokyo and Hong Kong are still more expensive; for example, Hong Kong’s average Grade A rents are about a third higher than Singapore’s.

With just 2.18 million square feet of new supply scheduled to be completed between now and 2009, ie less than one million sq ft a year, the tight office situation is expected to persist till 2009. In 2010, 1.8 million sq ft of new supply, mostly Grade A space emanating from the Marina Bay Financial Centre, will enter the market followed by large-scale completions from new Government Land Sales (GLS) of development sites in Marina Bay, as well as the redevelopment of obsolete buildings in the CBD like Ocean Building, from 2011 onwards.

In the interim, the government has introduced some strategies to mitigate the tight supply situation. Several disused state properties were immediately made available for lease via public tender and the first ‘transitional office’ development site with a 15-year lease at Scotts Road was successfully tendered to provide near-term relief.

In addition, new office redevelopment sites in the CBD and suburban centres like Tampines have been sold or are being fast-tracked for sale under the GLS programme. All the above will provide a supply pipeline of over 12 million sq ft of office space in the medium term.

In addition, there will be potential new supply of business park space at Changi Business Park, Alexandra Business Park and One-North, which will provide alternative space options for businesses that qualify under the zoning criteria.

On the part of corporate occupiers, many have also implemented workplace strategies to maximise their space utilisation in line with today’s lifestyle and trends. For example, flexible concepts like ‘hot-desking’, ‘hotelling’, or ‘work anywhere, anytime’ allow staff to opt to work from home or to work part-time, and have contributed to more efficient use of office space.

Notwithstanding the rental trends above, cost of office space is only one aspect of a company’s overall costs and should be set against other more important considerations, like market access, business environment and availability of talent, among others. In a nutshell, the real issue for many businesses is a city’s or a country’s overall ‘value proposition’.

There are some pro-business initiatives that the government could adopt to alleviate the current space crunch.

Reviewing the business park and industrial use guidelines for greater flexibility or allowing the conversion of well-located, under-utilised industrial premises into offices for back-of-house operations and for SMEs are possibilities.

In addition, the development of other non-CBD offices, for example, in the Paya Lebar sub-regional centre, could be expedited in tandem with those in the CBD.

 

Source: Business Times 9 Oct 07

KepLand to redevelop Ocean Building

KEPPEL Land will redevelop its Ocean Building and Ocean Towers office buildings into the new state-of-the-art Ocean Financial Centre (OFC), it said yesterday.

When completed in 2011, the 43-storey OFC will offer some 850,000 sq ft of prime Grade A office space.

Since KepLand owns the land OFC will come up on, it will only have to fork out for the development costs. Construction is expected to begin in the first quarter of 2008.

Ocean Building, which is now being demolished, has some 402,000 sq ft of net lettable area (NLA); Ocean Tower has another 229,000 sq ft.

The new centre will be built on land cleared when Ocean Building is demolished, integrating with Ocean Towers’ podium.

Once OFC comes up, Ocean Towers’ office block – which is above the podium – will then be taken down, said Tan Swee Yiow, KepLand’s director of Singapore commercial.

He said that tenants in Ocean Towers as well as past tenants in Ocean Building have shown interest in taking up space at the OFC.

Ocean Building’s major tenants included financial companies Credit Suisse, Ernst & Young and HSBC, while big tenants at Ocean Towers included law firm Drew & Napier and DMG & Partners Securities.

‘Ocean Financial Centre, with its commanding location in Raffles Place and the New Downtown, will be the preferred business address of major financial institutions and multi-national corporations,’ said KepLand managing director Kevin Wong.

The development is smaller than two other comparable office developments nearby – the massive Marina Bay Financial Centre (MBFC) and One Raffles Quay (ORQ).

Two office towers in MBFC’s first phase will add up to about 1.65 million sq ft of NLA. The office tower in the second phase is expected to offer another one million-plus sq ft of office space as well.

Similarly ORQ, which was completed last year, has slightly over 1.3 million sq ft of NLA.

Marketing for OFC will begin next year, Mr Tan said. The building is not likely to be injected into KepLand’s listed trust K-Reit Asia until development is completed in 2011, Mr Tan added.

OFC is designed by world-renowned architectural firm Pelli Clarke Pelli, whose portfolio of commercial developments in major financial cities includes the World Financial Centre in Beijing and Petronas Towers in Kuala Lumpur.

The building will have some ‘green’ features, such as the largest solar panel system on a commercial building in Singapore and the first hybrid chilled water system on the island.

OFC will be the fourth building to rise at the same site following redevelopment. The first Ocean Building was built in 1864.

 

Souce: Business Times 9 Oct 07

43-storey block to replace Ocean Building

KEPPEL Land (KepLand) has started demolishing the 29-storey Ocean Building in downtown Singapore to replace it with a new office block – complete with state-of-the-art green features – by 2011.

The new 43-storey building in Collyer Quay will be called the Ocean Financial Centre and offer about 850,000 sq ft of Grade A space.

It will be aimed largely at financial institutions and will have one of the largest floor plates – 19,000 sq ft to 23,000 sq ft – in the Raffles Place area.

Ocean Building’s heritage dates back to 1864, when the first block – a two-storey affair – was built. The second building was up by 1923, while the current one was completed in 1974.

The redevelopment plans are timely because office demand is still very robust, said Mr Tan Swee Yiow, director, Singapore Commercial, of KepLand International.

Mr Tan said some of Ocean Building’s existing tenants have expressed interest in taking a lease in the new block.

Office space supply is expected to ease only in 2010, when the Marina Bay Financial Centre opens.

Once KepLand has redeveloped Ocean Building, it will integrate it with the podium block of the smaller Ocean Towers.

It will then tear down the office portion of Ocean Towers, as this space has been calculated into the allowed space for the new 43-storey block.

Existing tenants in Ocean Towers include DMG & Partners Securities and Drew and Napier.

The new block will be designed by American architectural firm Pelli Clarke Pelli. It will boast two significant local benchmarks: the largest solar panel system for commercial buildings in Singapore and the first hybrid chilled water system.

 

Source: The Straits Times 9 Oct 07

One done deal, two around the corner as office blocks change hands

KeyPoint sold for $370m; talks on for 78 Shenton Way and Hitachi Tower

(SINGAPORE) Office blocks continue to change hands as the market sizzles. Allco Commercial Real Estate Investment Trust has just bought KeyPoint in the Jalan Sultan/Beach Road area for $370 million or $1,186 per square foot (psf) of net lettable area (NLA). The deal includes income support of up to $10.5 million for two years to be provided by the seller.

A deal for 78 Shenton Way is believed to be at an advanced stage of negotiation, with the price pegged slightly below $700 million. The buyer is said to be a property fund linked to Germany’s Commerz Grundbesitz Investmentgesellschaft (CGI). CGI is the capital investment company for the open-ended fund Haus-Invest, and a deal for 78 Shenton Way, when it materialises, will mark CGI’s first major property acquisition in Singapore, sources say.

All eyes in the market are also on Hitachi Tower at Collyer Quay, to see if a fresh benchmark will be set soon. The latest price being bandied about for the 999-year leasehold property is said to be around $3,000 psf of NLA, lower than the $3,200 psf and $3,300 psf discussed a few months earlier. The parties that had made offers at those pricing levels have since walked away from the negotiating table.

Industry observers suggest that a natural contender for Hitachi Tower now could be the Goldman Sachs group. In August, a Goldman Sachs-linked fund bought the next-door Chevron House (formerly known as Caltex House) for $2,780 psf, a record for an office block here. ‘A higher price can be justified for Hitachi Tower because it has a superior tenure (999-year leasehold) and orientation,’ a market watcher notes.

‘Another important difference between these two buildings is that for Chevron House, there are rental caps in (major tenant) Chevron’s lease agreement, which limits the near-term rental upside that the building’s owner can achieve,’ he added.

Hitachi Tower is 50:50 owned by CapitaLand and National University of Singapore. The 37-storey property has an NLA of around 280,000 square feet. Chevron House is on a site with a remaining lease of about 81 years.

Some industry observers think that it makes sense for Goldman to own two adjoining office blocks as it can then take advantage of synergies in managing them, as well as tap the possibility of redeveloping the properties in the longer term – or at least pitch that angle to potential buyers of the two properties when it wants to divest them in future.

A Goldman Sachs real estate fund also bought DBS Towers 1 and 2 on Shenton Way in November 2005 for $690 million or around $800 psf of NLA.

As for 78 Shenton Way, which CGI is in negotiations to buy, the acquisition will be based on a total NLA of 365,000 sq ft, which includes some 65,000 sq ft that the seller, a joint venture between Credit Suisse and CLSA funds, has undertaken to build for the asset. The site has a remaining lease of about 75 years.

KeyPoint at Beach Road stands on a site with a remaining lease of 68 years. It is being sold by Sable Resources, whose key shareholder is Han Chee Juan, who teamed up with a group of investors to buy the 25-storey property, formerly known as Jalan Sultan Centre, in 1996 from the former Pidemco Land.

Their acquisition price was $125 million and the group completed a $35 million refurbishment of the asset in early 2000.

Buyer Allco Reit said the assumed initial net property income yield for the first 12 months is 4.65 per cent, inclusive of the $10.5 million income support. The acquisition will be fully debt-funded with a cost of debt of about 3.6 per cent. The trust’s leverage will increase from 33.2 per cent to about 46.5 per cent after the completion of the acquisition, Allco said. DTZ Debenham Tie Leung brokered KeyPoint’s sale.

KeyPoint currently has an NLA of 311,892 sq ft, of which about 89.4 per cent is offices and the remaining 10.6 per cent retail space. KeyPoint also has 227 car-park lots.

 

Source: Business Times 6 Oct 07

LEASEHOLD BUILDING – KeyPoint on Beach Road sold for $370m

A 29-YEAR-OLD commercial building on Beach Road is changing hands at $370 million.

The buyer is Allco Commercial Real Estate Investment Trust, which is acquiring the 99-year leasehold KeyPoint from a group of investors led by real estate veteran Han Chee Juan.

Mr Han and his business associates bought KeyPoint, then known as Jalan Sultan Centre, for about $125 million in 1996. The seller then was Pidemco Land, which later merged with DBS Land to become CapitaLand.

KeyPoint had extensive upgrading work done by 2000. Today, it is an integrated 25-storey building with a total net lettable area of 311,892 sq ft. The development comprises a three-storey podium and a 22-storey office tower. It also has a four-storey carpark that can accommodate 227 cars.

Allco says the acquisition is expected to add value to the property trust’s yield and give it exposure to an investment grade quality commercial asset in a fringe region of the central business district.

KeyPoint is 95.9 per cent occupied. While passing gross rents are significantly below the current market rate, many of the tenants’ leases will be up for renewal in the next two years, with over 50 per cent of the net lettable space expiring in the coming year.

This will give the new owner the opportunity to raise rentals going forward.

 

Source: The Straits Times 6 Oct 07

Parkway Parade office space sold for above $1,000 psf

Two units in the leasehold building were sold at $1,243 psf and $1,275 psf

TWO office units at Parkway Parade have been auctioned at $1,243 per square foot and $1,275 psf of strata area, a new high in the current office cycle at the leasehold building, though still shy of the $1,665 psf achieved in 1996 in the building.

The buyer of the latest two office units, which are located on the 21st storey of Parkway Parade, is believed to the owner of the Hotel 81 chain, which also owns the adjacent space, used for its management office.

‘Perhaps they bought the two latest units with a view to expanding their office at Parkway Parade,’ a market watcher said.

Parkway Parade is on a site with a remaining lease of about 71 years.

The two units auctioned off last month by Colliers International are currently fetching a monthly rental of about $3,500 each. Their rental leases expire early next year.

Each of the two units has a strata area of 925 sq ft and have sea views.

The seller was M&P Investments, which a companies search showed as being a subsidiary of listed Parkway Holdings, the developer of Parkway Parade.

Office units at Parkway Parade have been changing hands this year mostly below $1,000 psf. For instance, an eighth floor unit was sold for $983 psf in July while a unit on the 10th floor went for $929 psf in May.

But the highest price ever achieved for office space in the building was the $1,665 psf in March 1996 when a 1,765 sq ft unit on the ninth level fetched almost $2.94 million.

The Urban Redevelopment Authority’s price index for office space in the central region for Q2 2007 was 26.6 per cent higher than a year earlier.

 

Source: Business Times 5 Oct 07

Sales of state land fetch $6.3b for year to March

Bulk of bumper takings comes from sales to private sector for $3.55b

THE government collected $6.3 billion selling state land during the year ended March 31, up from $5.5 billion in the preceding year – but still shy of the record $14 billion for the year ended March 31, 1998.

The bulk of the latest year’s bumper takings came from selling land to the private sector for a total of $3.55 billion, up from the previous year’s $3.3 billion, according to the Singapore Land Authority’s latest annual report.

The SLA also sold $2.75 billion of land to statutory boards such as Singapore Tourism Board, Sentosa Development Corporation and JTC Corp under public sector sales in the latest year, higher than the previous year’s $2.2 billion.

Rental collections for state land and properties (including Temporary Occupation Licence fees) amounted to $514.3 million for the year ended March 31, 2007, up from $387.3 million in the preceding year.

The SLA reported a 39 per cent increase in net surplus to $13.67 million, on the back of a 9.7 per cent improvement in total income to $88.6 million. Operating income from land sales agency fees as well as title registration and related fees went up 10 per cent.

To meet competing demands for space for office, business, educational and commercial uses during the past year, the SLA stepped up to meet increased demand for state properties. In January to September, 13 state properties were turned into dedicated office space to help ease the supply crunch in this market.

The occupancy rate of state properties managed by SLA rose to 86 per cent in the latest year, up from 82 per cent in the preceding year, while the utilisation rate of state land managed by the SLA rose to 77.8 per cent from 76 per cent previously.

As custodian of state land and properties, the SLA manages about 14,000 hectares of state land and about 5,000 state buildings that have been put to use as offices, education centres, restaurants, recreational, retail and hospitality space. Its stock of buildings includes about 700 colonial ‘black and white’ residential bungalows.

 

Source: Business Times 4 Oct 07

Stockbroker team eyeing more deals

David Loh, Han Seng Juan who won Kovan site may also rope in partners

THE ‘David and Han Team’ of top stockbrokers that has been awarded a condo site in Kovan for $290.02 million, is looking at more property ventures in Singapore and the region across various sectors, including residential, office and hotels.

The Kovan condo will be the duo’s maiden property development project, and they are expected to rope in some ’strategic partners’, including a construction firm for the project.

‘The condo is likely to have around 500 to 600 units, and could be launched sometime in the second half of next year. We’re looking at an average selling price above $850 per square foot, but of course if the market goes up, we’ll be very happy,’ says Tony Bin, CEO of Duchess Development, the holding company of Duke Development, the vehicle that Han Seng Juan and David Loh Kim Kang used to bid for the 190,000 square feet site next to Kovan MRT Station at a state tender that closed on Tuesday.

The $290.02 million bid for the Kovan site reflects a unit land price of $437 psf per plot ratio, and based on this, market watchers reckon the breakeven cost for the new condo works out to around $730-750 psf.

Mr Han and Mr Loh work at UOB-Kay Hian and are also well known as pre-IPO China investors. ‘They are diversifying into property,’ as Mr Bin puts it.

The two men will only be investors/shareholders and not be involved in the management of Duchess Development, which will be left to a professional team, added Mr Bin, who was formerly general manager of the property division of Guthrie GTS.

Market watchers reckon that given Mr Han’s and Mr Loh’s strong interest in China, it would not be surprising if they could also be looking at property ventures in that market.

 

Source: Business Times 4 Oct 07

Banyan Tree to double global assets by 2010

It plans to move into Latin America, the Caribbean, Middle East, Mediterranean

BANYAN Tree, a leading manager and developer of premium resorts, hotels, spas and galleries, is on an aggressive expansion push to more than double its global portfolio by 2010.

Banyan Tree executive chairman Ho Kwon Ping said it is moving into new markets in Latin America, the Caribbean, the Mediterranean and the Middle East, in addition to stepping up its presence in South-east Asia, the Indian Ocean and North-east Asia (China and Korea).

The group’s investments will involve new projects as well as organic growth as it continues to improve and add capacity to existing properties, he said in an interview on the sidelines of celebrations to mark its 20th year in Phuket.

On Phuket island, where the flagship Banyan Tree resort is located, plans are afoot for a new project adjacent to the existing 600-acre Laguna Phuket which houses six properties that are built on land which has been rehabilitated from a polluted abandoned tin mine.

Banyan Tree subsidiary, Laguna Resorts and Hotels, has just concluded a joint-venture agreement with a prominent local Phuket businessman Kanit Yongsakul to develop the 7 million sq ft plot for housing, retail and commercial uses (including office space), plus a hotel.

To be called Laguna Lake, the project is expected to reach the peak of development in three to four years.

The potential revenue contributions from this development could be S$400 million to be realised over a medium term period, the company said.

The residential portion of the development will offer upscale condominium units, bungalows and townhouses.

Mr Ho also revealed that within Laguna Phuket, the group plans to add a seventh hotel. This one will be under its Angsana brand. Room rates will be the second highest after the flagship Banyan Tree Phuket.

Construction of the 150-room property will start next year and is scheduled to be completed in 2009. It will cost 1.5-2 billion baht (S$70-93.4 million).

The group’s first hotel to open in Laguna Phuket in 1987 was the Dusit Laguna. This was followed by the other five properties, Laguna Beach Resort, Sheraton Grande Laguna Phuket and The Allamanda (all suites), Banyan Tree Phuket and the Laguna Holiday Club (time-share units).

Laguna Phuket has become the reference point for the group’s projects elsewhere, such as Laguna Vietnam whose construction will start early next year near Hue in central Vietnam. Mr Ho hopes this project will replicate the success of Laguna Phuket.

On Banyan Tree’s global expansion plans, Mr Ho said: ‘We want to have strong growth in the next one to three years. Given the strong pipeline of projects that we have – over 40 new hotels (compared with our current existing portfolio of 22) and at least 55 spa projects, we are confident of our growth plan.

‘The key drivers will come from three core segments – hotel investment income, fee-based income (such as hotel, spa and design management fees) and property sales. Based on existing signed and sealed contracts that we have, we would have about 60 hotels and resorts by 2010. This is bearing in mind that we will continue to work on increasing this figure.’

Banyan Tree adopts a practical approach in its quest to spread its roots. Its strategy is to further expand into lowcost locations close to its key customer markets.

Mr Ho elaborated: ‘In some of these so-called ‘low-cost’ regions, such as China and Mexico (Latin America), we have managed to leverage on the growth in the tourism sectors there to accelerate our growth there. These regions account for over 20 existing projects in development and continue to present more opportunities for growth.’

Mr Ho is a firm believer in nurturing a brand instead of relying on cost competitiveness. He said: ‘One prevalent business model in Asia is to use low cost labour – with many companies manufacturing for other people, as opposed to developing their own brand. My view is that this is not a sustainable business model because someday someone cheaper will come along.

‘The key to success is to invest in a brand and build it – like what we have done with Banyan Tree. We need to compete on brand, not cost competitiveness, which takes long-term commitment and mindset, and to be close to the market,’ he said.

‘Banyan Tree is all about creating unforgettable, deeply personal and cherished memories. It is about the romance of travel and connecting people with a ’sense of place’ through the design and architecture of our resorts, that promotes the uniqueness of indigenous cultures of the place. As we have our own full-time in-house design capabilities, we are therefore able to graft the ‘Banyan Tree’ experience onto our real estate offerings from the ground up.’

‘Banyan Tree’s business model is to be in exotic destinations, and places like China and Latin America offer a plethora of such destinations. One of the reasons for Banyan Tree’s success is that we have stayed in our niche. It’s like within this ’sandbox’, as long as we are the King of the hill, we could be No 1.’

He added: ‘In our space, going global is not about having a few hundred hotels and resorts, but a necklace of jewels that span the globe with a representation in every key market. It is not about being everywhere, but being where we need to be to remain among the best of the best.’

 

Source: Business Times 4 Oct 07

Call for more hotel rooms amid crunch

WITH hotels filling up and guests having to pay more for their accommodation, there is ‘a call for more hotel rooms’ in Singapore, says a consultant. There are already 15 more hotels planned or under construction, which should help, he says.

In an interview with BT, Patrick Ford, who is president of Lodging Econometrics, an international consultancy based in the United States, said that the HotelBenchmark Survey by accountancy firm Deloitte & Touche shows that Singapore had the third highest occupancy rates in the Pacific Rim at 81.5 per cent, last year. Hong Kong was first and Melbourne second.

The half-year results for the Deloitte report puts occupancy rates for the first half of 2007 at 82.9 per cent for Singapore, a 5.3 per cent increase over the corresponding period for last year. Deloitte reported average room rates for Singapore to be about US$160, a 22.4 per cent growth from the previous year.

