Yio Chu Kang site for sale

THE Urban Redevelopment Authority (URA) has launched a commercial and residential site for sale by public tender.

The land parcel, located at Yio Chu Kang Road and Seletar Road, has a site area of 2.1 hectares and is designated for a mixed commercial and residential development.

Interested developers must submit a bid of at least $40.5 million for the plot of land.

Two weeks ago, URA said it received an application from a developer which has committed to putting in a bid above the minimum price.

Previously, the land parcel had been made available for sale through the Reserve List System.

Under this system, a site would be released for sale only if a bid with an acceptable minimum price is received.

Source: Today, 21 Aug 2009

Singapore office rents to rise next year, Hongkong Land says

Hongkong Land Holdings, a developer of Singapore’s biggest office project, expects commercial rents to rise in 2010 as the Southeast Asian city- state emerges from recession.

Hongkong Land is one of three owners of the 3 million square-foot Marina Bay Financial Centre, a five-tower complex overlooking the central business district that opens from next year and will be completed in 2012.

Commercial rents in the central area slumped 23.8% in the second quarter from a year earlier as Singapore endured its worst recession. The market is “bottoming out” and rents will start increasing in the middle of next year, said Robert Garman, Singapore’s executive director of Hongkong Land.

“Sentiment has improved somewhat and economic indicators that are coming out of the U.S. and some of the other major markets are improving,” Garman said in a phone interview yesterday. “So we are starting to see transaction volumes increase. We expect that in the remainder of this year.”

Rents at the project have fallen since developers pre-let 61% of office space to tenants including Standard Chartered Plc, he said, without giving details. Garman expects financial firms to follow banks into the towers, mimicking a trend seen in Hong Kong.

Colliers International, in a July report, said 1.4 million square feet of new office space will be completed in the second half of 2009, putting rentals under further pressure. Office supply is already at its highest in three years, according to government data.

‘COMPETITIVE’

“There’s quite a lot of completion next year and 2010 and demand doesn’t seem to be picking up anytime in the short term,” said Tay Huey Ying, Singapore’s director of research and advisory at Colliers International. “Developers will have to look to competitive rents in order to boost pickup.”

Standard Chartered has pre-let 500,000 square feet and DBS Group Holdings has secured 700,000 square feet of Marina Bay Financial Centre. The complex includes two residential and three office towers. About 1.6 million square feet of office space will be launched next year.

Singapore-listed Hongkong Land, one of the biggest business-district landlords in Hong Kong, said Aug. 6 underlying profit rose 16 percent in the first half as rental income increased. Its shares have gained more than 60 percent this year, compared with a 48.5% gain in the Straits Times Index.

Source: The Edge, 13 Aug 2009

Record 18 bids for prime Kaki Bukit industrial site

All tender offers exceed $5m reserve price; top bid hits $12.1m

A LAND parcel suitable for industrial use in the Kaki Bukit area has drawn a record number of bids.

The 115,342 sq ft plot in Kaki Bukit Road 2 was launched for public tender on July 14 after an unnamed party submitted an application bid of $5 million, or $43 per square foot per plot ratio (psf ppr).

Bidding ended yesterday with 18 offers on the table, all of them exceeding the reserve price of $5 million. This is the highest number of bids ever received for an industrial site, according to the Urban Redevelopment Authority (URA).

Previously, the highest number received was 14, for an industrial plot in Commonwealth Drive in November 2007.

The top bid of $12.1 million for the 30-year leasehold site at Kaki Bukit – zoned as a Business 2 development for a range of clean, light and general industrial uses – was made by privately held Kng Development.

This translates to a unit land price of $105 psf ppr and is 16.5 per cent more than the second-highest bid of $90 psf ppr submitted by the trio of Lee Siaw Ling, Low Khoon Huat and Ang Lai Huat.

It is also 142 per cent ahead of the application bid and beats the $72 psf ppr that Eastpoint Development paid for a 30-year leasehold industrial site along Kaki Bukit Road 3 in August 2007.

Mr Lim Kien Kim, Knight Frank’s head of business space (industrial), said the site drew a lot of interest as Business 2 sites are usually situated farther out in Tuas or Changi, and it is ‘very difficult to find a Business 2 site in the Kaki Bukit area’, which is considered more prime.

Mr Li Hiaw Ho, executive director of CBRE Research, said the response reflected the improving business sentiment.

‘The top six bids of above $75 psf ppr could be reflective of the bidders’ expectation that Singapore’s manufacturing sector will improve in the near future,’ he said. He noted that although Singapore’s economy was still shrinking, the pace of decline had slowed.

