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.

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

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

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.

(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 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

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

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

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.

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

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

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, 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.

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

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’.

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:

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.

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.

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

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.

(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

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

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.

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

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.

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

(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

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

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

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

(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