Revenue per available room was strong and ‘driven up by average room rates’ Deloitte said, to US$132, a 28.9 per cent rise. The strength of these figures puts Singapore ahead of other Asia Pacific markets such as Hanoi, Mumbai, Manila, Shanghai, Bangkok and Bali.

According to data from Lodging Econometrics, Singapore currently has 15 hotel projects in the pipeline – which have been formally announced in the public domain or are being actively pursued – to provide the hotel industry with more than 6,400 rooms over the next few years.

Of the 15, five are currently under construction, two are expected to start in 12 months and eight are in various stages of early planning. The 15 hotels are expected to be completed between 2007 and 2010.

Two of the 15 hotels will open their doors this year – the St Regis, Singapore, being one of them.

Mr Ford said the upcoming integrated resorts, coupled with Singapore being a popular choice as a MICE destination, keeps the city as a top international market and tourist destination as well as being on the booking rotation for conferences and conventions.

‘It puts Singapore on the map as a hot destination for different reasons and different markets,’ Mr Ford said.

Propelled by the flourishing property market, future hotel developments may have to be luxury or highend ones, so as to reap the highest possible room rates and offset the costs of development and land, Mr Ford told BT. While there will still be a demand for mid-market hotel properties, they may be pushed outside of desirable locations.

 

Source: Business Times 3 Oct 07

MGPA sells 12 floors of offices for quick profit

$225m sale price is 70% up from price it paid in Jan for space in Springleaf Tower

TWELVE floors in Springleaf Tower that were bought in January for $134 million have been sold again for $225 million – an increase of almost 70 per cent.

The seller is Macquarie Global Property Advisors (MGPA) which made headlines recently by submitting the top bid of $2.02 billion for a development site at Marina View.

The buyer of the SpringLeaf Tower space is SEB Asset Management (SAM), part of German pension fund manager SEB, which bought SIA Building from CLSA Capital Partners in April for more than $525 million.

SAM said in a statement yesterday the Springleaf Tower investment is its second in Asia for its new SEB Asian Property Fund, after it acquired an office tower in Shanghai’s Puxi district in a 50-50 joint venture with Pacific Star at the beginning of September.

In Singapore, churn in the office sector appears to be increasing.

CLSA Capital Partners, for instance, acquired the SIA Building for $344 million in June 2006 before selling it less than a year later for 50 per cent more.

MGPA acquired Temasek Tower in March for $1.04 billion. And with capital values rising, it too could sell for a quick profit.

According to a report by CB Richard Ellis (CBRE), the average capital value of prime office space was an estimated $2,900 per square foot in Q3 2007, reflecting an increase of 16 per cent quarter on quarter and 114.8 per cent year on year.

CBRE said prime office yields were 4.32 per cent – up only slightly from 4.23 per cent in Q2 2007. But that has not stopped investors buying offices.

It said the office investment market remains active, with $3.459 billion of transactions in the third quarter. Notably, a fund linked to Goldman Sachs bought Chevron House for $366.4 million or $2,780 psf of net lettable area,

setting a new benchmark that exceeded the $2,650 psf that British-based property fund Develica paid for One Finlayson Green in June.

SAM expects an internal rate of return of 9 per cent per annum on its investments.

 

Source: Business Times 3 Oct 07

Growth of office rentals to slow

Tenants prepared to explore lower-cost locations and alternative premises: CBRE

ENOUGH is enough. Or so it seems for those having to pay high office rents.

CB Richard Ellis (CBRE) executive director (office services) Moray Armstrong foresees further rent rises but reckons that the pace of increases will slow.

‘We have observed tenants’ increasing resistance to rental hikes,’ he said. ‘Occupiers are more prepared to explore lower-cost locations and alternative premises such as business parks and high-tech space.’

CBRE’s analysis of Q3 2007 data shows prime office rents averaged $12.60 psf per month, an increase of 16.7 per cent quarter on quarter (QoQ) and 82.6 per cent year on year (YoY).

Grade A office rents now average $14.90 psf per month, an increase of 13.7 per cent QoQ and 96.1 per cent YoY.

CBRE said that at end-August, full potential supply – the sum of known private sector project supply, awarded Government Land Sales sites and potential supply from expected future land sales – was 10.8 million sq ft for 2007- 2012.

This reflects an increase of 147 per cent from full potential supply of 4.4 million sq ft identified two quarters ago at end-March 2007 and works out to average potential annual supply of 1.8 million sq ft for the next six years, higher than the past 10-year average supply of 1.5 million sq ft per annum.

Based on projected average annual take-up of 1.6 million sq ft for 2007-2012, CBRE forecasts relative equilibrium between supply and take-up over this period, remaining in the range of 91 to 95 per cent even if full potential supply materialises.

‘On the supply side, the government’s reaction has been measured so far, but care is required in monitoring any future change in demand for office space,’ says CBRE.

‘As such, it may be timely for all in the sector – landlords, tenants, policy-makers – to take stock of the market dynamics in setting out policy and making decisions.’

The temptation to keep pushing rents is why Colliers International expects a modest office building at 23 Middle Road to be attractive.

The indicative price for the six-storey building – which has a total gross floor area of 23,499 sq ft and a net lettable area of 17,314 sq ft – is $28 million or $1,600 psf of net lettable area.

Colliers’ executive director for investment sales Ho Eng Joo says: ‘If tenants in the CBD have to pay more than $10 psf per month they may as well consider buying their own property rather than face landlords who keep raising rents.’

Mr Ho expects accountancy and law firms may be among the bidders for the Middle Road building.

With space tight, office property also has good investment potential.

Based on average rent of $6-$8 psf per month in the Middle Road area, Mr Ho expects an investment yield of 4-5 per cent.

And with capital appreciation, gains could be much higher.

 

Source: Business Times 3 Oct 07

Vibrant new logo for Raffles City brand

CEO: Another step towards realising investment potential

CAPITALAND yesterday launched a new logo for its Raffles City brand at the 21st anniversary of Raffles City Singapore.

Capita-Land chief executive Liew Mun Leong said that the re-branding was another step towards realising Raffles City’s investment potential.

‘We have said that we would grow the number of Raffles City developments globally to 10 or even more. We are working on this, with prospects in several gateway cities.’

CapitaLand said that its new clean-cut, vibrant and modern logo encapsulates Raffles City’s sophistication and timelessness as an international icon.

Minister Mentor Lee Kuan Yew, who spoke at the event, said that the Raffles City site was where Raffles Institution stood, where he studied for four years from 1936 to 1939.

However, Raffles City Singapore transformed the landscape in the very heart of the city, MM Lee said.

‘It was a bold engineering move of its time, the biggest development project in Singapore which linked the central business district in Shenton Way to the shopping belt in Orchard Road.’

‘It was to be a city within the city,’ Mr Lee said.

And as Raffles City goes global, it is also bringing other ‘Made in Singapore’ retailers such as BreadTalk and Bee Cheng Hiang along.

‘With more Raffles City developments, together with their Singapore retailer tenants established in key cities around the world, they can over time become another marketing icon for Singapore,’ Mr Lee said.

CapitaLand is building several new Raffles Cities in Beijing, Chengdu and Bahrain.

 

Source: Business Times 3 Oct 07

Big developers lose bidding for prime Kovan plot

BIG gun property developers who lined up for a prime residential site in the Kovan area were pipped in the bidding by a firm hardly anyone has heard of.

Duke Development placed the top bid of $290 million for the 190,000 sq ft site in Simon Road, trumping highprofile rivals Far East Organization, Hong Leong Holdings, Frasers Centrepoint and Allgreen Properties.

Duke is believed to be a group of private investors with a pair of top dealers as shareholders.

A company search turned up Mr Han Seng Juan and Mr David Loh as Duke shareholders. They are former executive directors at UOB Kay Hian, the brokerage arm of United Overseas Bank.

Both Mr Han and Mr Loh, who are believed to be related, also hold shares in Cybertech Communications and Healthstats International, among other companies.

Their winning bid works out to about $437 per sq ft (psf) per plot ratio, and is a ‘reasonable bid’, said CB Richard Ellis Research executive director Li Hiaw Ho.

Mr Li believes this offer can break even at about $800 psf for the finished condominium units, which are likely to sell at between $850 psf and $950 psf.

Nearby Kovan Melody has sold out all 778 units, a testament to the strong demand for homes in the area. The units are now being resold in the secondary market for more than $800 psf, said Mr Li.

He added that part of the area’s attraction are the good schools in the vicinity, such as Rosyth School and Maris Stella High School.

A condominium with about 555 units can be built on the Simon Road site, which has a maximum gross floor area of 664,337 sq ft.

Apart from homes, the plot can also host service apartments, said the Urban Redevelopment Authority.

 

Source: The Straits Times 3 Oct 07

Raffles Cities abroad help to extend S’pore brand: MM Lee

CapitaLand blazes a trail for local firms by exporting mall concept overseas

RAFFLES City has become a landmark since it opened two decades ago, and CapitaLand’s efforts to take the concept overseas has extended Singapore’s global footprint, said Minister Mentor Lee Kuan Yew last night.

He told a ceremony marking the building’s 21st anniversary that the site had special memories. ‘This was where Raffles Institution stood for more than a century before Raffles City. I was a student here for four years from 1936 to 1939. We demolished several old, brick two-storey buildings of considerable historical value.’

The complex – comprising a mall, two five-star hotels and a premium office tower – that was built transformed the landscape in the very heart of the city and was the largest development project in Singapore at the time.

‘Raffles City has added to the unique Singapore brand and gained international recognition for itself and Singapore,’ said Mr Lee, adding that it attracted many tourists and business travellers daily.

But with developer CapitaLand exporting the Raffles City concept to cities such as Shanghai, Beijing, Chengdu and Manama in Bahrain, it was also blazing a trail for other Singapore firms, he said. ‘Reflecting the excellence associated with the Singapore brand, Raffles City Shanghai recently won the accolade of being one of the best buildings in China.’

Other ‘made in Singapore’ retailers have also joined Raffles City overseas, with familiar names such as BreadTalk and Bee Cheng Hiang featuring in the malls.

‘With more Raffles City developments, together with their Singapore retailer tenants established in key cities around the world, they can, over time, become another marketing icon for Singapore,’ said Mr Lee.

CapitaLand plans to increase the number of Raffles City projects to 10 and a number of major cities have already expressed interest. It also unveiled a new logo for the Raffles City brand, which is similar to the developer’s own logo.

CapitaLand president and chief executive officer Liew Mun Leong said yesterday the logo would help expansion.

‘Now that we have achieved the critical mass of five Raffles Cities, it’s high time we consolidate the image,’ he said.

Mr Liew added he expected gains in private home prices to slow in the fourth quarter.

Third-quarter prices rose by 8 per cent to a 10-year high but the increase slowed for the first time since prices began to rise two years ago. ‘The momentum will be there but may not be as fast. It will not be fast growth but there will still be growth,’ said Mr Liew.

 

Source: The Straits Times 3 Oct 07

Balestier hotel site taken out of reserve list

URA to review plot’s land use; Rangoon site goes to S’pore Healthpartners

A HOTEL site at Balestier Road/Ah Hood Road is to be withdrawn from the reserve list of the Government Land Sales (GLS) Programme for the second half of this year, the Urban Redevelopment Authority (URA) said yesterday.

The URA intends to review the land use plan of the site together with the other vacant land in the vicinity.

This site was on the reserve list since Oct 26 last year, being slated for hotel development on a 99-year lease.

The URA declined to indicate what plans it was considering for the site, saying that it would release details when they are finalised.

‘We are unable to reveal if we have received applications for the site,’ a URA spokesman said.

‘However, from time to time, the government receive inquiries for the site.’

Under the reserve list, the government will release a site for sale only when an interested party submits an application for a site to be put up for tender with a minimum purchase offer price that is acceptable to the government.

Separately, URA yesterday awarded the tender for the white site at Race Course Road/Rangoon Road to Singapore Healthpartners Pte Ltd (SHP).

The company submitted the highest bid of $265.27 million or $4,635.47 per square metre of gross floor area.

Singapore Healthpartners has a total of 38 shareholders, including prominent doctors Charles Chan, Leslie Lam and Maurice Choo.

A major shareholder is Berjaya Leisure (Cayman) Ltd, which is said to be linked to Berjaya Leisure Capital led by Malaysian businessman Vincent Tan.

Directors of SHP contacted by BT last week declined to comment on the company’s plans for the 13,625 sq m site but a medical centre-cum-hotel appears to be in the offing.

The 99-year leasehold white site has a maximum permissible gross floor area of 57,225 sq m and at least 40 per cent of this must be used as a hotel.

 

Source: Business Times 2 Oct 07

URA aims to conserve up to 228 Katong/Joo Chiat buildings

More developers, owners expending resources to buy and restore their old buildings: Mah Bow Tan

THE East Coast may be a hive of new construction activity right now, but the Urban Redevelopment Authority (URA) is also working to keep some old buildings conserved for posterity.

Minister of National Development Mah Bow Tan revealed yesterday that the planning authority was looking at conserving up to 228 buildings in the Katong/Joo Chiat area. The URA is seeking feedback from the owners.

The area already has 700 gazetted conservation buildings. Most of the additional buildings under consideration are shophouses or terrace houses. The addition will make Katong/Joo Chiat one of the larger clusters of conserved residential buildings.

Mr Mah said: ‘The aim of this conservation proposal is to complete conservation of the street block and add to the critical mass of heritage buildings and rich architectural diversity in Katong and Joo Chiat.’

Mr Mah was speaking at the presentation ceremony of the URA

Architectural Heritage Awards (AHA) 2007. Awards were presented to the owners, architects, engineers and contractors of six buildings. These were:

• National Museum of Singapore;

• The 1930s holiday home on Pulau Ubin of the former chief surveyor, Landon Williams;

• Amara Sanctuary Resort Sentosa;

• National University of Law, Bukit Timah Campus;

• 13 Martaban Road, Balestier;

• and 62 Niven Road, Mount Sophia.

  Since the awards’ inception in 1995, a total of 77 buildings have received the AHA.

  Mr Mah said: ‘Increasingly, more and more enlightened developers and owners have willingly expended resources

to buy and restore their conservation buildings for the benefit of the larger society and our future generations.’

One such person is Lyn Lee, who together with her husband bought a house on Tembeling Road six years ago for about $800,000 and then spent another $500,000 on restoring it. This house and others like it on the same road are now being considered for conservation – and Ms Lee is all for it.

Getting conservation status will increase the value of the building as its future is guaranteed. But more important for Ms Lee is that the conservation status means owners who want to alter their homes beyond conservation guidelines will not be allowed to do so.

‘Right now, there is a beautiful symmetry to the street,’ she explained. This sense of identity of place is exactly what URA hopes to do by restoring or creating ‘markers’ in housing estates as well. Mr Mah also said that apart from plans to rejuvenate Queenstown, the government is proposing to build a 4.9km promenade to link Punggol Point and Sungei Serangoon to enhance the ‘rustic coastal character’.

Other areas being looked at include Woodlands, Siglap Village and Upper Serangoon Road. Mr Mah said these projects could be completed by around 2009-2010.

Click here for Mr Mah’s Speech

Source: Business Times 2 Oct 07

Transforming Singapore’s hotel industry

Global players are injecting new brands and product concepts into the local hotel scene

SINGAPORE’S hotel sector is currently enjoying a new surge of energy and opportunities brought about by the government’s efforts to reinvigorate tourism.

Complementing efforts by the Singapore Tourism Board (STB) to raise visitor numbers to 17 million by 2015, the government had in recent years released more sites for hotel development under its Government Land Sales (GLS) programme to meet the anticipated accommodation needs.

The state land tenders have generally been met with keen industry interest, buoyed by the strong trading conditions that have prevailed with the current strong demand and tight room supply. This is a stark contrast to the 1990s when the government announced a hotel safeguarding policy in 1997 to check the creeping trend of hotels being converted to residential use.

Latest numbers from the tourism authority showed a total of 225 hotels and 36,891 rooms in Singapore’s accommodation market as at end-2005. There is no existing star-rating system in Singapore and the current hotel stock is sub-divided into 103 gazetted hotels (30,445 rooms) and 122 non-gazetted hotels.

Jones Lang LaSalle Hotels estimates that around 81 per cent of the gazetted 30,445 rooms fall within the upper-tier four-star and five-star hotel segments.

Geographically, the majority of these upper-tier hotels are concentrated along the traditional hotel belt: Orchard Road, City Hall, Suntec City/Marina Centre, Bras Basah/Bugis and the CBD/Boat Quay/Clarke Quay.

Familiar international brands found within these localities include the Ritz-Carlton, Marriott, Grand Hyatt, Hilton, Shangri-La, Four Seasons, Raffles, Swissotel, Traders, Pan Pacific, Conrad, Meritus, Novotel as well as The Oriental Singapore which was re-named the Mandarin Oriental Singapore from Sept 25.

Outside of these locations, a cluster of smaller, self-managed budget or boutique hotels have emerged in the Chinatown, Little India and Geylang/ East Coast/Joo Chiat areas.

Sentosa Island is now home to a handful of mid- to high-end hotel properties such as The Sentosa Resort & Spa, Shangri-La’s Rasa Sentosa Resort and the new Amara Sanctuary Resort Sentosa.

A more exciting local hotel scene is unfolding with a new cast of players, additional brands and creative product concepts. Riding on the opportunities presented by the renewal of the tourism industry, international hotel management companies such as Accor, Starwood Hotels & Resorts and the InterContinental Hotels Group (IHG) are growing their presence in Singapore by bringing in other brands from their portfolios that are currently not in this market.

Ranging from boutique to mid-tier to luxury establishments, many of these new hotel developments are being established in non-traditional hotel locations such as Tanjong Pagar, One-North, Labrador Park and Novena areas.

A new 320-room Crowne Plaza, a brand from the IHG family, is scheduled to open at the Singapore Changi Airport next year.

United Engineers, a local developer with a strong focus on the residential sector, has announced plans to build a business hotel at Singapore’s biosciences hub at South Buona Vista.

With the latest GLS programme for the second half of 2007 including sites like Jalan Bukit Merah/Alexander Road, Outram Park and Kampong Glam for hotel development, more hotels can be expected to spring up outside of the typical hotel hot spots.

The two upcoming mega integrated resorts (IRs) at Marina Bay and Sentosa will also be the launch-pads for new hotel brands and concepts. While Sands @Marina Bay will offer 2,500 rooms in the upper-tier sector in 2009, Resorts World @Sentosa will add another 1,830 rooms in six hotels in 2010.

The latter will comprise a Hard Rock Hotel, the Hotel Michael boutique hotel, the Festive Hotel with a Hollywood theme, an iconic Maxims Residences, the Equarius Hotel with a lush greenery theme and the ESPA Villas.

Resort and villa-type establishments, too, are making a stronger statement in Singapore. Apart from the ESPA Villas, Villa Raintree @Labrador Nature Reserve (a refurbishment project) as well as the recently opened Amara Sanctuary Resort and the upcoming Capella Singapore at Sentosa fall under this category.

Meanwhile, the luxury hotel segment will soon witness the opening of the 299-room St Regis Hotel at end-2007.

Sino Land plans to open a new 120-room boutique hotel at Collyer Quay in 2009, while a new 320-room W Hotel at Sentosa Cove is expected to be operational by the end of 2010.

The entry of these new hotels will up the ante in Singapore’s luxury hotel segment, which currently comprises the Four Seasons, Shangri-La, Ritz-Carlton and The Fullerton.

The present lack of quality branded mid-tier accommodation options has created opportunities for new niche developments that are targeted at specific market segments. For example, Far East Organization’s upcoming hotel at Sinaran Drive next to the Tan Tock Seng Hospital will cater to the needs of the growing inbound medical tourist segment.

Similar opportunities are available at a government ‘white’ site on the current Reserve List that is located at Outram Road/Eu Tong Seng Street to develop a 555-room hotel near the Singapore General Hospital.

The proliferation of low-cost carriers in Asia has also fuelled the growth of lower-tier segment, with the new Ibis Hotel scheduled to open at Bencoolen Street in 2009 a case in point. More recently, the Hong Leong Group has linked up with Istithmar PJSC and Tune Hotels.com to open around 30 budget hotels in South-east Asia, including Singapore.

The completion of the Marina Bay and Sentosa IRs as well as supporting infrastructure and tourist attractions in the Marina and Sentosa vicinities will collectively cultivate an environment conducive for the entry of differentiated quality and luxury hotel products to the Singapore marketplace.

The arrival of new brands and new-generation properties such as W, Westin, Fairmont, emerging Middle East Groups like Jumeriah and from the Indian sub-continent, groups like Taj and Oberoi, will provide synergy for the broader local hotel market and is anticipated to generate a wider geographical capture and mix of tourist traffic to Singapore.

In the longer term, new hybrid products such as condotels (or condo-hotels) that are established in the US but still relatively untested in Asia, may be introduced, although the success of such products will hinge on the regulatory framework.

In the meantime, with a wider selection of accommodation offerings to suit the different budgets and expectations of visitors, guests can look forward to a more varied and interesting stay experience in Singapore.