‘After eight months of contraction, the Purchasing Managers’ Index moved above the important 50.0 benchmark in May, indicating growth in the manufacturing sector. The index has since remained above the benchmark,’ he said.

Mr Tan Boon Leong, director of industrial sales at Colliers International, pointed out that the site is attractive to ‘a wide variety of end-users and a whole spectrum of industrialists’ because it is located in a mature industrial estate and has Business 2 zoning.

‘Moreover, it’s quite small, so in terms of quantum it’s very affordable. The level of interest goes to show or confirm that the economy seems to be turning from its lowest point now,’ he said.

The tender has not yet been awarded to any of the bidders. A final decision on the award will be made after the bids have been fully evaluated, said the URA.

Source: Straits Times, 13 Aug 2009

Kaki Bukit industrial site attracts 18 bids

(SINGAPORE) An industrial site along Kaki Bukit Road 2, put up for sale by the government, drew an impressive 18 bids by the close of tender yesterday.

The Urban Redevelopment Authority (URA) said that the highest bid received for the 30-year leasehold site was $12.1 million, more than double the minimum bid price of $5 million.

That highest bid, which works out to just under $105 per square foot per plot ratio (psf ppr), was placed by Kng Development, whose shareholders include Ng Teng Yeng, brother of property tycoon Ng Teng Fong; Kim Chan Wah and Ng Hock Lye.

Kng’s bid is 16.5 per cent above the second highest bid of $10.4 million, or $90 psf ppr, submitted by Lee Siaw Ling, Low Khoon Huat and Ang Lai Huat.

It is also higher than the $72 psf ppr which Eastpoint Development paid for a 30-year leasehold industrial site along Kaki Bukit Road 3 in August 2007.

This latest site, offered from the government’s reserve list, has an area of 1.07 ha and a gross plot ratio of one. CBRE Research says that the breakeven cost for Kng Development is likely to be $250 psf.

‘The robust response to the tender reflects the prevailing improving business sentiment,’ said Li Hiaw Ho, executive director at CBRE Research.

He noted that the top six bids were all above $75 psf ppr and ‘could be reflective of the bidder’s expectations that Singapore’s manufacturing sector will improve in the near future’.

Colliers International director (industrial) Tan Boon Leong said that the large number of bids received was not surprising as the ‘quantum amount is small’.

He thinks that the good response reflects greater confidence in the economy, as well as the fact that the plot lies within a mature industrial estate and is zoned for a Business 2 development, which means that it can be developed for a range of clean, light and general industrial uses.

Mr Tan also said that some of the bids were placed by contractor developers ‘who are probably more competent in judging their construction costs, and with prior experience, may thus be bolder when it comes to putting in bids’.

URA’s decision on the award of the tender will be made after the bids have been evaluated, and disclosed at a later date.

Source: Business Times, 13 Aug 2009

Hotel Royal family offering Guillemard apt block for sale

Fragrance Group picks up freehold site at Changi Road for $33.56m

(SINGAPORE) Melodies Limited, controlled by the Lee family of Hotel Royal, is selling a 20-storey freehold apartment block in Guillemard Road which it developed 11 years ago.
The price is about $70 million, reflecting $783 per sq ft based on existing strata area of 89,362 sq ft.

Colliers International, which is marketing the property, Cassia View, through an expression-of-interest exercise, says that the buyer could either spruce up the 72 units and sell them individually or tear down the property and redevelop it.

Cassia View is understood to have utilised the maximum gross floor area (GFA) allowed for the site based on a 2.8 plot ratio under Master Plan 2008. The site is zoned for residential use.

Nevertheless, Colliers executive director (investment sales) Ho Eng Joo reckons the buyer could redevelop the property, given its age, as there may be scope for improving the layout to better suit current tastes.

Based on Cassia View’s GFA of 105,823 sq ft, the $70 million price reflects a land cost of $661 psf per plot ratio if the new owner chooses to redevelop it.

Some 28 of Cassia View’s existing 72 units are currently let on short-term leases of up to a year.

Dakota Residences, a 99-year leasehold condo nearby, is now selling for about $900 psf on average.

The expression-of-interest exercise for Cassia View closes on Sept 2.

Separately, Fragrance Group last week picked up a freehold site in Changi Road for $33.56 million.

The deal was brokered by DTZ. The land area is 28,545 sq ft.

Fragrance said that it plans to develop the site into a five-storey mixed development comprising commercial space and apartments.

It intends to start construction and sale of the project in the second half of financial year 2009.