 

Source: Business Times 2 Oct 07

Q3 rents for high-tech industrial space up 15%

THE average monthly rent for high-tech industrial space has increased by 15 per cent in this quarter to $3.45 per square foot per month, real estate consultant DTZ Debenham Tie Leung reported.

High-tech industrial space includes business park and science park space such as Changi Business Park and International Business Park, and rents there now range from $3 to $4.50 psf per month. The monthly asking rent for the newly completed Eightrium @ Changi Business Park is also in the vicinity of $4 psf.

DTZ executive director (consultancy and research) Ong Choon Fah attributed the increasing rents to the continuing spillover demand for conventional office space.

The latest figures showed that business parks experienced a 5 per cent drop in occupancy in the second quarter of this year due to the completion of Eightrium @ Changi Business Park and Xinlinx Asia Pacific’s business park development at Changi Business Park Vista.

Mrs Ong added: ‘Notwithstanding the dip in occupancy rate, demand for business parks remains strong.’

HSBC will take up 10,000 square feet of space at the Comtech, she noted.

Islandwide, private industrial stock, which includes factory and warehouse space, rose one per cent to 295 million sq ft in the second quarter. The average occupancy rate of private factory space rose marginally by 0.1 of a percentage point quarter-on-quarter to 90.7 per cent in the second quarter while islandwide occupancy rate of warehouse space stood at 89 per cent.

Separately, JTC Corporation launched a 20,867 square metre land parcel at Jalan Tepong for sale yesterday. Industry executives expect this site, which is the second of the two industrial sites for the year to be launched under the Government Land Sales Confirmed List, to go for between $380 and $400 per sq m per plot ratio. The site has a plot ratio of 1.4 and can be used for light industry, general industry, warehousing, utilities or telecommunications.

Demand for high-tech space could see new entrants into the market building their own facilities.

Jones Lang LaSalle (JLL) associate director (industrial markets) Tahlil Khan said that his firm is working with a number of organisations and is looking at public tenders and direct allocation of sites ‘depending on the preferences, accommodation needs and objectives of the occupier’.

David Wilton, JLL regional director and head of industrial (Asia) said that users were unlikely to find space at what he called ‘the existing business park or high-tech inventory’.

He said that these users were left with three options: purchase land to occupy; commission a leased facility; or negotiate with owners/developers on facilities under development or construction.

 

Source: Business Times 29 Sept 07

MAS tightens rules for Reits to protect retail investors

No more discounts for institutional investors at listing time

THE Monetary Authority of Singapore (MAS) has tightened up the rules for property funds to improve the odds for retail investors.

Institutional investors or the big boys will no longer have discounts for subscriptions made at the time of the listing of a real estate investment trust (Reit) under new guidelines for Reits issued by MAS yesterday.

Another change limits what’s allowed under fixed-term management contracts to five years.

These fixed-term management contracts have been used by fund managers as a poison pill to entrench their positions and to provide an obstacle to takeovers, as it makes it expensive to fire them.

In a statement, MAS said the revised rules ‘are intended to improve safeguards for investors and to provide greater clarity and flexibility for commercial transactions’.

MAS said a majority of the respondents to its public consultation exercise in March raised objections to disallowing discounts to institutional investors.

They felt that the discounts are justifiable because such investors enter into binding subscription agreements prior to the launch of the initial public offering (IPO); institutional investors were also said to have helped ensure the success of a Reit offering, particularly in difficult markets, by providing a useful signal to the retail market about the quality of the Reit.

Those who wanted to retain the discounts suggested full disclosure, putting a cap on discounts and/or a moratorium or the sale of the Reit units.

But MAS said: ‘As a matter of policy, there does not seem to be any good reason why different groups of investors should be permitted to pay different amounts for the same interests in these assets at the time of the IPO.’

MAS said it is prepared to allow discounts that are given to investors who assume equity risks different from those of IPO investors, for example if they are willing to underwrite the listing.

On management contracts which have been a contentious issue, the new guideline said the term of a compensation provision should not be more than five years and the compensation amount payable to the Reit manager should not exceed the sum of the fixed component of unearned management fees (excluding variable or performance fees) over the remaining term of the provision.

Industry players had argued that entrenchment clauses in management contracts were to help professional Reit managers who do not hold large stakes in a Reit and ‘would be discouraged from establishing Reits in Singapore if there is no flexibility to implement measures to obtain appropriate compensation if they are removed as managers’.

But MAS said: ‘We continue to be concerned with entrenchment arrangements that impede the market for corporate control and place significant restrictions on the ability of unit-holders to terminate management contracts.’

Ronnie Tan, chief executive of Bowsprit Capital, the manager of First Reit, said he supported not giving discounts to institutional investors.

‘It’s not fair for the small investors,’ he said.

He added that if demand is an issue, ‘Reit issuers should look at pricing rather than use discounts as a (sales) mechanism’.

‘Removal of the poison pill (means) the takeover rules would be similar to other listed companies,’ he said on the new rule which makes it easier to fire the Reit manager.

 

Source: Business Times 29 Sept 07

Mass-market sector rebounded in ‘06: CBRE

Non-landed projects in non-prime areas turn in strong sales volume

MASS-MARKET property sales actually staged a recovery last year, earlier than widely believed, said property consultant CB Richard Ellis (CBRE) yesterday.

In a study of the take-up rates of new non-landed projects in non-prime areas, CBRE found that the mid-tier and mass-market projects turned in strong sales volume in 2006, although prices for these segments only began rising this year.

‘Until now, the market had perceived that these segments trailed the luxury segment in their recovery, and had begun to recover only in early-2007, in terms of volume and price,’ it said.

An analysis of the new units launched last year and the corresponding take-up volumes ’shows otherwise’, it said.

It found that 68 per cent of the new projects launched last year in the West Coast, in districts 5 and 21, were taken up. Similarly, take-up rates for projects in districts 15 and 16 were about 90 per cent – ‘not far’ from the take-up rates of 74 per cent for projects in the prime districts 9 and 10 and 96 per cent for those in the downtown and Sentosa Cove areas.

‘Of course, in terms of pricing, the mass market and mid-tier projects have only begun to inch up in the previous two quarters of 2007,’ said Joseph Tan, executive director for residential property at CBRE.

‘But the strong sales of non-prime projects since a year ago show the return of buying power for upgraders and private homeowners, who, at that time, saw good investment value in the projects, while anticipating the upside in prices later on.’

Since then, the number of projects on the market has increased dramatically.

The number of new units launched in the west has tripled from a year ago, with the launch of One-north Residences, One Rochester, Botannia and The Parc Condominium, it said.

Meanwhile, the number of new units launched in the Newton/Novena area has doubled from 578 units in 2006 to 1,351 units so far this year. Take-up rates have been ‘very healthy’ at 90 per cent, said CBRE.

In districts 15 and 16 in the east, the take-up rate so far this year has been ‘equally strong’ at 85 per cent.

Residential rents have also risen sharply ‘due to the shortage of apartments for lease following the slew of collective sales of existing developments in the past two years’, said CBRE.

After rising 18.7 per cent on average in the first half, rents are expected to increase by another 8-10 per cent in the third quarter.

Rents in the popular areas of Tanjong Rhu, Meyer Road, East Coast, Dunman, Joo Chiat and Siglap have gone up 40.9 per cent since the fourth quarter of 2006, with median rents now at $2.62 per square foot per month.

The next biggest increase in rents were for apartments in the Orchard Road, Grange Road, Tanglin and Bukit Timah areas, where rents have gone up by 37.5 per cent to $3.74 per square foot per month on average.

The residential market is likely to remain active in the final quarter of this year, amid strong growth in the economy, CBRE said.

 

Source: Business Times 29 Sept 07

Little India site fetches $265m top bid

A PLOT in Little India drew two bids when its tender closed yesterday.

Singapore HealthPartners put in the higher offer for the 1.36ha site at $265.3 million.

This works out to $431 per sq ft (psf) of gross floor area and is 11 per cent more than the other bid submitted by Hiap Hoe Superbowl, which offered $238 million, or $386.40 psf of gross floor area.

The Government firmly pushed out the site – located at the junction of Rangoon and Race Course Roads – earlier this year after it received little interest from developers.

It was first offered as a ‘white’ site in August last year, which meant it could be used to build homes, shops, offices or hotels.

The site, however, failed to attract takers eight months after it was first offered, prompting the Government to

extend its use to hospital development.

The Government stipulated that 40 per cent of the site’s total floor area – potentially 615,965 sq ft – should still be given over to hotel rooms.

Even then, no developers came forward. This prompted the Government to offer the site for sale outright in July.

Property consultants said yesterday it is likely that the winning bidder will build a development with both hotel rooms and hospital rooms or medical suites on the site.

At least 550 hotel rooms can be built on it, estimated Mr Li Hiaw Ho of property consultancy CB Richard Ellis.

These rooms can ‘complement the hospital or medical suites’ by serving medical tourists, foreign medical consultants or family members accompanying patients, he said.

Mr Li added that this hospital-hotel hybrid model is likely to prove successful, given Singapore’s twin aims of boosting tourism and health care.

 

Source: The Straits Times 28 Sept 07

Katong Mall goes on sale amid controversy

Minority owners say process to sell en bloc too fast; no chance to air views

KATONG Mall is up for a collective sale but angry minority owners claim they have been left out of the process.

More than 35 disgruntled owners said the sale agreement was drawn up so fast that they did not get a chance to air their views.

They are also upset that the sale process was conducted under the old rules and not the stricter ones due to kick in next month.

Owner Jeannette Aruldoss, 44, a lawyer, told The Straits Times that the process was ‘done too quickly. We welcome the idea of the sale, but we want it done by the new rules’.

The revised law requires sale committee members to be elected at a general meeting and allows a five-day cooling off period for owners after signing a sale deal.

Three firms own 72 per cent of the 258-unit mall at the junction of East Coast and Joo Chiat Roads – Elysium, a holding company, and property developers Nustavino and Habitat Properties. The three have common investors. The rest of the mall is divided among about 100 owners.

The majority owners backed a sale and needed only a further 8 per cent for the required 80 per cent. This was confirmed on Wednesday.

The first time minority owners heard of a sale initiative was in a July 6 letter from property firm Jones Lang LaSalle (JLL) stating that five owners, holding about 74 per cent of the shares, had already volunteered for a sale committee.

At an Aug 6 meeting to discuss the sale, JLL said a process for collecting signatures would start the next day.

Minority owners met JLL on Sept 6 to express their concerns and to set up a meeting with the sale committee.

They did not hear from JLL until Sept 11, when it told them that the required 80 per cent level had been reached.

They were unconvinced and tried repeatedly to arrange a meeting with the sale committee – personally and through JLL – but to no avail.

JLL marketing agent Stella Hoh told The Straits Times yesterday that she did tell minority owners on Sept 11 that they had achieved the 80 per cent ’subject to lawyer’s verification of signatures’.

Confirmation came only on Wednesday.

Owner Lim Earn San, 60, said he was shocked at the speed of the sale, adding that the minority owners were not given any room for negotiations over the terms of the sale agreement.

The appointment of the marketing agent and lawyers was also done by the majority owners without consulting the minority owners, he said.

Mr Lim, who also owns a unit at Katong Shopping Centre, said the approach to the sale of the two malls, ‘couldn’t be more different’.

Owners at Katong Shopping Centre are following the new rules, having known of the changes since March, he said, adding: ‘Why can’t Katong Mall do the same?’

Some minority owners also fear a conflict of interest as two majority owners are in the property industry. But Ms Hoh said JLL had told the owners that the sale will be done by public tender and that any interested buyers related to the collective sale agreement ‘are required by law to declare their interests’.

Three sale committee members declined to comment.

The 99-year leasehold mall has a plot ratio of 3.6 and a site area of 78,158 sq ft. An independent expert estimated its sale price to be between $600 per sq ft (psf) and $650 psf, valuing the mall at about $175 million.

JLL figures show that units have sold at a range of $300 psf to $800 psf this year.

All eyes are now on its upcoming sale launch. ‘We’ll see how it goes, but if we’re not convinced the sale was done in good faith, we’ll take our concerns to the Strata Titles Board,’ said minority owner Robert Ong.

SHP’s $265.3m bid wins Race Course site

A CONSORTIUM that includes several prominent doctors has put in the highest bid for a hospital cum hotel site in Race Course Road – $265.3 million or $431 per square foot per plot ratio (psf ppr).

The consortium, called Singapore HealthPartners Pte Ltd (SHP), includes doctors Charles Chan, Leslie Lam and Maurice Choo. A major shareholder in Singapore HealthPartners (SHP) is Berjaya Leisure (Cayman) Ltd, which is thought to be linked to Berjaya Leisure Capital led by Malaysian businessman Vincent Tan. There are 38 shareholders in total.

Directors of SHP contacted by BT declined to comment on the company’s plans for the 13,625 sq m site but a medical centre cum hotel seems likely.

The site has a maximum permissible gross floor area of 57,225 sq m and at least 40 per cent of this must be used as a hotel.

CBRE Research executive director Li Hiaw Ho believes that a hotel with 550 rooms could be built.

‘Accompanying family members of patients can also patronise the hotel,’ he said.

Mr Li also highlighted that it was recently announced that $2 billion would be needed to expand Singapore’s health care infrastructure.

‘The development of this site as a hospital cum medical centre targeting medical visitors would contribute to Singapore’s efforts at becoming a medical hub for the region,’ he said, adding that according to the Singapore Tourism Board, more than 150,000 international patients come to Singapore each year for a whole range of medical care.

Average occupancy of hotels was also at a high of 89.4 per cent in August, Mr Li noted.

Whether more government land sale sites could go to the medical sector is not known.

Interestingly, the Race Course Road site was initially not expected to be for hospital use.

The site was first made available for sale in August 2006 as a white site for possible commercial, office, residential and/or hotel use. Then in April this year, the Urban Redevelopment Authority (URA) said in a statement: ‘In line with increased interest in hospital development, URA has been working with the Ministry of Health and EDB (Economic Development Board) to review new sites for hospital development.’

 

Source: Business Times 28 Sept 07

S’pore property seen as top buy in Asia-Pac

Sentiment strongest in rental apartment, office, hotel/resort, retail sectors: survey

SHANGHAI, Singapore and Tokyo have emerged as the top three most promising Asia-Pacific cities for real estate investment prospects, according to a report from the US-based Urban Land Institute (ULI) and the accountancy firm PricewaterhouseCoopers (PwC).

‘Sentiment was strong among survey participants to either buy or hold all types of properties in Shanghai, Singapore and Tokyo, rather than sell properties, illustrating the cities’ strong popularity with the investment community,’ a news release by PwC and ULI said.

For Singapore, the strongest sentiment for buying property was in the rental apartment sector, followed by the office, hotel/ resort, retail and indus- trial/distribution property.

The report, Emerging Trends in Real Estate Asia Pacific 2008, is the second annual investor survey from ULI and PwC. It shows that Singapore has jumped from fourth to second placing for investment prospect rankings, and from ninth to third spot for development rankings. Singapore is ranked first for city risk ratings.

One respondent in the survey said Singapore was ‘certainly one of the markets in the area that provides a very stable legal and tax environment, and property rights that are beyond question. And it therefore is certainly one of the markets where many, especially Westerners, are very comfortable.’

The report was based on interviews and surveys with more than 190 professionals, including investors, developers, property company representatives, lenders, brokers and consultants.

The survey covered 20 cities. Shanghai was in the top position in the latest 2008 investment prospect ranking, up from second spot in the earlier ranking. Tokyo maintained its third position, while Osaka, which was first in the 2007 ranking, moved down to fourth position. Hong Kong was ranked fifth in the latest survey, moving up six positions.

While Singapore moved from fourth to second spot in investment prospect, sell recommendations increased for office, retail, and hotel/resort from 0 per cent in the 2007 report issued last year to 19 per cent, 13 per cent and 13 per cent respectively in the latest 2008 report.

Buy recommendations for industrial/distribution property increased from 35 per cent to 44 per cent.

The 2008 survey also shows that the growing Asia-Pacific real estate market still offers opportunities for investors and developers next year. Asia-Pac real estate executives’ response remains strong on overall economic and market fundamentals, regardless of interest rate increases.

High levels of equity capital continue to pour into the Asia-Pacific property pool. For 2008, the hotels sector tops the list of real estate performance prospects, followed by the office sector.

PwC’s tax partner in Singapore, David Sandison, said: ‘It’s expected that even greater amounts of capital will be flooding Asia Pacific real estate markets in 2008. The real challenge for investors will lie in finding the right assets against the backdrop of yield compression and scrutiny by regional governments and tax authorities.’

The strongest sentiment for buying in Singapore was for rental apartments, with about 53 per cent of respondents recommending a buy, 34 per cent hold and 13 per cent sell.

For office space, 52 per cent advised buying, 29 per cent hold and 19 per cent sell.

The survey also showed that 48.5 per cent recommended buying hotel & resort property, 38 per cent advised holding, and 13 per cent, selling. For retail property, 45 per cent advised buying, 41 per cent holding and 13 per cent selling.

In the industrial/distri- bution sector, about 44 per cent of respondents recommended buying, 42 per cent holding and 14 per cent, selling.

ULI is a global education and research institute championing responsible leadership in land use to enhance the total environment.

 

Source: Business Times 28 Sept 07

Industrial space gets snapped up

Vacancy rates are the lowest in eight years, as Reit players push up demand for warehouse and factory space

IN TANDEM with the growth in residential and office space, average rents for the less glamorous but nonetheless expanding industrial space sector increased by 7.7 per cent in the second quarter this year.

This is all the more significant considering that the industrial space sector is still trying to clear the supply glut that has been stagnating in the market. In spite of this, vacancy rates are at the lowest in the past eight years. Besides a promising 8.3 per cent growth in the manufacturing industry, higher demand for business parks also accounts for the expansion in this property sector. Industrial space is made up of warehouse and factory space. The latter itself contains three sub-categories – single-user factories, multi-user factories and business parks.

In the first half of this year, factory and warehouse space saw an increase of 3.7 million and 1.6 million square feet in stock respectively. This has brought the total stock to 299 million sq ft for the former category and 65.7 million sq ft for the latter.

As at end Q2 this year, supply in the pipeline will channel a further 45.2 million sq ft into the market over the next five years.

Additionally, nine industrial sites have been released for the second half of 2007 under the government’s industrial land sales programme, which will provide an additional 3.74 million sq ft of space once completed.

On the demand side, the past half year recorded a healthy take-up of about 330.5 million sq ft of industrial space, contributed by 271.9 million sq ft of factory space and 58.6 million sq ft of warehouse space respectively. This resulted in a decline of vacancy rates to 9.1 per cent for factories and 10.9 per cent for warehouses.

The biggest demand in the industrial space market came from aggressive acquisitions by major Reits players like Mapletree, A-Reit, Cambridge and the recently listed MacarthurCook Industrial Reit.

In the first half of this year, more than 15 acquisitions have taken place, bringing the total value of transactions to almost $900 million, upping last year’s tally during the same period by 1.6 per cent.

Steadily increasing rents no doubt account for the active acquisition rates. According to URA statistics, rental and price indices for warehouses increased by 20.4 and 13.9 per cent in the first half of 2007 compared to the same period last year, while those of factories rose by 14.2 and 18.1 per cent year-on-year respectively.

During the first half of the year, average monthly rents for factory space increased by 3.8 per cent quarter-onquarter, standing at $1.60-$1.80 psf for ground floor units and $1.20- $1.40 psf for upper floor units. Average capital values for freehold factory space appreciated by about 5 per cent to $366 psf and $298 psf for ground floor units and upper floor units respectively. UE Print Media Hub, located at Tai Seng Drive, a project by United Engineers, catering mainly for the print and media industry, saw occupancy rates hit 88 per cent in one month.

High-tech space posted the largest rental growth of almost 12 per cent quarter-on-quarter, benefiting from the spillover of high demand for office space. With rents substantially lower than that of office space, yet providing similar functionality, it is no wonder that developments like The Comtech and Alexandra Technopark are enjoying near 100 per cent occupancy.

The Comtech, especially, has seen a rapid dwindling in its vacancy rate even as asking rentals surge to $4 psf for upper floors. Currently, average rents for high-tech space stand at $2.80 psf, up from $2.10 psf in the first quarter of the year. With a limited stock of high-quality warehouse space in the island, demand is fast catching up with supply, with an occupancy rate of 90 per cent. This is especially so in the east where a high concentration of logistics companies are located due to its close proximity to Changi Airport.

In addition to building specifications such as high floor loads, large floor plates and good cargo lift facilities, location remains important, with developments located near major transportation nodes seeing higher take-up rates than those in the outskirts. Warehouse space is now asking an average rental of $1.45 psf per month with higher floors asking $1.15 psf, a rise of 11.5 per cent quarter-on-quarter. Average capital values for freehold warehouses factories are also on the uptrend, coming in at $450 psf for ground floor units and $352 psf for higher floor units.

In light of the growing manufacturing sector, strong demand for industrial space will continue to support rents and capital values, despite a substantial amount of new stock entering the market during the second half of the year.

Rents of factories and warehouses are likely to rise another 10 per cent by the end of the year. Also, as industrial Reits continue to expand their portfolio, the sector may well see an overhaul for much of the existing stock, especially older sites that are centrally located.

 

Source: Business Times 27 Sept 07

A glowing report card for the hotel industry

Business is brisk as visitor arrivals climb steadily, pushing up room rates and triggering a flurry of new hotel construction

SINGAPORE is all set to spur tourism in the next few years with high-impact projects like the two integrated resorts, the Singapore Flyer, the Formula One (F1) Grand Prix and a rejuvenated Orchard Road.

Last year, a new record was set with 9.7 million foreign visitors coming to Singapore. This year’s visitor arrivals are expected to hit a blistering 10.2 million with Singapore Tourism Board (STB) numbers showing a glowing midterm report card. From January to July this year, visitor figures reached 5.9 million, a 5 per cent rise over the same period last year. July alone saw hotels raking in $168 million in room revenue, a 28 per cent increase from a year ago. This puts it right on target for another record-breaking year.

STB has set a target of 17 million visitor arrivals by 2015 with $30 billion in tourism receipts. Based on the impressive year-on-year growth over the past 12 months, we should be on track to achieve the 2015 target.

To meet the growing number of visitor arrivals, more hotel rooms have to be built. Presently, there are about 37,000 rooms in Singapore. Based on new supply under construction, some 11,000 rooms will come on-stream by 2010. This includes 4,300 rooms from the two integrated resorts at Marina Bay and Sentosa. It is estimated that in 2010, a total of 14 million foreign visitors will visit Singapore. Based on a conservative average stay of 3.4 days, the city-state will experience an acute shortage of at least 35,000 rooms from now till 2010. Come next September, the F1 event alone will bring an estimated 50,000 visitors. In short, our existing hotel stock needs to be doubled in the next three years to meet surging demand.

To meet this need, the government has since 2006 offered 25 hotel sites for sale. Of this, 10 sites valued at $2.4 billion million have been acquired by developers. In addition, 11 hotels have effectively changed hands. Total private hotel investments soared to over $1.3 billion. Another two hotels, Paramount Hotel and Mitre Hotel, are either under negotiation or waiting for a finalised offer.

About 53 per cent or nine out of the total 17 hotel properties (including government sites), were sold to international investment funds, foreign hoteliers and investors since 2006. In the recent Beach Road tender, USbased Elad Group and Dubai-based Istithmar are joining forces to develop a $2.7 billion integrated hotel, office and retail project. The strong interest from foreign investors shows their astute reading of the opportunities arising from the shortage of Singapore hotel rooms, as well as the potential of reaping higher yields from room-rate increases. It is this overwhelmingly positive outlook that is driving investors’ appetite.

In the first half of this year, the average occupancy rate (AOR) hit a high of 86 per cent with average room rates (ARR) reaching $189. STB recently announced that ARR had increased to $210 in June, the highest rate ever achieved. AOR in July hit 91 per cent, a whisker shy away of November 2006’s 13-month peak of 92 per cent.

With the third and fourth quarters typically being the busy period for hoteliers, room charges and occupancy rates are likely to be maintained or surge further.

For 2008, we are projecting that AOR will test the 90 per cent level with ARR expected to grow by at least 15 per cent from current levels.

With higher occupancy and rising room rates, the burning question is: Can Singapore hotels maintain their competitiveness to continue attracting foreign visitors? The answer is a resounding yes, based on the following reasons.

Singapore ranks sixth out of 15 key Asian cities in terms of ARR, according to a recent Cushman & Wakefield survey. Tokyo has the distinction of having the highest room rates in Asia followed by Hong Kong.

The government has been releasing more three-star hotel sites as part of its strategy to have enough affordable class hotels. These hotels cater to budget-conscious tourists, predominantly from South-east Asia, China and India.

The hotel sites on the government sale list tend to be located at the city fringe such as Alexandra Road and Bencoolen Street. The latter is where Accor’s Ibis three-star 538-room hotel will be built.

The opening of Changi Airport’s Terminal 3 in January next year is set to bring in a steady stream of foreign visitors. The new terminal is capable of handling up to 22 million passengers a year and some of the world’s largest aircraft.

Despite the US sub-prime lending setback, Singapore’s hospitality sector is experiencing one of its strongest recoveries in over a decade. The market is at the initial stages of takeoff as the high-impact tourism projects start to unveil from 2008. This is when the world’s tallest observatory, the Singapore Flyer and the F1 Grand Prix take centrestage in thrilling visitors from around the world.

A year later, all eyes will be on the opening of Marina Bay Sands, which will be the most expensive casino-cumintegrated resort ever built. In 2010, Universal Studios and Resorts World will open their doors to charm a global audience.

Some cities looking to break onto the world stage have looked to hosting mega catalytic events like the Olympic Games, which would instantly give them global city status. Singapore has its own booster in the high-impact tourism projects that will be ready between 2008 and 2010. These should collectively propel Singapore to a different league in the global travel and hospitality industry.

 

Source: Business Times 27 Sept 07

Getting the right look

Looking to dress up that brand new home? Here’s a peek at some of the latest trends in furniture design

THE humble sofa is set to get all touchy-feely, judging by the emerging trends from the design capitals of the world.

Furniture designers often take their cue from what is put on show at cutting-edge exhibitions like the International Furniture Fair in Milan. And this year, whether the designs were whimsical or staid, much attention appears to have been put into getting the textures just right.

Mod Living’s director of sales and marketing Kim Foo said: ‘There was a lot of research and development done on manufacturing techniques and combinations of different and new materials for production.’ Putting your finger on the right trend is not just about being avant garde. It is also about good business, as Ms Foo well knows.

For Mod Living, Ms Foo estimates that their customers generally spend about $40,000 to furnish a living and dining room. This may sound like a lot but a good sofa can easily cost upwards of $10,000.

If you are looking to buy your next armchair, you might want to invest in exotic timbers too. Ms Foo expects a return to natural timbers with accentuated wood grains, ‘especially wood species from South Africa’.

A trend that has endured for several seasons now is classical styling with a modern twist, notes Ms Foo. For Mod Living, the Nube Sir armchairs epitomise this fascination. A combination of a traditional Chesterfield-inspired club chair with its typical deep, quilted-leather upholstery and state-of-the-art moulded teak-wood panels, the Nube Sir armchair consists of materials and technology that are as disparate as two ideas can possibly be, yet it somehow makes sense.

Retro designs still maintain their hold on the market as re-launched fabrics and designs from the 1950s and 1960s still prove popular. Examples of this are Moroso’s Print sofa by Marcel Wanders and Pierre Paulin’s Le Chat chair for Artifort, both brought in by Mod Living. Le Chat, designed in 1967, has been re-issued in a vintage fabric designed by Jack Lenor Larsen.

And this mood for visual experimentation is already catching on here. Nanyang Academy of Fine Arts’ (Nafa) head of the school of visual arts, Sabrina Long, who also makes a point of visiting fair shows around the world predicts more cutting edge designs too. ‘There was a lot of exploration into materials and technology,’ she noted of her recent jaunts.

These trends are, of course, nothing if they do not filter down and get accepted by the mainstream. It remains as art otherwise.

But already, touchy-feely designs by local designers are emerging, most recently by Sarafina Han Sisi, also a Nafa alumni whose hand-made ottomans or mini sofas made of PVC balls and covered in yarn take experimentation to an extreme. On Ms Han’s design, it is, ‘the willingness to explore a new material and execution’, that makes it very ‘current’, says Ms Long.

The truly creative, however, do not wait until something appears in a catalogue before recognising it as good taste.

Rather, they go in search of it themselves. And architect Andrew Tan of Seeds Architecture is finding inspiration in casinos. But it is not the obvious ‘casino style’ that appeals but rather the concept of ‘excess’ and the materials and textures that this implies.

Mr Tan also believes rich textures like leather will remain a mainstay in fashionable homes in the form of large sofas, preferably by Fendi. But these could be layered with bold foral prints, not unlike those that appeared on wallpapers not too long ago. ‘But wallpaper is out now,’ he says.

There are limits, though, to excessive excess. Chandeliers made a huge comeback several years ago for its outre glamour. Cheap imitation ones have since flooded the market – the scourge of most trends – and they hardly have the same appeal anymore.

Instead, stick to quality materials, suggests Mr Tan. ‘Swarovski makes chandeliers that are both modern and classic,’ he says. Any designer who can manage that will have a sure hit on their hands.

 

Source: Business Times 27 Sept 07

The changing face of office space

CALVIN YEO looks at how the development of New Downtown at Marina Bay will shape new offerings in the current CBD

WITH demand for office space in Singapore outpacing supply in the last three and a half years on the back of healthy economic growth, rents have been surging, with prime space seeing a rise of over 200 per cent since the lows of 2004.

Monthly gross rents of Grade A space in Raffles Place grew by a phenomenal 222 per cent from an average $3.95 per sq ft at the trough in Q1 2004 to a record $12.69 psf as at end Q2 this year. Occupancy of office space islandwide hit 92 per cent as of Q2 2007 – the highest level since Q3 1996, with most prime office buildings enjoying near full occupancy.

Against this backdrop of soaring rents and a dearth of supply, office tenants are eagerly awaiting new office stock coming to the market. This will largely comprise prime office developments in the New Downtown at Marina Bay.

Assuming the two new white sites at Marina View currently on tender are developed by 2011, the New Downtown would yield some 5.4 million sq ft of prime office space. This is equivalent to 47 per cent of the current Grade A stock in Raffles Place and Shenton Way/Tanjong Pagar.

The New Downtown at Marina Bay will not only give the Central Business District (CBD) a new skyline, but could also spur higher building standards in the existing CBD. When landlords of existing Grade A buildings in Raffles Place and Shenton Way/Tanjong Pagar redevelop or retrofit their properties in the coming years, they will have to raise their specifications to match those of offices in the New Downtown to stay competitive.

Among other things, this new office space will offer specifications and services catering to the evolving needs of multinationals and match the top standards found in other regional markets such as Hong Kong and Shanghai.

Examples of such specifications include:

• Larger floor plates in excess of 20,000 sq ft, against the current average of 13,000 sq ft

• Enhanced efficiencies with column-free regular floor plates

• Floor-to-ceiling heights in excess of 2.7m

• More robust technical infrastructure, such as dual-feed power supply to overcome power failure, and dedicated emergency power feed.

• New-generation prime office stock in the existing CBD can also be expected to offer services such as regular tenant feedback meetings.

  An increasing number of companies are also looking to raise the quality of the work space, as an attractive office environment becomes key in recruiting and retaining the best talents, comprising largely the Generation X and Y workforce who drive change. Such an enviroment will also boost overall productivity. As such, we can expect future Grade A office supply in the existing CBD to feature the following:

• Maximum work space adjacent to natural light and views

• Good ventilation

• Minimal noise intrusion from building mechanical services

• Use of non-health hazardous building materials

• Dedicated higher capacity IT fibre connectivity

• Uninterrupted power supply.

  With companies becoming more environmentally aware, tenants would also prefer to locate in an environmentally friendly office building. This would include features such as efficient energy and water consumption and conservation systems, as well as measures on indoor pollutants against the corresponding green building maintenance and operational guidelines.

  Hence, many redeveloped or retrofitted Grade A office buildings in the CBD can be expected to seek a Green Mark certification from the Building and Construction Authority.

  In fact, the gentrification of the current CBD had already begun with the redevelopment of buildings such as Crosby House, Ocean Building and Overseas Union House. By 2011, some 3.5 million sq ft of redeveloped Grade A office space in the current CBD is expected to be completed.

  Landlords of other older buildings in Raffles Place could choose to retrofit instead. For example, the landlords of 6 Battery Road, Singapore Land Tower and UOB Plaza II have opted for retrofitting. This includes re-cladding the building façade, creating space for cafes, installing multi-media screens, and upgrading lifts, lobbies, toilets and carparks. With this, they can command top rents and occupancy rates.

  Second-tier buildings, such as those built on smaller footprints, could find a niche catering to tenants who do not require the most prime office locations or large floor plates. The answer is the boutique office, typically a high quality office building with a smaller footprint. These developments have small floor plates and target smaller space users such as fund managers, private banks, re-insurance firms, professional services firms and regional offices. They offer tenants the prestige and exclusivity of being a full-floor tenant.

  The live, work and play concept is taking root here so tenants would appreciate features such as shower and fitness facilities and common break-out areas with wireless computer access and flexible after-office hours airconditioning arrangements.

In this context, the clustering of eateries, convenience stores, laundries, mobile devices support centres, and covered walkways could just make buildings along a street collectively more attractive.

Some might say the current CBD lacks character. But with the New Downtown as catalyst, the older part of the business district could see an innovative repositioning that would help Singapore’s office market gain depth and breadth, catering to a broad range of tenants, from MNCs to boutique operations.

The writer is director of commercial leasing, Colliers International

Source: Business Times 27 Sept 07

Can the credit crunch dent prime office market?

MEGAN WALTERS and ALVIN TEO examine the impact of sub-prime woes on the real estate needs of financial institutions here

Singapore’s fast growing financial sector has been a major user of prime office space and helped fuel the strong growth in rental and capital values of late. But the recent credit crisis in global markets stemming from defaulting US sub-prime loans has put a dampener on the financial sector.

At the start of the sub-prime fallout in July, Asian banks were thought to be relatively insulated from the problems.

But by the end of August, banks, including DBS and the Bank of China, appeared to have greater exposure to US mortgage debt than previously thought.

DBS admitted to $2.4 billion exposure to collateralised debt obligations (CDOs), double what the market had expected. The Bank of China saw its share price fall 8.1 per cent when it became apparent that it held $9.5 billion or 3.8 per cent total securities investments in CDOs.

What will be the effect on the Singapore office market from this shake-up in the banking system? Cushman and Wakefield examine the issue by looking at the performance of the top 25 office buildings here.

Financial services are a key part of the Singapore economy, making up 20 per cent of GDP. More importantly, financial services’ annual GDP growth was 17 per cent for Q2 07, more than double the manufacturing GDP growth rate of 8.3 per cent on the same basis.

Manufacturing is the largest single component of GDP accounting for 45 per cent GDP, but the growth rates in financial services means banking and related services is catching up fast.

The Singapore Department of Statistics found that for Q2 07, the financial services industry did extremely well with turnover growing at an astounding 39.7 per cent on an annualised basis.

A slowdown in the American economy is now expected – with higher borrowing costs, and falling house prices affecting US consumers. With the health of the financial sector dependent on the health of the main economy, the question is: to what extent is the slower growth of the US going to affect the financial sector in Singapore?

This will be two ways: first, the health of the general economy in Asia and, more specifically Singapore, and the second, where the interrelated nature of the financial markets means a downturn in the US financial sector will squeeze the financial sector here.

Of the two issues, the first – the general economic outlook for the region – is still very positive, whilst the second – the financial markets themselves – are still uncertain.

Following a review with 480 companies in seven Asian cities, including Singapore, IMA Asia, a consultancy firm, has revised its economic forecast for Asia (excluding Japan) upwards from 7.4 to 7.9 per cent for 2007 and 7.1 to 7.6 per cent for 2008, despite a substantial cut in the US GDP forecast.

The effect of the risk in the financial markets is much harder to judge – with no one really certain where the risk currently lies. This will be an issue for banks, uncertain whether to expand their regional operations to meet the projected regional growth, against the backdrop of uncertainty in the financial markets. What will be the effect of difficulties in the financial markets on Singapore prime office markets? As at end- August 2007, Singapore prime office rents are $12.21 psf/month with the Top 25 buildings at $12.28 psf/month.

It is expected that any immediate effect on the local prime office market will come from banks as tenants. Most banks are not the owners or landlords of the top 25 office buildings. The majority of the buildings are owned by local property developers or, most recently, funds.

C&W research has found that banks and financial institutions occupy nearly 40 per cent of floor space or nearly 4.8m sq ft in the top 25 prime office buildings, a long way ahead of the next largest category of occupants – professional services firms such as auditors and lawyers.

Given the current volatility of the market triggered by the sub-prime lending in US and the most recent fear of a liquidity crunch, would this affect this group of occupiers in their aggressive expansion plans as we have witnessed in the past 18 months?

A squeeze on bank profits from the credit crunch may result in a reduction in headcount, as already seen in Lehman and HSBC in the US, which will lead to some secondary supply back on to the market. It is possible that this may affect the developers in the real estate markets, but to date we have no evidence of any problems for developers occurring as a result of the current credit crunch.

We have consistently witnessed space being taken up due to expansions and new set-ups. Although at a slightly slower pace as compared to the first half of the year, it is largely due to a lack of supply of good class office buildings.

Vacancy rates are consistently hovering at only one per cent for this group of buildings. Many large financial institutions are also aggressively pre-committing spaces even before the building is constructed and this was best demonstrated in Marina Bay Financial Centre where the entire Tower 1 of about 600,000 sf was pre-leased three years ahead of the building completion! They include tenants like Standard Chartered Bank and French investment bank Natixis.

With 70 per cent of the Top 25 buildings achieving full occupancy consistently, many businesses have also resorted to reconfiguring their existing premises to contain more headcount due to shortage of spaces for their expansions.

The fundamentals of the Asia-Pacific economies remain strong with GDP rates remaining robust. Singapore’s own GDP figures have just been revised upwards by MTI from 5-7 per cent to an upbeat 7-8 per cent range. It is possible that the credit crunch will have little effect as fundamentals remain strong, and Singapore remains a competitive place to do business. Any reduction in headcount by banks and freeing up of supply will more than be met by demand from other sectors.

However, sentiment plays a strong part in stock markets particularly in Asia. In the longer term, the current market wobble may lead to a correction in prices which will affect firms’ expansion plans, and the banks’ willingness to lend.

 

Source: Business Times 27 Sept 07

Bright outlook for S-Reit market

With more overseas players seeking to list here and strong backing from the government to strengthen governance and the operation structure of the market, Singapore is fast developing into a regional Reit hub

SINGAPORE has established itself as one of the most developed markets in Asia for real estate investment trusts (Reits), supported by new listings and active acquisitions by existing Reits.

Reits have been the bright spot in the Singapore capital market and a major driver in the growth of market capitalisation on the Singapore Exchange (SGX). Currently, there are 17 Singapore Reits (S-Reits) listed on the SGX with a total market capitalisation of more than $25 billion as at end-August.

S-Reits have come a long way since the first retail Reit, CapitaMall Trust (CMT), was listed in 2002. The subsequent raising of the gearing cap from 25 per cent to 35 per cent contributed to the burgeoning market.

The investment trust framework allows an attractive level of tax-efficiency. S-Reits are granted tax transparency status, waiver of stamp duty and exemption from capital gains tax. Individual investors are given tax exemptions on Reit payouts. For these reasons, Reits have spurred considerable interest among investors and are now widely accepted as a high-quality investment option.

S-Reits themselves have been growing through acquistions. A total of $6.14 billion worth of properties was acquired by S-Reits in 2006, representing 20 per cent of the year’s total investment sales. This was also 39 per cent higher than the $4.41 billion of total assets acquired by S-Reits in 2005. So far this year, S-Reits have acquired properties of more than $3.7 billion.

Commercial Reits contributed the bulk of investment sales made by S-Reits in 2006 by acquiring a total of $3.84 billion worth of assets or 63 per cent of the total acquisition costs ($6.14 billion). The most significant transaction made by commercial Reits last year was the joint acquisition of Raffles City by CapitaCommercial Trust and CapitaMall Trust for a total of $2.17 billion, representing the highest price paid for any investment transaction in 2006.

So far this year, commercial Reits continue to account for the largest proportion of investment sales made by SReits, contributing $2.16 billion in transacted value or 58 per cent of the $3.71 billion in total investment sales. It was announced recently that both K-Reit and Suntec Reit have each acquired a one-third stake in One Raffles Quay for $1.88 billion. In addition, CapitaLand divested its interest in Wilkie Edge, a commercial-cum-serviced residence development, to CapitaCommerical Trust for $182.7 million.

The potential for further growth in the S-Reit market is substantial. The development of the S-Reit sector is largely supported by the proactive initiatives of the Monetary Authority of Singapore (MAS) to enhance their competitiveness in the region. In a move aimed at making Singapore a major Reit hub, the MAS released a consultation paper on proposed amendments to the Reit regulations in March. Key proposals include improving disclosure on short-term yield enhancing arrangements and their impact, allowing Reits to pay dividends in excess of current income, removing the aggregation rule for transactions with the same interested party and prohibiting discounts to institutional investors during IPOs.