Source: Business Times, 13 Aug 2009

Prepared industrial land allocation falls in Q2

Negative 32.2 ha compares with net allocation of plus 14ha in Q1

(SINGAPORE) Net allocation of prepared industrial land went into negative territory in the second quarter for JTC Corporation, as the downturn continued to take a toll.
JTC’s Q2 facilities report shows net allocation was negative 32.2 hectares, compared with a net allocation of plus 14 ha in Q1 and 34 ha in Q2 2008.

Gross allocation in Q2 this year slid to 5.4 ha. And termination jumped to 37.6 ha, from 16.7 ha in Q1. Almost half of total terminations stemmed from the electronics segment. And almost a quarter of terminations was due to companies consolidating operations.

Net allocation of generic land and specialised parks also moved into negative territory in Q2.

Net allocation of generic land was negative 7.1 ha, down from plus four hectares in Q1 and significantly lower than 26.7 ha in Q2 2008. As gross allocation fell 77 per cent quarter-on-quarter to 2.5 ha, termination rose 37 per cent to 9.6 ha in Q2. The manufacturing sector accounted for 74 per cent of gross allocation.

Net allocation of specialised parks dropped to a negative 25 ha versus plus 10 ha in Q1 and 7.3 ha in Q2 2008. This was also due to lower gross allocation and higher termination. Gross allocation plunged 85 per cent quarter-on-quarter to 2.9 ha, while termination rose three-fold to 28 ha.

Wafer Fab Park accounted for 65 per cent of termination within specialised parks, with 18.3 ha in Q2, which widened net allocation for Wafer Fab Park from negative 6.5 ha in Q1 to negative 18.3 ha in Q2.

In JTC’s ready-built factory (RBF) segment, net allocation remained negative in Q2 but improved slightly, climbing to negative 7,800 sq m versus negative 8,900 sq m in Q1, thanks to a 64 per cent increase in gross allocation to 17,800 sq m. Higher gross allocation was partly offset by higher termination, which rose by 30 per cent to 25,600 sq m in Q2.

The RBF occupancy rate was 0.3 percentage points lower at 97.4 per cent.

Meanwhile, Phase 2A of Fusionopolis is under construction and is expected to be finished by 2013, JTC said yesterday.

Source: Business Times, 13 Aug 2009

Consultants see slower slide in office rents

But most are conservative about the strength of space absorption for the rest of 2009

(SINGAPORE) Some property consultants reckon the worst is over for falling office rents. And one even expects net take-up of space to turn positive by the fourth quarter of this year if the economy does reasonably well.

Cushman & Wakefield’s mid-Q3 analyses show the decline in prime office rents has slowed. For instance, Raffles Place Grade A office rents fell 18 per cent from $10.61 in Q1 to $8.70 in Q2. But since then, they have dipped just 2.9 per cent to $8.45.

The same trend is showing up for prime office rents in the Shenton area. They have dropped 5.8 per cent from Q2 to $6.32 – a smaller decline compared with the 17.9 per cent drop from $8.17 in Q1 to $6.71 in Q2.

The prime office vacancy rate at mid-Q3 is 6.1 per cent, up 0.4 of a percentage point from Q2.

‘As economic conditions continue to stabilise, we will see the flow-through to improved space absorption happening over the next few months,’ said Cushman & Wakefield research director Ang Choon Beng.

‘On a more optimistic note, if Singapore’s GDP performance comes in at the better end of current estimates, we could potentially see positive space absorption by Q4 2009.’

Singapore’s Q2 GDP jumped 20.7 per cent quarter-on-quarter but the government remains fairly guarded, keeping its GDP forecast for the year at a contraction of 4 to 6 per cent.

Net take-up of office space here has been negative for three consecutive quarters since Q4 2008 – a result of weakening demand for office space and rising supply.

Other consultants that BT spoke to agree that office rents have fallen at a slower pace, but are more conservative about the strength of space absorption for the rest of the year.

‘It’s probably a little bit early to forecast positive take-up over the second half,’ said CB Richard Ellis’s executive director for office services Moray Armstrong. For one thing, some companies may have introduced downsizing plans that will only take effect in the months ahead, he said.

There could still be downward pressure on rents in the next few quarters and positive take-up of space might not emerge until next year, he added.

Jones Lang LaSalle’s head of markets in Singapore Chris Archibold is also cautious about where net take-up could head in Q4. ‘There are little bits of expansion here and there but they are very few and far between at the moment . . . and we’re still seeing some organisations downsizing,’ he said.