An increasing variety of asset classes is expected to be listed as Reit vehicles in the medium term, beyond office buildings, shopping malls and industrial properties. Following the launch of the first healthcare S-Reit, First Reit, Lippo Group announced its plans to list two more S-Reits in the near term, 12 of which are shopping malls located in Jarkata with a total lettable area of 500,000 sq ft. The initial portfolio of the group’s third Reit will comprise commercial properties outside Indonesia, such as office buildings in Singapore, China and Hong Kong, worth about $2 billion in total.

JTC, the largest industrial developer in Singapore, announced its plan to list an industrial S-Reit in the near term.

Its initial portfolio, estimated at $1.4 billion to $1.6 billion, will include flatted factories, ramp-up and stack-up factories, three multi-tenanted business park buildings and a warehouse.

Pramerica Asia was reported to be looking to divest its retail property portfolio via a Reit. Shopping malls to be injected into its $1-billion initial portfolio include Century Square, Hougang Plaza, Tiong Bahru Plaza and White Sands. Mapletree Investments was also reported to be planning to launch a commercial trust with VivoCity as the anchor asset, valued at an estimated $1.6 billion to $2 billion. Other properties likely to be included in this Reit are St James Power Station, HarbourFront Centre, a 60 per cent stake in HarbourFront Towers One & Two, a 30 per cent stake in Keppel Bay Tower, PSA Building and PSA Vista. The total value of the entire portfolio, including VivoCity, is estimated to be $3 billion.

While the Singapore government continues to strengthen governance and the operation structure of S-Reits, it is also striving to turn Singapore into a regional Reit hub, which will give Reits direct and ready access to capital.

More incentives are being provided for local and foreign companies to establish cross-border Reits, to hold overseas properties on other bourses as a strategy to expand their portfolios. Geographically, more than $20 billion or 81 per cent of the total asset portfolio held by S-Reits are local properties and the remaining 19 per cent or $4.77 billion worth of portfolio are overseas assets.

The outlook for the S-Reit market remains positive as more Reit issuers divest their overseas assets into Reits here.

More sophisticated Reit products will be developed over time. An Indian-based developer, Embassy Group, was also reported to be looking at launching a Reit in Singapore with a portfolio comprising some of the group’s business parks in India.

Indonesian property developer, Gapura Prima Group, will be teaming up with Malaysian developer (Amanah Raya Bhd) to launch a Reit on the SGX in the near term. Its initial portfolio will comprise five malls in Indonesia and another two in Malaysia worth $400 million in total.

Tokyo-based Asia Pacific Land Group plans to list a Reit in Singapore, with an initial portfolio comprising some of its retail and office properties in Japan worth $2.3 billion in total. Another Tokyo-based real estate fund manager, Re-plus, plans to launch an S-Reit in early 2008, with a portfolio comprising two China office buildings worth at least US$400 million.

Saudi Arabia-based property developer, Tanmiyat Investment Group, was reported to be looking to launch an SReit with an initial portfolio of developments in Saudi Arabia, the United Arab of Emirates, Turkey, Jordan and Sudan, worth a total of $13.6 billion.

As Reit portfolios become more diversified, more so than in the mature US and Australian Reit markets, Reit managers in Singapore are challenged to find ways to increase yields of the various asset types to make it more attractive for investors.

Certainly, Reits have added a dimension to the real estate investment and capital markets that appeals to both investors and property companies. The expected growth in Reits would have a positive impact on the broader market as it adds depth to the market and gives investors here wider investment choices.

 

Source: Business Times 27 Sept 07

Jalan Sultan conservation shophouses up for tender

SEVENTEEN two-storey conservation shophouses opposite KeyPoint at Jalan Sultan were yesterday offered to suitable investors by the Urban Redevelopment Authority (URA). The reserve-list site is 0.14 hectares in size.

A URA spokeswoman said: ‘The land parcel can be put to commercial uses such as hotel, office, shops and restaurants. There is no control on the quantum but detailed proposals for the use and layout within the shophouses are subject to approval of all relevant Competent Authorities.’

Knight Frank reckons the plot will attract good demand from boutique hotel developers and those keen on turning the units into office space, given the supply crunch in these two sectors.

When restored, the shophouses would also be suitable for housing food and beverage outlets, in line with the proliferation of such venues in the Kampong Glam Conservation Area where the latest parcel is located. ‘Tender prices are estimated in the $7 million to $10.2 million range, equivalent to $470 to $680 per square foot of land area,’ Knight Frank director Nicholas Mak said.

Its auctions director, Mary Sai, a veteran in the shophouse market, reckons investors will offer the URA around $500,000 to $600,000 per shophouse unit. ‘The restoration cost will amount to about $400,000 to $500,000 per shophouse, bringing the all-in investment to around $1 million or more per shophouse unit.

This is in line with the $1.2 million to $1.3 million that sellers of 99-year leasehold restored shophouses with land areas of under 1,000 sq ft are generally seeking,’ Ms Sai said.

URA will launch the reserve-list site for tender only if there is a successful application with an undertaking to bid a minimum price that is acceptable to the state.

 

Source: Business Times 26 Sept 07

Singapore office rentals still competitive

COMPANIES are paying more for labour and rentals in Singapore than before, but prices are still competitive compared to global cities such as London, New York, Tokyo and Hong Kong.

Minister Mentor Lee Kuan Yew pointed this out yesterday, but said the Government would ensure prices stayed lower than countries ‘in a similar position’.

This is so that Singapore can stay competitive.

‘I think we should be able to manage that,’ Mr Lee said. ‘I believe we’ve got to watch it closely, make sure that it doesn’t run away and get us into an uncompetitive fashion.’

He gave this assurance at a dialogue which followed the inaugural Singapore Maritime Lecture. A member of the audience asked how Singapore was balancing its bid to be a cosmopolitan city, with the need to stem soaring costs.

Mr Lee noted there was a property crunch now, with both commercial and residential sectors hit, as a result of the ’sudden influx’ of bankers and top corporate types. However, the Government has already taken action to tackle it, he said.

‘I think we can sort it out in two to three years. In the meantime, we have put into our plans some release of buildings from one use to another in order to loosen up the market,’ he added.

On Monday, the Government also released a second temporary office site for sale to help ease an office crunch that has sent rents and prices soaring.

 

Source: The Straits Times 26 Sept 07

Second transitional office site released

THE government yesterday launched for sale its second transitional office site in a bid to improve the supply of office space.

Market watchers estimate that the 1.2 hectare site in Tampines could fetch about $100 per square foot per plot ratio (psf ppr) – which works out to some $12.4 million in total.

The land parcel is the second transitional site offered by the Urban Redevelopment Authority (URA) as office rents in Singapore continue to climb amidst a supply shortfall.

Transitional office sites are expected to help tide over the space shortage until new supply starts to kick in from 2009 onwards.

URA in August awarded the first transitional office site at Scotts Road. That site attracted 11 bidders, with the winning bid coming to $37 million, or $219 psf ppr.

The new site, which has a maximum gross floor area of 124,000 sq ft and a 15-year lease, is expected to fetch a lower price as it is not in the central area.

‘The Scotts Road site can fetch rents of between $7 and $8 psf per month, while this site will be able to get only about $4-$5,’ said Ku Swee Yong, director of marketing and business development at Savills Singapore.

Some experts were more bullish, however.

Knight Frank director of research and consultancy Nicholas Mak expects the site to fetch between $200 and $260 psf ppr, similar to the Scotts Road site. That price works out to $24.8-$32.2 million.

‘With the current absorption rate of office space at 91.9 per cent, coupled with a shortage of Grade A office space in the prime area, demand for suburban offices with good location and well-developed infrastructure is in strong demand,’ said Mr Mak.

‘The office space that will be developed on this site is likely to be attractive to banks and financial institutions to house their backroom operations.’

The land parcel is located at Tampines Concourse/ Tampines Avenue 5 – within the established Tampines Regional Centre.

The upcoming office building will be within walking distance of the Tampines MRT station and bus interchange.

The building is expected to be a low-rise development of about three storeys that can be built quickly in about a year, URA said.

 

Source: Business Times 25 Sept 07

Second short-term office site released at Tampines

THE Government has released a second temporary office site for sale, this time at the Tampines Regional Centre.

This followed the strong response to a similar plot along Scotts Road last month, which drew a better-thanexpected 11 bids.

The two sites are the first plots of office land to be offered in Singapore on 15-year leases as part of the Government’s efforts to ease an office crunch that has sent rents and prices soaring.

The Tampines plot ‘will continue to help meet the demand for office space in the short to medium term’, the Urban Redevelopment Authority (URA) said in a statement yesterday.

Located at the corner of Tampines Concourse and Tampines Avenue 5, the 1.15ha site can be built up to a maximum gross floor area of about 124,000 sq ft.

A low-rise development of about three storeys can be built on the plot ‘quickly in about a year’, the URA said.

While they expect a good level of interest in the Tampines parcel, property consultants said competition for it is likely to be less keen than that for the Scotts Road plot.

The 1.04ha site, next to the Newton MRT station, drew a top bid of $37 million, or $219 per sq ft per plot ratio (psf ppr).

Mr Donald Han, managing director of property firm Cushman & Wakefield, said the Scotts Road site was hot due to its prime location.

In contrast, the Tampines plot is in the suburbs. It will also be competing with nearby sites at the Changi Business Park, which are sold on short-term, 30-year leases.

Mr Han expects five or six bids for the site, which are likely to be lower than the price fetched for the Scotts Road plot. Offers could range from $140 to $160 psf ppr, or about $17.3 million to $20 million, he said.

‘On top of everything, the market now expects that more transitional sites will be released,’ Mr Han added.

Mr Nicholas Mak, director of research and consultancy at Knight Frank, predicted, on the other hand, that while the Tampines site would fetch fewer bids than the Scotts Road plot, the bid levels would be the same.

‘Suburban offices with good locations and well-developed infrastructures are in strong demand,’ he said.

His estimate for the site: $24.8 million to $32.2 million, or $200 to $260 psf ppr.

 

Source: The Straits Times 25 Sept 07

LEASEBACK DEAL – MapletreeLog pays $15m for Tuas warehouse

MAPLETREE Logistics Trust Management (MapletreeLog) has bought a warehouse in Singapore for $15.2 million, marking the latest in a rapid run of acquisitions over the last few months.

Yesterday, it announced that it had bought the warehouse in Tuas from Pioneer Districentre, which will lease back the property for seven years – with an option to extend it for a further seven years.

MapletreeLog chief executive Chua Tiow Chye said that this acquisition adds to the trust’s stable core of Singapore properties which will generate long-term and stable returns for unitholders.

‘Given the tight supply situation for high quality logistics real estate in good locations, rentals and capital values are expected to remain firm,’ Mr Chua added.

Just last week, MapletreeLog said that it is investing $92 million in a distribution centre in the Kanto region of Japan, a key logistics area.

The tenant will have a lease tenure of 20 years, which the trust sees as complementing the shorter-term leases it has in its portfolio in higher-growth markets such as China, Hong Kong and Malaysia.

Earlier this month, MapletreeLog completed the purchase of two properties in Selangor, Malaysia for just under RM30 million (S$13 million).

Prior to yesterday’s purchase, its most recent buy in the Singapore market came last month. MapletreeLog then bought four warehouses for $36.8 million from mainboard-listed Union Steel Holdings, which will lease them back for six years, with an option to extend for another six years.

All four properties are located in the Tuas area.

Last Friday, the Reit’s units closed unchanged at $1.17. While the share price was as high as $1.46 in May, it has since lagged behind the broader market.

It is now roughly at the same level as at the start of the year, while the Straits Times Index is still 18 per cent up.

 

Source: The Straits Times 24 Sept 07

Home market will grow even if punters retreat: report

Developers may go for higher volumes, lower margins in mass, mid-segment

(SINGAPORE) Recent events could make the residential property market vulnerable to declines in collective sales and speculative activity.

However, Goldman Sachs believes that other demand drivers such as the increase in resident population will help mitigate the fall in those selling their homes through collective sales and looking for replacement homes.

It reckons there will be little adverse impact from a drop in speculation while foreign buying will be relatively sticky. And the silver lining from the recent market slowdown brought about by the sub-prime mortgage crisis in the US is that it has weakened reasons for the Singapore government to curb price rises, argues a paper by Goldman Sachs Global Investment Research.

‘Going forward, we think all developers will see more of their residential exposure being tied to mid- and mass market projects via new site acquisitions so as to meet expected demand in those segments.

‘We look for achievement of strong selling prices and take-up in forthcoming residential launches to demonstrate the strength of demand in the residential market and drive share price performance of Singapore developers,’ according to the paper, titled ‘Residential market shaken but still good for developers’.

The paper, authored by Goldman Sachs executive director (Asia-Pacific Investment Research) Leslie Yee, says the sharpest increases for Singapore residential property prices are over.

However, the operating environment in Singapore for developers is good, as they can still enjoy fat margins from developing their existing prime district residential landbanks, and reinvesting the money they make from selling such projects into mass/mid market sites where profit margins will be lower but volumes will be high.

‘We see developers achieving margins of about 20 per cent in mid to mass market projects and tapping into opportunities as population increases,’ Mr Yee said. He expects a positive demand picture, with net incremental annual demand of around 19,000 private homes over the next few years.

New demand will come from increases in the resident population, of which an increase in the number of permanent residents is a major driver; increase in the non-resident population; sellers of properties that are the subject of en bloc sales; and Housing and Development Board (HDB) upgraders.

The bank said its demand numbers do not factor in speculative buying. ‘Given the speed and scale of price increases this year, we think a fall in speculative activity benefits the property market in the longer run by reducing pressure for government intervention to cool prices,’ it added.

Goldman Sachs says it is not overly concerned about a decline in en bloc sellers looking for replacement properties arising from a near-term slowdown in collective sales amidst higher development charges and changes in legislation. This is because other components of demand will remain strong.

As for a slowdown in the supply of redevelopment sites if en bloc sales cool off, the paper argues that developers have enough residential projects on hand to execute, and the ability to acquire mid- and mass-market land from state tenders.

Goldman Sachs says it does not expect foreign buying, which has been instrumental in driving up residential property prices here, to dissipate as the factors attracting these buyers to the local property market – including transparency, openness to foreigners, and absence of capital gains tax – still hold.

Also, foreign buyers include permanent residents, whose property purchases here are likely to remain strong provided the momentum of new investments and jobs is maintained.

Goldman Sachs favours GuocoLand and City Developments for their leverage to the Singapore residential sector, accounting for 35 and 38 per cent respectively of their revalued net asset values.

In the mass segment of the private housing market, ‘we see strong domestic economic factors and rising HDB resale prices underpinning price performance’, the paper says.

‘We think the government will be happy to see HDB resale prices rise so that larger segments of the population can enjoy the fruits of Singapore’s success while continuing to ensure affordable housing for citizens through the HDB primary market,’ Goldman Sachs reasons.

 

Source: Business Times 21 Sept 07

House okays changes to en bloc sale rules

PARLIAMENT yesterday approved changes to the Land Titles (Strata) Bill, which spells out proper procedure for en bloc sales.

The changes will now become law sometime next month after it has been cleared by the President’s office.

During the second reading of the Bill in Parliament yesterday, Deputy Prime Minister and Law Minister S Jayakumar said that the changes are meant to provide more safeguards and transparency for all owners – and not intended to make it harder to reach a collective sale agreement.

‘We have to craft the amendments in a way that strikes a balance between trying to make the process more transparent and fair with suitable safeguards, while at the same time not making it unduly unmanageable or too onerous to bring about an en bloc sale,’ Prof Jayakumar said.

He was responding to Members of Parliament (MPs) who wanted more safeguards added to the Bill.

For example, one suggestion was to make it mandatory for developers to offer sellers a replacement unit within the same estate as their old property.

Prof Jayakumar explained that the government will not implement more safeguards this time round as he does not want to ‘micro-manage’ the en bloc process.

However, the Ministry of Law will not ‘close shop’ and forget about the issue, he said: ‘This review by my Ministry and the Strata Titles Board and the Singapore Land Authority will be an ongoing one.’

For now, in line with several MPs’ suggestions, the Ministry of Law will see if a best practices guide for en bloc sales can be developed.

For now, the passing of the bill means that the en bloc process will change somewhat.

For example, a lawyer will have to be present when an owner signs the collective sales agreement.

Owners can also change their minds after signing the agreement within a five-day ‘cooling off’ period.

Prof Jayakumar also explained that the changes will not apply to projects that have already got the required 80 or 90 per cent majority – based on share value – before the start of the amended act.

 

Source: Business Times 21 Sept 07

Steep rates likely for F1 trackside hotel rooms

Companies seeking to entertain guests may have to pay top dollar for packages over race period

(SINGAPORE) Corporations preparing to entertain their guests at trackside hotels during the Singapore Formula One Grand Prix in September next year may have to dig deep into their pockets.

Though most hotels have not publicised their rates yet, indications are that guests may be charged several times the normal tariff when F1 fever is in full swing. Also, some hotels may not agree to let out rooms just for race night, but could sell packages for several nights.

Companies in a hurry to book rooms for their guests and clients have already started negotiating with the hotels and some have been quoted tentative rates.

One hotel that usually charges $900 a night for a suite tentatively quoted a package of more than $18,000 for the period leading up to the race.

This works out to a daily rate of around $4,000 a night.

Trackside hotels will pay a levy of 30 per cent to the Ministry of Trade and Industry for the five-day period between Sept 24 and Sept 28 next year to offset some of the expenses involved in staging the event. While the levy contributes to raising the rates somewhat, the period also coincides with the drivers’ practice sessions, qualification races and the main event itself – all of which are eagerly watched by racing aficionados. This also enables hotels to sell packages for the entire period for which the F1 circus will be in town.

While the hotels involved seem hesitant to pin down concrete prices, BT was tipped that the suites at one of the trackside hotels, Swissotel the Stamford, are already fully booked with a price tag hovering around $3,500 per night.

One source trying to book rooms for his company said that he had been quoted a tentative rate of around $1,300 a night at The Pan Pacific Singapore. The hotel refused to confirm this. Cheryl Ng, public relations manager for the Pan Pacific, said: ‘Based on the market forces of variable demand and supply, certain room rates have been finalised and extended to potential guests. There are many wait-listed enquiries regarding rooms during Formula One and we are in the midst of responding to interested parties.’

She added that the price floor and ceiling will not be apparent until the hotel has completed its entire pricing strategy.

Ritz-Carlton Millenia general manage Allan Federer told BT that similar rates would be offered to individuals and corporations, and differentials would arise only on the basis of room types and the view of the track during the F1 period. The official room rates would be released on the Ritz-Carlton website around the end of the month. At this point, the Ritz-Carlton has committed about 85 per cent of its guest rooms, with bookings largely stemming from both local and international companies.

‘The F1 is a terrific way to entertain your top customers,’ enthused Mr Federer, adding that the hotel began to confirm bookings from its wait-list about a month ago.

The Oriental director of communications Ruth Soh said that no official bookings have been made although the hotel has also been maintaining a waiting list for interested clients, consisting of both F1 enthusiasts and corporations. Various packages will be available in time to come, with prices to be determined by a confluence of factors such as room size, a view of the track as well as special amenities.

Other trackside hotels include The Fullerton, Marina Mandarin, Raffles Hotel, Conrad Centennial, Carlton Hotel and Peninsula-Excelsior.

Unsurprisingly, even non-trackside hotels – which will pay a levy of 20 per cent during the lead-up to the race – say that the response so far has been heartening. According to Thierry Douin, area manager and general manager for Shangri-La Hotel Singapore, there have been many inquiries from various race teams as well as travel agencies.

One factor that will decidedly influence the prices of hotel rooms is the time of the race. The world governing body for motorsports, Federation Internationale de l’Automobile (FIA), is expected to confirm soon whether – as expected – Singapore will conduct a night race. An affirmative response would be significant as it will mark the first night race in F1 history.

 

Source: Business Times 21 Sept 07

New, tighter rules for en bloc sales passed

Further changes may follow if necessary, Jaya tells MPs who want more to be done

A SLEW of intensely-debated changes aimed at making the red-hot collective sales market fairer was passed in Parliament yesterday.

The revisions – keenly watched since they were mooted in March – will make it harder for residential developments to go en bloc as they must fulfil more conditions.

And further changes may be in the works if they are necessary, said Deputy Prime Minister S. Jayakumar, also Law Minister.

He was responding to spirited appeals by several Members of Parliament yesterday, who peppered him with suggestions on how to further tighten the rules.

Most felt more could be done to protect the interests of minority owners and the elderly, who are often strongly opposed to selling en bloc but find they have no choice.

In response, Prof Jayakumar said that while their suggestions were not ‘without merit’, he was also concerned about not ‘micromanaging the process’.

‘We have to…strike a balance between trying to make the process more transparent…while at the same time not making it unduly unmanageable or too onerous.’

But he added that the ministry is not going to ‘close shop and forget about the process of en bloc sales’.

It will ‘monitor very closely’ the new laws and make further amendments if needed.

The changes have already had some effect on the en bloc market, even before they are due to come into effect next month.

Property players say they have spurred a rush among homeowners to go en bloc before the new rules make it harder.

But some consultants, like Knight Frank director of research and consultancy Nicholas Mak, say the changes may not have a large impact on the market.

‘They will add more procedural hurdles, but on the whole, they were not designed to slow down en bloc sales and they are unlikely to do so,’ he said.

More than 30 amendments were approved yesterday, after extensive public and industry feedback. They are meant to introduce more regulation into the market and ‘minimise complaints of harassment, unfairness and lack of transparency’, said Prof Jayakumar.

Key revisions include a five-day period for owners to change their minds after signing the collective sale agreement. Also to come are new rules on setting up a sale committee and new powers for the Strata Titles Board, which governs collective sales.

Another major change addresses an imbalance in voting rights in a mixed development. It adds an extra level of owner consent, by floor area, before a sale can proceed.

The amendments were beefed up in recent months after 400 suggestions from the public and discussions with about 40 industry experts.

They follow months of grievances from homeowners over a lack of clarity in collective sales, which have seen a spectacular record run in the last two years.

The need for more regulation has also been thrown up by cases such as that of Horizon Towers, where owners are being sued by the estate’s buyer over a botched collective sale.

Not to be outdone, MPs weighed in with their own proposals yesterday.

These ranged from not allowing ‘young’ buildings below 10 years of age to go en bloc to offering a one-for-one exchange of units in the new development.

More than one MP also spoke of the non-monetary losses felt by owners forced to sell en bloc, and condemned ‘condo raiders’ who buy units in a development and push for a collective sale.

Nominated MP Kalyani Mehta suggested that only residents who have stayed in an estate for more than two years can sit on the sale committee.

Prof Jayakumar took these outpourings in his stride.

A two-year residency condition, he said, would discriminate against new bona fide homeowners. Replacement units are sometimes offered, but turned down by sellers for various reasons.

As for those concerned about younger buildings, he offered this statistic: since 1999, almost 70 per cent of developments that have been sold en bloc were more than 20 years old.

But he agreed to look into some proposals, such as a best practices guide and standard forms to help en bloc players.

 

Source: The Straits Times 21 Sept 07

All new buildings to go green from next year

IN A major push to make developers go green, the Government will require all new buildings to meet minimum environmental standards from next year.

Developers will be required to be more efficient in using water and energy than under current industry practice.

The Building Control (Amendment) Bill was passed in Parliament yesterday to give the Minister of National Development the power to impose the rules.

This latest change is perhaps the most significant extension of regulations so far to make buildings environmentally friendly.

The Building and Construction Authority (BCA) estimates the requirements would raise construction costs by just about 1 per cent.

But experts say the final figure would be even less – negligible in fact – if green features were factored into a building’s design from the start.

These could take the form of more efficient air-conditioning and lighting systems, water fittings or better insulation. More details of the rules will be released later.

Going green was optional for developers in the past. In December last year, the Government launched a $20 million incentive fund which private developers could use to make their buildings more environmentally sustainable.

In April, the Government required all new public buildings to meet green standards as set out by the BCA.

Under its two-year-old Green Mark certification programme, buildings are rated on how efficient they are in the use of water and energy, and their effect on their users’ health and the environment.

So far, 66 out of about 120,000 buildings in Singapore have received the Green Mark certificate, while another 25 are in the pipeline for this stamp of approval.

The BCA estimates that getting this minimum Green Mark standard would eventually shave 10 to 15 per cent off a building owner’s utilities bill.

Major developer City Developments, which has Green Mark certifications for 16 of its buildings, said the Government’s previous green initiatives had made the impending requirements easier to accept.

General manager for its projects division Eddie Wong told The Straits Times: ‘We believe that with early and efficient planning, green buildings can be both environmentally sustainable and financially successful.’

Meanwhile, another part of the Bill passed yesterday requires building owners to maintain facilities for the disabled. They will not be allowed to change, remove or block any features designed especially for these users. This would mean, for example, that they risk being penalised if they lock up a toilet built for the disabled.

 

Source: The Straits Times 21 Sept 07

71 Robinson Rd to be developed for $450m

Lehman Brothers- Kajima office project will be up by mid-2009

US INVESTMENT bank Lehman Brothers and Japan-based Kajima Corporation said yesterday they will spend about $450 million developing their upcoming office project at 71 Robinson Road.

The 280,000 sq ft building – aimed mainly at finance and banking companies – will be up by mid-2009, beating the nearby Marina Bay Financial Centre (MBFC) by about six months.

The price includes the $163.4 million the partners paid last year for the plot, which was the site of SingTel’s Crosby House.

Lehman and construction and property conglomerate Kajima have equal stakes in the venture.

The 15-storey building in the Central Business District (CBD) is designed to meet growing demand for space from global banks and financial institutions that want to establish or expand regional operations. For example, it will have purpose-built trading floors.

The building will come to market ahead of MBFC, which will offer some 1.6 million sq ft of office space in 2010.

MBFC has proved popular with financial institutions but is not fully leased yet.

‘There is no question there is an advantage in being quick to market,’ said Chris Archibold, regional director at Jones Lang LaSalle (JLL), which is marketing 71 Robinson Road. Space in the building will be leased at ‘market rate’, he said.

The project will benefit from rising office rents in the CBD amid a supply shortage.

JLL’s research shows Singapore will have about 2.3 million sq ft of new office space over the next three years – far short of the 5.1 million sq ft that will be needed, which will push rents up.

In just the first half of this year, Prime Grade A office rents in the CBD rose 44 per cent to $13.80 per square foot (psf), JLL said. It expects rents to hit $15.80 psf by year-end.

71 Robinson Road is Lehman’s first direct property investment in Singapore, said Blake Olafson, senior vice president of the bank’s global real estate group.

Kajima, on the other hand, has been involved in more than 200 projects in Singapore and has two luxury residential projects for launch – one at Balmoral and the other at Bishopwalk.

 

Source: Business Times 20 Sept 07

Servcorp expands in S’pore as office market booms

OFFICE space provider Servcorp is looking to expand in Singapore to take advantage of the booming office market here.

Last year, the Australia-based company grew the office space in its Singapore portfolio by 35 per cent with the opening of a new location in Prudential Tower and the addition of another level in Suntec Tower Three.

And now, it is looking to add another five Servcorp floors over the next three to five years.

Servcorp, which celebrated its 20th year in Singapore yesterday, leases office space in bulk from landlords, then re-leases the space to companies and provides office support – providing what it calls a ’serviced office network’.

It also offers ‘virtual office packages’, where a client can take advantage of a prestigious address, get a dedicated receptionist who answers calls in a company’s name and gain access to boardrooms and meeting rooms.

The group has about 64,000 sq ft of space under lease in Singapore – out of more than 800,000 sq ft worldwide.

But to ride the booming office market here, it wants to grow its portfolio.

‘Demand has certainly increased and we are seeing companies being much more bullish about their entry to the Singapore and Asian markets,’ said Alf Moufarrige, Servcorp’s chief executive. ‘Instead of setting up with only one or two people, they are starting with six or more people – which, of course, increases the demand for space.’

Enquiries for space have climbed by about 30 per cent in the past year, he said.

Due to the strong demand, the rents charged by Servcorp have also gone up, in line with the rent the company has to pay to its own landlords.

‘The commercial space market is definitely booming in Singapore!’ said Mr Moufarrige. ‘When I arrived in Singapore in early 2005, the asking rental for traditional space in Six Battery Road was $5.50 per square foot (psf). This is now at record levels of $18.50 psf.’

But there is still room for expansion, the company feels, as there are many office developments that are slated to come up over the next three to five years.

 

Source: Business Times 20 Sept 07

MGPA puts in record $2.02b bid for office site

All eyes are now on the plot next door, say consultants

(SINGAPORE) Macquarie Global Property Advisors (MGPA) is enlarging its footprint in the Singapore office market, putting in a record bid yesterday of $2.02 billion, or $1,409 psf of potential gross floor area, for a site slated for mostly office use.

Market watchers reckon MGPA’s all-in investment including land, construction costs and fees could be around $3 billion. The project could be completed around 2010.

The one-hectare plot, which is behind the One Shenton development and dubbed Marina View Parcel A, attracted just three bids in all. The 99-year leasehold plot can be developed into a maximum gross floor area (GFA) of 1.43 million sq ft, at least 70 per cent of which has to be set aside for offices.

Sources suggest Macquarie could be looking at an all-office scheme. Based on this, the sources estimate that Macquarie’s breakeven cost could be around $2,500 psf of net lettable area, and that it could be looking at exiting the investment at about $3,500 to $4,000 psf.

Said MGPA managing director Simon Treacy in a release yesterday evening: ‘The site presents a rare opportunity to develop a Grade A+ office building in the prime business district of Singapore where strong demand coupled with limited supply makes now an ideal time for high quality office development.’

Office industry watchers reckon that on a project-average basis, the development could fetch a monthly gross rent of around $12 per square foot and based on that, the net yield works out to 4.7 per cent on breakeven cost.

An all-office project could yield about 1.2 million sq ft net lettable area of offices. ‘An all-office configuration would provide opportunities to maximise the floor plate,’ said CB Richard Ellis executive director Li Hiaw Ho.

Macquarie’s bid was nearly 10 per cent higher than the second highest offer, believed to be from a joint venture between Mapletree Investments and CapitaLand ($1.8 billion, or $1,281 psf per plot ratio). The only other bid came from Malaysia’s IOI Group, at $1.6 billion or $1,128 psf ppr. Property consultants say that all eyes are now on the next-door, Marina View Land Parcel B, which is being offered for sale at an Urban Redevelopment Authority tender that will close on Nov 13. The 0.9-hectare plot can be developed into a maximum GFA of 1.22 million sq ft, of which at least 60 per cent has to be set aside for offices, and 25 per cent for hotel use.

MGPA’s bid yesterday of $2.02 billion is the highest ever for a state land sale in Singapore, pipping the total of $1.91 billion paid for the Marina Bay Financial Centre site in two phases, excluding the option fee.

The unit land price of $1,409 psf ppr is also said to be the highest for a primarily office site, surpassing the $1,104 psf ppr set in 1995 when Straits Steamship Land (now Keppel Land) bid for a site in the China Square area, which it later developed into what is today Prudential Tower.

It remains to be seen if MGPA will decide to team up with any partners for Marina View Land Parcel A. Assuming an all-in investment of $3 billion in developing this project, MGPA’s all-in investment in Singapore over the past year would cross $4 billion.

In March this year, an MGPA fund bought Temasek Tower for $1.04 billion or $1,550 psf of net lettable area. Late last year, MGPA made its maiden foray into Singapore’s real estate by buying 12 floors at Springleaf Tower on Anson Road for about $134 million, or $1,240 psf.

Source: Business Times 20 Sept 07

61% of Upper Serangoon Shopping Centre for sale

SOME 61 per cent of Upper Serangoon Shopping Centre has been put up for sale by its owner, who is asking for $35-37 million for the stake.

The price works out to an average of $595 to $629 per square foot (psf) over available floor area.

The 61 per cent share is made up of strata-titled units consisting of 66 shop units out of a total of 164, as well as the sole office unit and all eight apartments. The properties for sale have a total strata floor area of 58,750 sq ft.

Transacted prices of commercial units in the vicinity for this year are in the range of $600-770 psf, said Credo Real Estate, which is marketing the project.

The stake is being sold by the original developer of the building, Hong Huat Development Co, which is now in voluntary liquidation.

The property firm was previously trying to get owners holding at least an 80 per cent share value in the shopping centre to agree to a collective sale. But BT understands that the majority owner decided to go ahead and sell the 61 per cent stake rather than to wait.

Credo said that there is still an opportunity for an en bloc sale together with other proprietors who may be keen to explore the possibility.

The buyer can also embark on a refurbishment scheme to spruce up the units for potential higher rentals, the firm added.

The ageing Upper Serangoon Shopping Centre is a six-storey commercial and residential development on Upper Serangoon Road.

‘With its prominent visibility and good accessibility, Upper Serangoon Shopping Centre is an attractive investment to serious investors looking for higher returns compared with those of the residential properties,’ said Credo.

The area consists mainly of conventional landed housing and low to mid-rise residential and shophouse developments.

The tender for the property will close on Oct 17 at 2.30 pm.

 

Source: Business Times 19 Sept 07

Prime office rents up 3.3% in August

Raffles Place buildings led rise, with average rents there climbing 5.6%

PRIME office rents in Singapore climbed some 3.3 per cent in August to hit an average of $12.21 per sq ft per month (psf pm), Cushman & Wakefield’s new office report shows.

The property firm used a basket of about 50 buildings to calculate the average rent, managing director Donald Han said.

The firm, which also tracks the office rents for the top 25 Grade A office buildings within the larger basket of properties, said that rents for the selected 25 buildings rose to an average of $12.28 psf pm as at end-August, from $12.07 psf pm in July – up 1.7 per cent.

Last month’s rise in prime office rents was led by buildings in Raffles Place, Cushman & Wakefield’s data shows.

Average rents in Raffles Place climbed 5.6 per cent in August to hit $13.68 psf pm. Rents in the Orchard and Scotts area also rose some 2.2 per cent to $9.76 psf pm, while at City Hall/Marina Centre/Bugis, rents rose 0.3 per cent to $12.22 psf pm.

Mr Han expects overall prime office rents to hit $13.50 psf pm by year-end. However, rents at the top tier of Raffles Place properties will hit $19 psf pm by end-2007, he said.

He added that the US sub-prime crisis, which rattled markets here in August, will have little impact on the office market for the rest of the year. ‘Moving forward, you will still see an upside in terms of rentals,’ Mr Han said. ‘Subprime or no sub-prime, the fundamentals are still there for prices to keep climbing – there will still be a shortage of office space over the next few years.’

 

Source: Business Times 18 Sept 07

Drop in subsales points to more stable prices ahead

Speculation window seen closing, with prices in high-end sector peaking

(SINGAPORE) The number of property subsales – an indicator of speculative activity – appears to be stabilising, possibly even falling.

Some industry players even believe that this could mark the beginning of more stable prices in the months to come.

Official property statistics for the third quarter will not be out until next month but monthly figures tabulated by CB Richard Ellis show a surprising dip in the number of subsales between the months of June and July.

The July figures will be updated in time but the drop is still likely to be an estimated 5-10 per cent. This comes after numbers that have been rising consistently for the three months in the second quarter of 2007.

One explanation for this could be that the window of opportunity for speculators is closing, with prices in the highend sector peaking.

CB Richard Ellis executive director Li Hiaw Ho said: ‘If you don’t have sharp increases in prices, you don’t have property speculation.’

Speculators could also be discouraged by the volatility in the global markets. ‘Because of the sub-prime crisis, a lot of buyers are exercising caution,’ said Mr Li.

Another indication that speculators could be cooling off is that the number of returned options to buy new condos also appears to be dropping.

In January, the high-profile launch of One Shenton attracted many punters hoping to flip units before exercising their options. And even though it was fully booked within days of the launch, industry watchers believe that as much as 15-25 per cent of the options were returned in the following months when speculators failed to get their target prices.

Since then, there have been several more high-profile launches. Among the most notable ones were Orchard Residences – which has since set the record for the most expensive property in Singapore at $5,500 psf – and Scotts Square.

Both developers declined to reveal the number of options returned. But persistent talk in the market has it that ‘many’ options were returned for Scotts Square.

A source said that the figure was closer to about 5-10 per cent, which in comparison is perhaps not as high as might be expected for such a prime location.

CapitaLand’s Seafront on Meyer was launched in Q2 and saw queues of buyers forming at its showflat. Now 80 per cent sold, CapitaLand said that only 3 per cent of the options were not exercised.

One Rochester, another hot property launched in Q2, also saw queues at its showflat. Developer United Engineers Ltd (UEL) said that it was surprised that only 10 per cent of the options for the fully sold condo were returned.

UEL CEO and group managing director Jackson Yap said: ‘Initially, we had some concerns about the number of returned units as the option period coincided with the sub-prime crisis. We are rather happy that the number of returned units eventually stabilised at 10 per cent, which reflects a high proportion of genuine buyers who are confident of the strong fundamentals of the development.’

Speculators are very much a part of the market and do actually have a function as they help set the threshold prices that buyers are willing to pay.

UEL’s Mr Yap added: ‘We are in no urgency to sell the returned units, although there is a waiting list of genuine buyers, in this current market. We have more than covered our costs through the rest of the sales, and feel there is a need to protect the selling prices for a high-quality development like ours.’

One Rochester was sold at a price ranging between $900 psf and $1,600 psf. Whether these prices will go up could depend on how gung-ho speculators will be in the coming months.

The Soleil at Novena was launched last month and is almost fully sold. Developer UOL said that to-date, 42 per cent of its buyers have exercised their options. The remaining 58 per cent have until the end of the month to exercise theirs.

 

 

Source: Business Times 17 Sept 07

Sales of office units jump amid space crunch

SALES of office units have shot up this year in the face of a crunch in office space here.

An impressive $491.79 million worth of single units in larger office buildings has changed hands since January.

This already outstrips the $386.39 million in deals for the whole of last year, according to new figures from property firm CB Richard Ellis (CBRE), which tracked deals above $5 million.

The price of each unit has also surged. Last year, a record 24 office units were sold, but only 19 have been sold so far this year.

This means that, on average, each of the units sold this year is fetching a much higher price than those sold last year.

Compared with earlier years, this year’s sales look even more impressive. Only $95.21 million in single office deals were done in 2005, and $8.14 million in 2003, said CBRE.

These standalone office spaces, called strata-titled office units in the property industry, are owned by one-off investors or businesses, as opposed to an office block that belongs to a single owner.

Price rises have been dramatic. In buildings such as Suntec City, the prices of strata-titled office units have trebled over the past 18 months, CBRE data showed.

Demand for office space here has been soaring in recent months, pushing up both sale prices and rental levels, as a shortage of prime office buildings coincides with booming investor and business demand.

Due to the limited supply of buildings in the Central Business District (CBD), investor interest has extended to strata-titled office properties in the fringe areas of the CBD, said Mr Jeremy Lake, CBRE’s executive director of investment properties.

‘The rising number of strata-titled office transactions is a logical consequence of a tight office rental market,’ he said. ‘Rather than pay rentals of $12 per sq ft (psf) per month, investors are finding it attractive to buy a unit and cash in on the high rentals.’

The most popular buildings for such deals this year are International Plaza and Suntec City, Mr Lake said.

There were 43 office sales in International Plaza this year, just shy of its 45 deals for the whole of last year.

However, these deals ranged in price from $215,000 to $3.3 million, so they were not captured by CBRE’s analysis of strata office deals above $5 million.

In Suntec City Tower One and Two, seven deals had taken place this year, at prices starting from $4.61 million.

Mr Lake also said the prices of units in these buildings had skyrocketed in the past 18 months. At International Plaza, they jumped from $491 psf in January last year to $1,150 psf in July.

In the same period, prices of units in Suntec City Tower One nearly tripled from $850 psf to $2,200 psf.

In Suntec City Tower Two, prices doubled from $1,148 psf in March last year to $2,360 psf last month, a new high for the tower.

‘Investors’ demand for office units at these buildings has been strong due to the scarcity of this type of medium-sized office space located in the core business districts,’ explained Mr Lake.

He suggested that some buyers of these units could be ’small- and medium-sized businesses’ whose space needs can be met by small office units, unlike multinational companies, which take up entire floors in a single building.

Other buyers could include investors ‘who have pocketed some gains in the stock market and are looking at attractive investment options’, Mr Lake said.

He expects the number of strata-titled office deals above $5 million to hit a new record this year.

 

Source: The Straits Times 17 Sept 07

Green hotels gain, others spew hot air

Saving the environment can go with lower power bills, but many still reluctant to change

(SINGAPORE) In some parts of the world, conviction is driving hotels to go green. But, as several hotels in Singapore have concluded, common sense points to the same path.

The Far East Organization, for example, realised that its corporate electricity bill for all its properties across Singapore was $33 million a year. ‘Imagine if we can cut that by 10 per cent,’ said Chia Swee Cheng, assistant director of the group’s central engineering & operations department.

And so its Changi Village hotel has new boiler and chiller systems in place and a far more efficient energy use.

Over at the Grand Hyatt, Singapore’s first plant to produce electricity, steam and chilled water at a hotel is under construction. Along with the solar panels planned for a new garden conference room, the plant could slash Hyatt’s energy use by a third and save it $800,000 in bills.

While critics say that many local hotels pay only lip service to eco-programmes, there are others, led by Hyatt, who are changing mindsets, going green – and finding that it pays.

‘My impression is that all the hotel operators are serious about sustainability, but not necessarily all the owners, who have to pay for changes,’ said Robert Hacker of Horwath, a hotel consultancy. ‘Generally, all the international chains are taking on board green principles.’

The Regent Singapore, for example, in late 2005 replaced a diesel boiler for heating water with a heat exchanger that produces hot and cold water at the same time. This has cut energy use by a fifth.