All three consultancies reckon a game of musical chairs is going on in the office market – leasing activity has been dominated by companies relocating for better propositions, such as more competitive rents or more efficient floor plates. As BT reported last week, several firms are moving to new buildings such as Mapletree Anson and Straits Trading Building.

Source: Business Times, 13 Aug 2009

Office leasing scene – musical chairs with extra seats

Some tenants factor in higher headcount as they move to new locations

(SINGAPORE) There’s a buzz in the office leasing market. Many new leasings are at the expense of space being given up in existing locations as occupiers are drawn to better-value propositions in newer buildings. But a few are taking up more space in their new locations than what they are giving up in their existing premises to cater to future increases in headcount.

‘It’s not all musical chairs. There’s also a smattering of improved headcount numbers, even as most occupiers chase lower cost, better value locations,’ a seasoned office property consultant said.

Another office consultant, Knight Frank director of office leasing Agnes Tay, said: ‘I don’t expect net office demand to turn positive this quarter, but the negative demand will be smaller in the second half of this year. Companies in general are more optimistic now compared to the end of last year.
More of them are now taking a position on headcount and real estate requirements and a few are even making plans for future growth.’

Much of the leasing activity has centred on new buildings – including Mapletree Anson and Straits Trading Building.

More than 80 per cent of Straits Trading Building is said to be let out, ahead of its completion later this year.

Tenants are said to include Rajah & Tann (which is understood to be taking up at least 80,000-90,000 sq ft), overseas law firm Conyers Dill & Pearman and serviced office operator Asia-Pacific Business Centre. Colliers International is said to have brokered these leasing deals.

Rajah & Tann is expected to move from its existing premises at Bank of China Building nearby; Conyers, which is leasing a floor at Straits Trading Building, will move from Singapore Land Tower.
Over in the Anson Road/Tanjong Pagar corner of the CBD, Mapletree Anson, which received Temporary Occupation Permit recently, is said to be 35 per cent let out, with more than 100,000 sq ft leased. Tenants include AON, QBE (both involved in the insurance and reinsurance business) and a Japanese MNC, understood to be Sumitomo.

AON is moving from Singapore Land Tower, QBE from OCBC Centre and Sumitomo from Equity Plaza. CB Richard Ellis is said to have brokered the three leasing deals in the project.

Tenants are said to have been drawn to Mapletree Anson’s efficient floor plates, with column-free space of 20,000 sq ft per floor allowing more effective layout of workstations.

A stone’s throw away, a La Salle Investment Management fund will be completing its 20 Anson Road project in a few months.

Both office buildings have attained Singapore’s highest green building certification of Green Mark Platinum.

An office developer said: ‘Most of the leasing deals in the past six to nine months involve relocations or consolidation from several buildings into a single location. In contrast, 12 to 24 months ago, leasing deals involved occupiers upsizing their space requirements.’

Jones Lang LaSalle’s head of markets, Singapore, Chris Archibold said: ‘2009 will be a negative take-up year but in terms of market activity, leasing deals will be higher in the second half of this year. A lot of relocation is being driven by consolidation or downsizing rather than expansion. Hopefully, expansion will come back next year. There are tenants with passing rents below current market rents and who are therefore looking for cheaper alternatives like new buildings in peripheral CBD locations.’

Office consultants expect office rents to continue easing for the rest of this year – but at a slower pace. The demand is still weak but there is substantial supply coming on the market in the next few years.

According to government figures, the pipeline supply for the office sector stood at about 13.3 million sq ft gross floor area as at end-Q2 2009, of which about 12 million sq ft is slated for completion by 2012.

JLL’s average monthly rental value for prime Grade A Raffles Place (small space) stood at $9.50 psf in Q2 2009, about half the peak figure of $18.40 psf in Q3 last year.

Source: Business Times, 5 Aug 2009

Steepest fall in office occupancy cost here

Some firms may expand as rents fall and the economy stabilises

(SINGAPORE) A plunge in Grade A office rents has raised Singapore’s competitive edge somewhat. According to Colliers International, office occupancy costs here were the fourth-highest among 26 Asia-Pacific cities in Q2 this year – down a notch from a quarter ago.

As rents stay weak while the economy stabilises, property consultants also expect some companies to take advantage of the situation to expand.

Colliers noted that monthly gross rents for Grade A offices in Singapore’s central business district (CBD) posted the sharpest fall in Q2, compared with other major cities in the region. Rents slid 26.2 per cent quarter-on-quarter, averaging at $6.73 psf per month in Q2.

As a result, Singapore fell from third to fourth place in a ranking of office occupancy costs. Tokyo remained the most expensive place in the Asia-Pacific to rent an office – average Grade A CBD office rents there were 2.2 times that of Singapore’s, up from 1.6 times in Q1.