And at the Shangri-La, energy use improved over 10 per cent through better work processes, such as using small ovens to prepare meals on demand, rather than keeping a large oven fired up all day just to reheat food. But critics like Tay Kheng Soon, architect and promoter of socially and environmentally conscious architecture in Singapore since the 1970s, say Hyatt is the only energy-efficient hotel in Singapore.

And though the National Environment Agency handed out the new Energy Smart label to some hotels last month, that is only a starting point, said Mr Tay. A more basic change might come about, in his opinion, if there were incentives to use renewable energy sources, like wind and solar energy.

Many hotels ‘hand-wave’ over cosmetic eco-programmes, like using hybrid cars to ferry guests or planting trees, but miss the ‘elephant in the room’ – like the efficiency of their chiller systems – said Lee Eng Lock, general manager of Trane, a US-based energy solutions firm and an accredited Energy Service Company (ESCO) here.

The Hyatt sets the bar but there is no reason why others should not follow suit, with high returns and backed by bank guarantees, said Mr Lee.

But business in the hotel sector is negotiated on the basis of relationships, so it is not necessarily the most efficient solutions that get selected, he said.

Luxury hotels in Singapore run at an energy intensity of 427 kilowatt hours of electricity per square metre of gross floor area, according to a study by the National University of Singapore (NUS) last year. This is down from the 468 KWh/m2 reported by Apec in 1999, but pales beside the under-300 KWh/m2 averages achieved in parts of Europe and Australia.

In other words, local hotels could be using up to 40 per cent more electricity than ideal.

Dr Lee Siew Eang, head of NUS’s Energy Sustainability Unit and leader of the study, recalls some four and fivestar hotels saying during the study that energy efficiency was ‘not relevant’ to them – since, as ‘posh hotels’, it was ‘their duty to be extravagant’.

Many hotel managers were not aware of how much energy their buildings were using. One hotel, which had wanted to apply for an eco-award, was found by NUS to be using an exceptionally high 800 KWh/m2, said Dr Lee.

That’s almost twice the industry average. According to the Singapore Hotel Association (SHA), which represents about 90 per cent of the total number of gazetted hotel rooms here, most hotels in Singapore pay attention to water and energy conservation. ‘In the long run, it makes good corporate sense for hotels to go green as it not only saves the environment but reduces costs,’ said SHA president Kay Kuok.

Whether the message has sunk home is another matter. With the two integrated resorts set to help up Singapore’s hotel room stock by over 10 per cent by 2010, it is a critical time to move into energy efficiency, said NUS’s Dr Lee. ‘The designs are being drawn right now. If we miss this chance, we have to wait another 20 years.’

 

Source: Business Times 15 Sept 07

Marina South: New choice area for homes

60ha site earmarked for ‘waterfront-garden living’; design contest seeks fresh ideas

THE Government yesterday earmarked a giant 60ha site right on the coast at Marina South for what it bills as ‘waterfront-garden living’ in the heart of the city.

The site, not far from the upcoming Marina Bay Sands integrated resort, is already being touted as Singapore’s future No.1 residential hot spot by property analysts.

The Marina South Residential District has spectacular sea views in one direction and lush greenery in the other, as it is right next to the upcoming Garden at Marina South.

Up to 11,000 homes are expected to be built in the district, which will also boast shopping malls, hotels, parks and schools.

The site will have roughly the same number of units as District 11, which covers Newton, Novena and Thomson.

To garner fresh, innovative ideas as inspiration for its development, the Urban Redevelopment Authority (URA) and the Singapore Institute of Architects yesterday launched a design competition for the site.

This is a first in the planning for residential districts, said URA yesterday. The competition calls on budding student and professional architects alike – local and foreign – to design a mini-city based on the experience of living in a waterfront garden.

It must also be distinctive, eco-friendly, and promote a strong sense of community.

The institute’s president Tai Lee Siang, one of the judges, told The Straits Times that ‘now is the perfect time to explore…ideas that have never been seen or tested here before’.

Yesterday’s announcement also marks a new chapter for Marina South.

The site is now home to SuperBowl Marina South and Victor’s Superbowl, along with seafood restaurants and wide open spaces.

These buildings will eventually have to make way for the new residential district.

Guidelines from the competition brief, available on the institute’s website www.sia.org.sg gives the project’s gross floor area as 1.5 million sq m and a gross plot ratio of five.

This sets the scene for high-rise, high-density housing, typical of the 50-storey public housing at the Pinnacle@Duxton and the 70-storey apartments at The Sail@Marina Bay, said property analysts.

It will cater to Singaporeans’ growing appetite for high-rise apartments with stunning views. Property analysts anticipate that demand for the site will be red-hot, if the economy remains robust.

‘This has all the makings to be Singapore’s number one residential hot spot,’ said Colliers International’s director for research and consultancy Tay Huey Ying.

When asked if any public housing will be built in the district, URA said detailed plans have not been finalised – but property consultants said this was very unlikely.

URA added that the project’s implementation will be decided when plans are finalised. It expects the district to be developed over a 15- to 20-year period.

The closing date for the competition is Nov 12. Up to 10 of the best ideas will be selected to share a cash prize of $50,000. The winning entries will be announced during the Singapore Design Festival 2007 in November.

Marina Bay Developments  

 

Source: The Straits Times 14 Sept 07

Big fall in Hungry Ghost month auctions this year

Market conditions cited for sale of only 10 out of 131 properties offered

OF the 131 properties put up for sale by auction during this year’s Hungry Ghost month, just 10 were sold – for a total value of $9.56 million – new data from property firm Colliers International shows.

This figure is one of the lowest seen in the past 10 years. The Hungry Ghost month was from Aug 13 to Sept 10 this year.

Colliers attributed the low sales volume to the current property market condition, factors affecting the world economy and new government policies – rather than buyers holding back their purchases during the Hungry Ghost month.

‘Given the good property market performance, many sellers have raised their expectations and upped their asking price; this is especially so for properties with en bloc potential,’ said Grace Ng, Colliers’ auctioneer. ‘This, coupled with the newly announced rules governing en bloc sales as well as the stockmarket turmoil amidst the US subprime woes, has caused a slowdown in the market as buyers took a cautious stand.’

Just three residential properties were sold during the Hungry Ghost month this year, generating a total sale value of $4.07 million – a far cry from last year’s $108.41 million, which was mainly contributed by the sales of 12 bungalow parcels in Sentosa Cove.

The number of properties put up for auction during the Hungry Ghost month this year – at 131 – was also a substantial 64 per cent drop compared to last year’s Hungry Ghost month.

Last year, the market saw a total of 359 properties being put up for auction sale as the Hungry Ghost month was spread across two calendar months.

Colliers also said that the total number of repossessed properties seen at auction sale during the Hungry Ghost month this year was only 43 – the lowest figure since 1998.

‘This decline is largely due to the buoyant economy and robust property market,’ the firm said. ‘Owners who faced difficulties servicing their loans were able to dispose of their properties in the open market before their bank or financial institution had a chance to repossess their properties.’

However, the auction method continued to be popular with owners for selling their properties during the Hungry Ghost month.

Colliers’ data shows that this year, some 88 properties were put up by owners for auction sale during the period.

This is the second highest number registered in a decade after 2006.

‘The continued high number of owners choosing auction to dispose of their properties indicates that the market is maturing, with an increasing number of property owners becoming less mindful of conventional taboos,’ Ms Ng said.

 

Source: Business Times 12 Sept 07

Plunge in August auction sales partly due to US sub-prime woes

Total value hits $11m, one-fifth of previous month’s showing: Colliers

SALES of properties on auction here plummeted last month, in one of the first signs that the global credit crunch may be taking a toll on Singapore’s property market.

Only $10.79 million of properties were sold under the hammer in the month, less than one-fifth of what was fetched in each of June and July, said property firm Colliers International, one of the biggest auctioneers here.

Since March, the value of properties sold via auction each month has ranged from $33 million to $108 million.

But this plunged last month, said Colliers, which released a report on auction sales yesterday.

In previous years, August has traditionally been a slow month for property sales due to the Hungry Ghost Festival.

But superstitious buyers were not the reason auction sales turned in an exceptionally poor showing in this year’s hungry ghost month, which stretched from Aug 13 to Monday.

Colliers said the nosedive in sales was mainly due to the recent stock market volatility caused by United States sub-prime mortgage worries, new government policies, and higher asking prices by sellers.

‘Given the good property market performance, many sellers have raised their expectations and upped their asking prices, especially for properties with en bloc potential,’ said Ms Grace Ng, Colliers’ auctioneer and deputy managing director.

She added that these properties have also become less appealing, thanks to the newly announced rules governing collective sales, which will make it more difficult for developments to sell en bloc.

In addition, the ’stock market turmoil amid the US sub-prime woes’ has also contributed to the ’slowdown in the market, as buyers take a cautious stand’, Ms Ng said.

Only 10 properties were sold via auction in this year’s hungry ghost month, less than one-tenth of the 131 that were put up for sale in the period.

The properties that were sold fetched $9.56 million in all – a tiny fraction of the $133.86 million achieved in last year’s double hungry ghost month and ‘one of the lowest seen in the past 10 years’, Colliers added.

Although the hungry ghost month typically sees fewer property sales due to superstitious buyers and sellers, the firm said this is unlikely to be the reason for the plunge in auction sales of property.

Indeed, the number of properties put up for auction by their owners in the period surged to 88, the highest level in at least a decade.

On the other hand, the number of repossessed properties – traditionally the main source of supply for auction sales – fell to 43, down from 239 last year and the lowest level since 1998. This was largely due to the buoyant economy and climbing property prices, said Colliers.

All this shows that auction sales in the hungry ghost month were being moved more by market conditions than superstitious beliefs, the firm added.

But Ms Ng was quick to point out that the firm is still receiving plenty of inquiries about auction properties from potential buyers.

‘The inquiries are still there, but people are thinking twice before jumping in,’ she said. ‘They may be taking a step back and reassessing the prices.’

Colliers also noted that while auction sales may have plunged in the hungry ghost month, other segments of the property market appeared to still be going strong.

For instance, the total number of homes sold in the period is ’still at a very healthy level’, although it has been falling since May, the firm said.

 12sept07_st_plungeinaugauctionsalespartlydue2ussubprimewoes2.pdf 

 

Source: The Straits Times 12 Sept 07

Lifestyle hub at one-north could boost housing prices, retail rents

THE upcoming integrated development at one-north is expected to generate more interest in the area and drive up housing prices and retail rents there, market watchers said.

On Sunday, property giant CapitaLand and New Creation Church’s Rock Productions said they will be investing some $660 million to build a lifestyle hub in one-north, JTC Corporation’s science hub. The project will be located right next to Buona Vista MRT station.

The hub, which will be the biggest retail development by far in the area once it comes up by 2011, will push up residential prices and rents as well as rentals for retail space in the vicinity, experts said.

‘You probably will see residential and retail prices going up in the area,’ said Mavis Seow, CB Richard Ellis’ executive director for retail services.

‘The Holland area is already a very much sought after location. Once the project is developed, it will only get better.’

Rents in the Holland Village area are now between $8 and $15 per square foot per month (psf pm), she said.

CapitaLand, which will invest some $380 million, will own the retail and entertainment component of the project, which will have some 180,000-200,000 sq ft of net lettable area.

Rock Productions will invest $280 million. The company, which is the business arm of the 16,000-strong New Creation Church, will manage the hub’s civic and cultural zone, which will include a 5,000-seat stateof-the-art theatre. The civic and cultural zone will have a gross floor area of some 323,000 sq ft in all.

Pua Seck Guan, chief executive of CapitaLand’s retail arm, said that in line with the developer’s asset-light strategy, the retail and entertainment component could eventually be injected into the developer’s listed real estate investment trust (Reit) CapitaMall Trust.

‘The hub will not be a traditional shopping mall,’ he said. ‘As the developer, we will take the risk – until investors are convinced it is sustainable – before selling.’

The mall will have mostly F&B and entertainment units as is the case with Clarke Quay, Mr Pua said. The retail component will be smaller than in CapitaLand’s other malls.

Possible tenants could include a gourmet supermarket, trade services catering to people living and working in one-north, and even a dance club, he said.

The hub is however guaranteed some footfall from New Creation Church’s congregation, said Matthew Kang, director of Rock Productions.

New Creation Church will be the theatre’s ‘anchor tenant’ and will hold both its Sunday and weekday service there.

At present, the church uses the Rock Auditorium at Suntec City, which seats about 1,400 people.

‘We wanted to look for a place to move to; the congregation was getting bigger,’ Mr Kang said.

 

Source: Business Times 11 Sept 07

Shophouse sales treble as firms seek cheaper rentals

33 units worth $308m sold so far this year but prices and rents are also rising, says consultancy

SHOPHOUSE sales have been shooting through the roof recently, as escalating office costs drive smaller businesses to seek out cheaper alternatives.

The number of shophouses that have changed hands so far this year is already more than treble that in an average year, according to new figures from property consultancy CB Richard Ellis (CBRE).

And as demand for shophouses soars, the sale prices and rents of such properties are also quickly climbing, added the company.

Its figures show that since January, 33 shophouses have been sold for a combined $308.2 million.

This is a huge jump from just two years ago, when only 10 such properties were sold. Their total value: a mere $85.1 million.

The booming demand is mainly coming from smaller firms that are being squeezed by soaring office rents, said Mr Li Hiaw Ho, executive director of CBRE Research.

Singapore’s strong economy and appealing business environment have prompted many companies to start a new business or expand their existing operations, he said.

But this comes at a time when office space is in acute short supply, thus driving up office rents and values continuously over the last year.

‘While multinational corporations, especially the banking and financial institutions, seek the prestige of prime office locations and are willing to pay a premium for it, small and medium- sized companies are feeling the pinch,’ said Mr Li.

‘To ease their expenditure on rents and with their options running out, some companies have creatively sought alternative spaces such as shophouses.’ The types of firms that use shophouses range from creative agencies and architectural practices to recruitment companies and financial advisers, he added.

But with more firms turning to shophouses as an substitute for offices, the cost of this space is starting to increase, according to CBRE data.

A row of eight shophouses in Telok Ayer Street sold for $18.6 million in November 2005. In March this year, they changed hands again – for almost double the price, at $35 million.

In Tras Street, four units with a total strata area of 6,311 sq ft were sold en bloc for $7.7 million in November last year. But two months ago, a single 3,618 sq ft unit right across the road managed to fetch $9.42 million.

Rents are also on the rise. In the prime shophouse areas downtown – including Tras Street, Boon Tat Street, Amoy Street and Telok Ayer – current asking rents are between $5 and $6 per sq ft (psf) a month, said CBRE.

This has doubled from the beginning of the year, it added.

In the fringe areas, such as Beach Road, monthly rents are also up, from $2 to $3 psf earlier this year to between $3 and $5 psf currently.

However, Mr Li notes that while the rises seem ‘hefty’, the rents are ‘reasonable considering the prime location’. Prime office buildings are now asking about $12 psf per month in the Central Business District, and $6 to $8 psf in the fringe areas.

‘For the same amount of space, companies renting shophouses are paying about 50 to 60 per cent less in rental compared to a prime office building,’ he said. ‘This is extremely attractive, especially for small or medium-sized companies which are able to operate without the glossy facade and facilities of a prime office building.’

Such facilities include security features and reserved parking lots. But ‘the savings in rents and building maintenance often more than make up for it’, added Mr Li.

11sept07_st_shophousesindd2.pdf 

Source: The Straits Times 11 Sept 07

CapitaLand, Rock to build $660m integrated hub

Hub at one-north to boast civic, cultural, retail and entertainment facilities

(SINGAPORE) CapitaLand and Rock Productions will spend a whopping $660 million to develop an integrated civic, cultural, retail and entertainment hub at Vista Xchange, one-north, which is expected to be completed by 2011.

The hub will comprise two zones – a Civic and Cultural Zone measuring over 30,000 square metres in gross floor area, and a Retail and Entertainment Zone spanning 24,000 square metres in GFA.

JTC Corp awarded the tender to build, lease and operate the entire hub to Rock on Friday, on a 60-year lease term at a land bid price of nearly $189 million.

Upon award of the tender to Rock, CapitaLand, through an indirect wholly-owned subsidiary, One Trustee, acquired the Retail and Entertainment Zone from Rock.

Rock will develop the Civic and Cultural Zone at a cost of about $280 million, while CapitaLand will invest another $380 million into developing the Retail and Entertainment Zone.

Designed by Andrew Bromberg of the commercial architecture firm Aedas Hong Kong, the hub will have eight levels of the former zone type and four levels of the latter.

The Civic and Cultural Zone is ‘envisaged to become the new dynamic art, cultural, meeting, convention and exhibition centre in Singapore’, a release said. It will contain a proposed 5,000-seat, state-of- the-art theatre for touring concerts, family entertainment, and other large-scale conferences or events.

It will also contain secondary performance and event spaces, like multi-purpose function rooms and outdoor amphitheatres. IMG Artists has been appointed to consult on and develop the strategies for the marketing and programming efforts.

The Retail and Entertainment Zone will comprise two levels above ground and two below. It will have an ‘open concept with a spiral design’, allowing visitors to stroll casually along a gently sloping spiral walkway to visit the various floors. These will contain restaurants, cafes, supermarkets, fashion and other stores. The zone is envisaged to ‘replicate the atmosphere at Clarke Quay, the premier riverfront F&B, lifestyle and entertainment precinct in Singapore’, the release said.

Director of Rock Productions, Matthew Kang, said his firm’s ‘extensive research indicates an overwhelming need for a sizeable performance venue, away from the city’ but ‘well-equipped with state- of-the-art facilities’.

Pua Seck Guan, CEO of CapitaLand Retail, said the hub represents a chance for CapitaLand to extend its presence to the Buona Vista area in Singapore.

It is expected to ‘benefit from the natural visitor catchments from the one-north communities, surrounding housing estates, as well as tertiary institutions close by’.

The hub will be directly linked to the Buona Vista MRT and also be served by a Circle Line MRT station currently under construction.

Vista Xchange is the first of three ‘centres of excellence’ under JTC’s one-north masterplan. Besides the hub, it will house offices, a business hotel and residential buildings over 17 hectares.

 

Source: Business Times 10 Sept 07

Some Katong commercial properties going for en-bloc sale

Buildings include Katong Shopping Centre; sales could help rejuvenate area and boost image

FACED with flagging businesses and dwindling human traffic, the shop owners of several commercial buildings in Katong are coming together to sell their properties en bloc.

This has led to renewed interest in the old East Coast hot spot recently, sparking hopes among residents and shopkeepers nearby that the area – famed for its good food and old-world charm – will get the rejuvenation that it needs to boost its image.

At least five commercial buildings along Mountbatten Road and East Coast Road have, or are in the process of engaging marketing agents to launch their collective sales. These include Katong Mall, Paramount Hotel and Shopping Centre, Roxy Square, Katong Plaza and the iconic Katong Shopping Centre, said Mr Lui Seng Fatt, the regional director and head of investments at Jones Lang LaSalle.

In its heyday, Katong Shopping Centre was the heart and soul of the East. But as the years wore on, the lack of entertainment facilities and an attractive retail mix made it a poor rival to malls like Parkway Parade.

Many of these buildings in Katong are more than 20 years old and, in the case of Katong Shopping Centre, which opened in 1973, more than 30.

Dr Lim Un Huat, an owner of several shops at Katong Mall, told The Straits Times most shop owners were in favour of a collective sale, and were waiting for the right price to sell.

Mr Lui said the ‘tired-looking’ buildings were overdue for a revamp, especially since residential projects in the area have gone upmarket.

Prices of homes in the Katong, Meyer and Amber Road residential enclave have soared recently with the property boom. The area’s proximity to the upcoming Integrated Resort in Marina Bay is an added lure.

United Industrial Corporation’s One Amber and Grand Duchess sold out around $700 to $800 per sq feet (psf) recently. CapitaLand’s The Seafront on Meyer and GuocoLand’s The View @ Meyer fetched new highs of between $1,500 psf and $1,800 psf.

While the shop owners do not expect to make a ‘huge windfall’, Mr Lui said selling en bloc would help them unlock the value of their shops.

He estimates that the prices transacted would be between $500 psf and $1,000 psf, depending on the building.

Colliers International’s executive director for investment sales, Mr Ho Eng Joo, said Katong’s rejuvenation would be a ‘natural progression’ following the influx of residents living in the area’s new condominiums.

‘Katong’s residential area is getting quite vibrant, so the commercial side has to catch up now,’ he said.

The only setback, he added, would be the new rules for collective sales – expected to kick in next month – which will prolong the sale process.

But in three or four years’ time, Katong could be transformed, he added.

However, while some property consultants remain optimistic about Katong’s future, others remain cautious.

Director of marketing and business development Ku Swee Yong at Savills Singapore said the area was a ‘bit of a mixed bag’ – comprising offices, residential apartments, hotels and retail space – which makes it ‘neither here nor there’ for redevelopment.

‘The area’s physical limitations mean a very creative approach is needed to redevelop it,’ he added.

From a conservation perspective, the revitalisation of Katong is desirable if done properly, said Singapore Heritage Society president Kevin Tan.

Over the years, the retail business in the area has withered, and given way to maid agencies, pubs and video arcades. But this can be changed by injecting some new life and a new trade mix into the area, he added.

He hopes, however, that the architecture of Katong Shopping Centre will be conserved as it was ‘very important in East Coast’s history’.

Shop owner Dr Lim concurred: ‘We all hope to bring back the hustle and bustle of the old Katong.’

 

MOVING FORWARD

‘Katong’s residential area is getting quite vibrant, so the commercial side has to catch up now.’

MR HO, Colliers International executive director for investment sales

OBSTACLES TO BEAT

‘The area’s limitations mean a very creative approach is needed to redevelop it.’

MR KU, Savills Singapore director of marketing and business development, on the area’s mixed developments

 

Source: The Straits Times 10 Sept 07

JTC launches Tuas industrial site for sale after $5.9m bid

ON the back of good demand for industrial space, JTC Corporation yesterday launched a 235,400 sq ft land parcel at Pioneer Road/Tuas Avenue 11 for sale, and market watchers estimate that the site could fetch as much as $7.6 million – or $23 per square foot per plot ratio (psf ppr).

JTC launched the site after it received a bid of $5.9 million on July 18. Observers, however, said that the site could fetch more than the initial bid.

Savills Singapore’s director of industrial business space Dominic Peters pointed out that in February, an industrial site at Tuas Bay Drive/Tuas South Avenue 3 was awarded for $23 psf ppr. That site had a 60-year lease.

While the lease for the site launched yesterday is for 30 years, Mr Peters expects the site to fetch $20-23 psf ppr due to good demand. The price translates to between $6.6 million and $7.6 million.

‘We anticipate very strong demand from end-users,’ he said. Companies in certain sectors – such as oil & gas and construction – are doing well at the moment and could be interested in the site, he said.

The site has a 1.4 plot ratio, giving it a gross floor area of 329,600 sq ft. It is zoned for ‘Business 2′ use, which means it can be used for clean, light and general industrial purposes, and warehousing.

The land parcel was on the Reserve List before its sale was triggered by the $5.9 million bid. Now, it is being launched under the Confirmed List.

The government had previously announced that it will launch two industrial sites under the Confirmed List and seven industrial sites under the Reserve List in the second half of 2007 under its Government Land Sales programme.

The tender for the site will close at 11 am on Oct 18.

 

Source: Business Times 7 Sept 07

‘Goldman fund buying Chevron House’

Acquisition would be second major Singapore office deal for group

(SINGAPORE) A Goldman Sachs-linked fund is believed to be the buyer of Chevron House (formerly Caltex House) whose sale by CapitaLand and its partners was announced last week. The deal values the leasehold Raffles Place office block at $730 million or a record $2,780 per square foot (psf) of net lettable area. CapitaLand last week declined to identify the buyer.

Market watchers noted that Chevron House will be Goldman Sachs’ second major acquisition of an office property in Singapore. A Goldman Sachs real estate fund bought DBS Towers 1 and 2 on Shenton Way in November 2005 for $690 million, or around $800 psf of net lettable area.

‘They could reap a nice profit if they decide to sell DBS Towers 1 and 2 today, given that they bought the asset during the early days of the office market upcycle,’ an industry observer noted.

Industry watchers said that capital values of offices in Singapore today are around two-and-a-half times what they were in the final quarter of 2005 so based on that, DBS Towers 1 and 2 should be able to command around $2,000 psf or possibly even more, given the shortage of offices.

This is despite the leasehold tenure of the property. The older 49-storey Tower 1 was completed in 1974, while the 34-storey Tower 2 was completed 13 years ago. The property has parking for about 400 cars.

Goldman Sachs bought the property from DBS, which leased back the office space it then occupied in the two towers for an initial eight-year term, with an option to renew the lease for two three-year periods, according to an earlier news report.

As for Chevron House, the change of ownership is taking place through shares in Savu Properties Ltd. Basically, CapitaLand, IP Property Fund Asia and NTUC Income Insurance Co-operative are selling their respective stakes – of 50 per cent, 25 per cent and 25 per cent – in Savu, which owns Chevron House, which stands on a site with a remaining lease of about 81 years.

CapitaLand said in its release last week that the completion date for the deal is Sept 24, and that upon completion, it will recognise in its group consolidated accounts a gain of about $150.8 million.

CapitaLand also owns a 50 per cent stake in neighbouring Hitachi Tower, where an exclusivity period has been granted to a potential buyer to conduct due diligence after discussions with the previous top bidder hit some snags, BT understands.

If the latest negotiations for the 999-year leasehold Hitachi Tower succeed, a new benchmark price is expected to be achieved for a Singapore office block.

 

Source: Business Times 6 Sept 07

Ascendas IT Park project in Dalian to cost US$200m

Flagship outfit will be built over 5-8 years in phases

(SINGAPORE) The six million sq ft Dalian Ascendas IT Park in China will cost an estimated US$200 million and will be built over five to eight years in phases.

Speaking at an event in Dalian yesterday to mark the completion of the first phase of the flagship project, Ascendas president and chief executive officer Chong Siak Ching said: ‘It will offer a fully integrated work-live-play environment and give full play to an international business lifestyle concept that we have test-bedded successfully in Singapore and India.’

The 11-storey, US$62 million first phase comprises one million sq ft of space. Ascendas said that 25 per cent of this has been taken up by tenants including Konica Minolta, Network Appliance and Dalian Hi-Think Computer Technology.

The second phase of development is expected to start early next year and to be completed by mid-2009, adding another 11-storey building with a gross floor area of about 840,000 sq ft.

The 35-ha Dalian Ascendas IT Park project could eventually have a total of six million sq ft, depending on demand, and is expected to target Dalian’s business process outsourcing (BPO), information technology outsourcing (ITO) and software R&D sectors.

Ascendas will run the park, including project management, marketing, lease management, property management, advertising and corporate services.

The chairman of Yida Group and Dalian Ascendas IT Park, Sun Yinhuan, said that the park is the first development in Dalian’s Lu Shun Nan Road software industry area. ‘This will surely facilitate the fast development of Lu Shun South Road software belt and further boost the software and IT service industry in Dalian,’ he said.

BPO is the fastest-growing sector in China’s IT services market. According to a recent report by IDC, China’s offshore BPO is expected to grow five times to almost US$7 billion by 2011 – a compounded annual growth rate of 37.9 per cent.

 

Source: Business Times 6 Sept 07

Downtown residential site put on Confirmed List

THE Urban Redevelopment Authority (URA) has put a residential site at Enggor Street on the Confirmed List of the Government Land Sales Programme for the second half of 2007.

Previously on the Reserve List, the site – Enggor Street (Land Parcel A) – is now almost certainly assured of a faster sale as it no longer requires a committed minimum bid before being put up for public tender.

The site has an area of about 0.30 ha and can generate a maximum permissible gross floor area of about 25,504 sq m (274,522.5 sq ft), and is zoned for residential use with commercial use on the first storey.

CBRE Research executive director Li Hiaw Ho notes that transactions in June and July showed that prices for units at the neighbouring Icon ranged from $1,150 psf to $1,700 psf while those at The Clift ranged from $1,400 psf and $2,100 psf.

‘The subject site can be developed into 260-300 apartments and assuming that it will take up the commercial option for the first storey, we expect that the site could fetch a price of $180 million to $200 million or $655 per square foot per plot ratio (psf ppr) to $715 psf ppr,’ said Mr Li.

‘At this level, the residential units could be launched at around $1,300 psf to $1,400 psf,’ he added.

In May, the URA announced that it would temporarily disallow the conversion of office use in the Central Area, which includes the CBD, to other uses like residential apartments until Dec 31, 2009, to curb further depletion of the existing stock of office space.

The move put on hold the strategy to revitalise the CBD by encouraging owners to redevelop their old office buildings.

Mr Li notes that the core CBD area has traditionally been a place for business and as such, human activities tend to be confined to business hours on weekdays.

But revitalisation of the CBD could continue regardless of the temporary halt on office conversions.

Already being built are Icon, Lumiere, The Clift, and One Shenton.

‘With the live-in population of the core CBD areas increasing in the foreseeable future due to the influx of residential developments, more complementary uses of retail, food and beverage and entertainment might prove to be sustainable on weekends and after hours,’ he added.

 

Source: Business Times 5 Sept 07

InCity Lofts offered for sale at $70m

INCITY Lofts, an eight-storey block of small office, home office (Soho) units at Beach Road completed about three years ago, is being offered for sale at a minimum price of $70 million or $1,149 per square foot (psf) of strata area.

The land lease tenure of the site has been extended to a full 99-year term starting April 2004, after the building was completed.

InCity Lofts, at 700 Beach Road, is being sold by its developer, In-Space Pte Ltd, whose shareholders are said to include Wee Chwee Heng of Kumpulan Akitek.

InCity Lofts comprises a ground-floor retail unit as well as 54 Soho units – ranging from studio units to maisonette penthouses – spread across the second to eighth levels of the building, which has a roof-top pool. There are also 24 surface and covered carpark lots on the ground level of the development.

‘The majority of the units in the development are leased; and leases are mostly short-term, hence the new investor can reposition or re-let the building and ride on the strong office rental market,’ said Cushman & Wakefield managing director Donald Han, whose firm is marketing the InCity Lofts en bloc sale through an expression of interest exercise that closes on Sept 28.

Nearby commercial buildings like The Concourse are operating near full occupancy with asking rents for office units in the region of $10 psf a month, Mr Han said.

Assuming InCity Lofts units are rented out conservatively at $6 psf a month and based on a minimum price of $70 million, the net yield for an investor works out to over 5 per cent a year, he added.

‘This is a top-end yield play for investors looking for an aggressive rental with capital appreciation growth,’ Mr Han said.

InCity Lofts has a land area of 18,401 sq ft and a fully built up plot ratio (ratio of maximum potential gross floor area to land area) of 4.15.

 

Source: Business Times 5 Sept 07

Mapletree fund acquires 2 industrial properties

MAPLETREE Industrial Fund Ltd is acquiring a factory building in Tech Park Crescent for $12.48 million, and has also bought a light industrial building at 19 Tai Seng Drive for $12.5 million.

In a statement, the company said it has signed a sale-and-leaseback agreement with Centillion Environment and Recycling for the three-storey Teck Park property.

The factory has a gross floor area of about 9,800 square metres and is located within the Tuas Industrial Estate, which houses a wide range of industries from bio-medical to food, manufacturing and warehousing industries.

Separately, the fund also bought a six-storey light industrial building, with a gross floor area of about 8,600 square metres. Located in Tai Seng Industrial Estate, the building currently serves various functions such as a telephone exchange, mobile telephone switching centre and international gateway network management centre. StarHub is taking out a long lease on the property, the statement added.

Both properties will be managed by Mapletree Industrial Fund Management (MIFM) – a wholly owned subsidiary of Mapletree Investments.

Phua Kok Kim, CEO of MIFM, believes that these acquisitions will enhance the fund’s portfolio value given their choice locations and the ’strong demand for industrial space on the back of the continued firm growth of the manufacturing sector’.

 

Source: Business Times 4 Sept 07

Apollo Centre up for sale for over $200m

Price tag amounts to $1,345 psf of net lettable area

APOLLO Centre, a commercial building in Havelock Road, is for sale for more than $200 million, the property firm marketing it said yesterday.

The 99-year leasehold property is being sold by Singapore-listed Apollo Enterprises.

And since the sale was announced, there have been many enquiries from potential investors, said marketing agent Knight Frank.

‘Given the lack of similar investment buildings in the market and the many interests expressed, a transaction price in excess of $200 million is not unexpected,’ it said.

At $200 million, the price would work out to $1,345 per square foot (psf) of net lettable area.

By comparison, almost a whole floor of nearby Chinatown Point was sold recently for about $1,250 psf of net lettable area.

The Apollo Centre, a seven-storey office and retail building, has a land area of about 54,600 sq ft, and a gross floor area of around 217,500 sq ft. At present, the net lettable area is 148,700 sq ft.

There are shops in the basement and on the first and second storeys and offices on the upper floors.

Because of the limited supply of office space in the central business district, Apollo Enterprises has obtained inprinciple approval to change the use of the building’s second storey from retail to office.

If the whole floor is converted to office space and targeted at a single occupier, the lettable floor area could increase by about 11,000 sq ft, Knight Frank said.

It said rents in the area range from $7.50-$8.00 psf per month (psf pm) for office space and $8.00-$8.50 psf pm for retail space.

The tender for the Apollo Centre is open until 3pm on Oct 16.

 

Source: Business Times 4 Sept 07

DC rates hoisted by as much as 112%

Average rate raised by 58% for non-landed residential use, and 42% for commercial use

(SINGAPORE) The government yesterday announced what is possibly the sharpest hikes in development charge (DC) rates, which are payable for enhancing the use of some sites or building bigger projects on them.

The Ministry of National Development (MND) cited the rise in market values as the reason for the increases.

On average, the DC rate for non-landed residential use was raised by 58 per cent and that for commercial use by 42 per cent. The average DC rate was also increased 23 per cent for hotel use, 11 per cent for landed residential use, and 2 per cent for industrial or warehouse use.

But the escalations were much bigger in certain locations – as high as 112.1 per cent for non-landed residential use in the Everton/Spottiswoode Park vicinity and 104.5 per cent for commercial use in the Maxwell Road/Telok Ayer St and Anson Road areas, based on Jones Lang LaSalle’s analysis.

The latest increases, which take effect today, are in addition to the 40 per cent across-the-board appreciation in DC rates announced on July 18 arising from a change in formula for computing DC.

While yesterday’s increases look steep, they did not surprise most market watchers given the substantial appreciation in land values over the past six months.

As to whether the latest hikes will further slow en bloc sales, which have decelerated lately as developers become more cautious about land-banking amid the stock market rout and credit tightening fears, property agents offered a range of views.

Credo Real Estate’s managing director Karamjit Singh estimates that probably only about 20 to 30 per cent of all collective sale sites have substantial DC components amounting to 10 per cent or more of total land value. ‘For many of these sites with high DC component, the increase may have been anticipated and priced in, so things can move on. For those that haven’t, their progress for an en bloc sale could be affected if owners are unwilling to lower their price expectations.’

Jones Lang LaSalle’s regional director and head of investments Lui Seng Fatt too said: ‘Despite the stellar increases in DC rates, the impact of the DC hike on en bloc residential developments remains marginal on most sites, especially freehold sites. Some leasehold sites with substantial DC components, however, may feel the heat.’

CB Richard Ellis executive director Li Hiaw Ho said the hikes will to ‘a small extent, slow down collective sales’.

‘Coupled with homeowners’ expectations of high prices for their properties, developers might not be as aggressive in acquiring sites,’ he added.

Colliers International’s director for research and consultancy Tay Huey Ying said two rounds of DC hikes in July and September, and global credit tightening, will likely lead to more cautious bidding by developers and more realistic price expectations by sellers.

Ms Tay said that increases in land prices may not be as phenomenal in the coming six months compared with the past six months. ‘But demand for development land should stay healthy as the end-market for residential property is expected to remain healthy on the back of strong economic prospects,’ she added.

Analysts noted that in any case, the supply of collective sale sites will slow due to impending changes to en bloc sale rules requiring more safeguards and procedures.

DC is specified according to use groups and is listed by 118 geographical sectors or locations across Singapore.

The 112 per cent hike in non-landed residential DC rates in the Everton/Spottiswoode Park area was attributed by most analysts to the Spottiswoode Apartment and Oakswood Heights collective sales in April and June at $732 psf per plot ratio and $740 psf ppr respectively – more than twice the land value of $307 psf ppr implied by the July ‘07 DC rate for the location.

And the DC rate hikes of 107.5 per cent each in the Newton/Surrey/Lincoln roads and River Valley/Jalan Mutiara areas were attributed to the collective sales of Lincoln Lodge for $1,449 psf ppr, and Bishopswalk for $1,544 psf ppr respectively, which are about three times the $492 psf ppr land value implied by the July ‘07 DC rate for the locations.

The Maxwell Road and Anson Road areas topped the increases for commercial use with gains of 104.5 per cent each, likely due to prices achieved at two recent state tenders for commercial sites at Anson Road. The same two locations also recorded the biggest increases in hotel use rates, at 66.7 per cent each, and again, this was probably due to two hotel sites at Gopeng Street and Tras Street sold by the state at significantly higher land values than implied by July DC rates.

As for industrial DC rates, the highest increase of 15.8 per cent was for the Pasir Panjang/Science Park area, followed by 11.1 per cent hikes in 15 other locations including Henderson Industrial Park, Bukit Merah View, Redhill and Hoy Fatt Rd/Alexandra Road, according to JLL’s analysis.

 

Source: Business Times 1 Sept 07

Banyan Tree enters Turkey market

LUXURY resort operator Banyan Tree Holdings has signed a new management contract in Turkey.

The win marks Banyan Tree’s first foray into Turkey, where the group will manage a boutique resort and residential development located in the northern coast of the Bodrum peninsula.

‘This project exemplifies Banyan Tree’s ability to continually lead the markets by tapping into what we see as Bodrum’s yet unrealised potential as a high-end resort and vacation home ownership destination,’ said executive chairman Ho Kwon Ping.

‘Banyan Tree Bodrum is another key step in the group’s diversification into key regions globally.’

Located a 45-minute drive from the Milas-Bodrum international airport, the 18-hectare site will feature an all-pool villa resort that is set to be Turkey’s first.

All units at the development will have unblocked views of the Aegean Sea.

The resort will also include a 4,000 sq m spa facility featuring Banyan Tree’s award winning spa treatments.

Earlier this year, Banyan Tree signed contracts to manage three hotels in China. These hotels are expected to begin operations in 2008 and 2009.

Shares of Banyan Tree closed down six cents at $1.92 yesterday.

 

Source: Business Times 31 Aug 07

Alexandra condo site up for tender

HDB also invites bids for sale of commercial plot at Toa Payoh Lorong 6

THE Urban Redevelopment Authority yesterday asked for tenders for a 99-year leasehold residential plot at Alexandra Road, close to the Redhill MRT station and opposite the Metropolitan, after receiving a minimum bid price that triggered the launch from the Reserve List.

The site occupies some 8,559 square metres with a gross plot ratio of 4.9, which can generate a maximum permissible gross floor area of 41,939 square metres.

It is zoned for development of condominium or serviced apartments. Property consultancies said the site could be developed into a 40-storey condominium.

Knight Frank managing director Tan Tiong Cheng said that he expects the project to have some 380 units averaging 1,200 square feet in size, given that its height and plot ratio are similar to those of the Metropolitan – a joint project between CapitaLand and Lippo Group.

Mr Tan reckons that bids for the site could have been in the region of $400 per square feet per plot ratio (psf ppr) or a lump sum of $180 million and expects the units to fetch average prices of $950-1,000 psf when they are put on the market, given that units in the nearby Metropolitan are fetching some $924 psf in resale prices in the third quarter.

CB Richard Ellis executive director Li Hiaw Ho estimates that the site could have drawn bids in a higher range of $650-750 psf ppr.

‘This will translate to an average selling price of between $1,200 psf and $1,300 psf, which could be attainable in the second half of 2008,’ he said, expecting strong demand to come from upgraders and investors who are looking to rent out the units given its proximity to the city and amenities.

In comparison, the Metropolitan site was purchased by the developers at $350 psf ppr in November 2005.

Based on the strong demand seen in Metropolitan where all 382 units were sold within six months, market watchers said that they expect the Alexandra site to draw strong interest from developers given that it is located at the fringe of the established Tanglin housing district which is within a five to 10 minute drive to Orchard Road, the Central Business District, Marina Bay, and the southern waterfront area.

Yesterday, the Housing & Development Board invited tenders for the sale of a commercial site at Toa Payoh Lorong 6, under the Confirmed List of the Government Land Sales Programme.

The 99-year leasehold site has a land area of 1,396.8 square metres with maximum allowable gross floor area of 4,190.4 square metres, and is located near the HDB Hub.

Its tender will close on Oct 16 and the project is expected to be completed by 66 months from the date of tender acceptance.

Mr Li from CBRE estimates that the site could yield about 34,000 square feet of net lettable area of commercial space and can be developed for a variety of uses including retail, F&B, office and entertainment facilities such as cinemas, bowling alleys and fitness centres.

‘It is likely that the successful bidder would devote 100 per cent of the maximum gross floor area for retail use, so as to tap on the large population catchment within the Toa Payoh housing estate as well as workers and visitors at HDB Hub,’ he added.

‘We expect bids to range between $600 and $700 psf ppr. Assuming that the mall is able to fetch a monthly rent of about $7-9 psf per month, this would provide the developer with a stabilised yield of about 5.5-6 per cent.’