Hong Kong also kept its No. 2 spot. Average Grade A CBD office rents there were 1.4 times that of Singapore’s, growing from 1.2 times in Q1. Ho Chi Minh City rose one notch to replace Singapore in third place on the list.

Colliers expects office rents in Singapore to continue falling up till H1 next year, albeit at a slower pace. This is because demand from most companies is likely to stay subdued, while supply of shadow space could increase.

This means that Singapore could continue slipping in the list of the most expensive Asia-Pacific cities to rent an office, said Colliers research and advisory director Tay Huey Ying.

While most companies may be cautious about expansion, some may take advantage of lower rents to grow in anticipation of better times ahead. ‘Flight to quality and opportunistic expansion can be expected to intensify on the back of continued rental weakness,’ Ms Tay said.

Cushman and Wakefield managing director Donald Han agreed, noting that companies have been more willing to relocate to larger premises since May or June this year.

‘The economy now looks like it’s on the mend’ and some companies ‘are budgeting for a possible increase in headcount’ by some 10-15 per cent, he said.

Mr Han added that a few quarters ago, most firms were still watching the rental market and would rather extend their leases than commit to more space. As rental declines moderate, ‘tenants are going to say – how low can it go?’

Colliers cited Dresdner Bank as an example of companies expanding or upgrading their space requirements as office rents fall. The bank will be moving from Tung Centre at Collyer Quay to 71 Robinson Road where it will take up 20,000 sq ft of space.

Source: Business Times, 4 Aug 2009

Property fund snaps up 21 condo units for $65m

Other big-ticket transactions could rev up investment sales in second half

(SINGAPORE) IN one of the first bulk sales of apartments since the economic crisis unfolded last year, a property fund is understood to have purchased the remaining 21 units at Sui Generis condo at Balmoral Crescent for $65 million.

The price works out to about $1,260 per square foot on average. The units are said to be located throughout the freehold project, which is slated for completion around the second quarter of next year. The condo comprises three blocks – seven, nine and 12 storeys high. It is being developed by a joint venture involving United Engineers and Kajima.

CB Richard Ellis is understood to have brokered the latest sale, but it declined to comment on the transaction.

Market watchers commented, however, that $1,260 psf average price for the latest deal is about half the average price of about $2,460 psf achieved for the earlier 19 units in the 40-unit development that were sold in 2007 and 2008 at prices ranging from $1,991 psf to $2,717 psf.

About $2.2 billion of investment sales deals were struck in the first six months of this year, against $17.9 billion for the whole of last year and the record $53.7 billion in 2007.

However, activity is expected to pick up in the current half. For one, sites on the Government’s reserve list have been triggered for launch, including residential sites at Dakota Crescent and Chestnut Avenue.

Recently, the 50-room Hotel Nostalgia in the Tiong Bahru area was sold for about $22 million. The Indonesian buyer was represented by Rodyk & Davidson. Hotel Nostalgia, a freehold property, is expected to receive Temporary Occupation Permit soon. The seller was Lion Properties Group.

Some big ticket items are also on the market. One is a portfolio of four malls and an office tower owned by Asian Retail Mall Ltd (ARML) 1 fund with a price tag said to be about $1.5 billion – which industry players described as ‘bullish’. An expression of interest closed last week for the portfolio, which comprises White Sands in Pasir Ris, Century Square in Tampines, Hougang Mall, Tiong Bahru Plaza and the next door Central Plaza office block.

The fund’s life actually ended late last year – around the time of the Lehman Brothers collapse – and the investors decided to continue the fund until they could find the right mode of disposal or seek a formal extension to the fund’s lifespan.

ARML 1’s investors include a few Dutch pension funds that are said to favour selling the fund’s malls to realise their investment. However, market watchers say the other investors, which include entities linked to Pramerica Real Estate Investors Asia, Guthrie and NTUC FairPrice, want to wait for a better time to maximise their profit.

The fund bought the five assets for a total of about $943 million and may have invested a further sum of over $80 million enhancing the properties. ‘This leaves less scope for further improvements,’ a market watcher said.

Property consultants generally expect retail rents in suburban malls to dip slightly this year and if yields demanded by investors rise, this will create downward pressure on capital values of suburban malls.

However, on a more positive note, a property consultant said: ‘Shopping centres as an asset class don’t suffer the same weakness as the office market, where there’s too much supply in the horizon and demand is still weak. Institutional investors have a fairly negative view on the Singapore office market.’

Source: Business Times, 4 Aug 2009