Singapore still hot despite office space crunch

Singapore still hot despite office space crunch

Its overall value proposition is what counts ultimately, not just rental costs
By CHENG SIOW YING
ASIA today is different from what it was 10 years ago - all the countries have undergone changes politically, economically and socially. Likewise, Singapore has emerged stronger fundamentally and is now one of Asia’s most conducive environments for business and investment, earning accolades for its many endeavours to transform the island state into a bustling metropolis not just for business but also for entertainment, the arts, and other lifestyle attractions.

More efficiency: Rising rentals have forced firms to implement flexible workplace strategies to maximise the use of space
In 2008, Singapore will host the Formula One race, while in 2009 and 2010, world-class integrated resort developments like the Marina Bay Sands and Resorts World Sentosa will open their doors. By 2012, the historic City Hall and the former Supreme Court buildings will become the National Art Gallery.

The Asian office property sector enjoyed strong growth underpinned by the robust economic performance in the region. A high correlation between the economic and office market cycles is evident. Singapore’s economy grew by 7.9 per cent in 2006 and is forecast to grow between 5 per cent and 7 per cent in 2007, with the FIRE (Financial, Insurance, Real Estate) sectors being the major growth contributors.

According to Russell Reynolds Associates, 50 per cent and 40 per cent respectively of Europe-based and US-based technology companies locate their Asia-Pacific headquarters here - more so than in any other Asian country.

Due to strong leasing demand, office occupancy continued to soar and in H107, the Singapore office rental index increased by 22.5 per cent, while the office price index grew by 13.5 per cent.

The financial services sector was a key driver for this demand growth, as evidenced by the increased space taken up in the last 18 months by Barclays, Credit Suisse, Merrill Lynch, Scotiabank, Societe Generale, Standard Chartered Bank, and The Royal Bank of Scotland.

In addition to a wave of M&A activity, the increase in demand for finance and business services was also driven by the emerging markets of countries in the region such as China, India and Vietnam, where progressive deregulation of these banking markets opened up new opportunities. As a result, mortgage lending, consumer credit and wealth management activities flourished.

Singapore’s office take-up escalated and the market attained a high occupancy of 97 per cent in the Central Business District (CBD). The unrelenting race for space continued to drive rents up in all micro-markets to historic highs. The financial hub of Raffles Place led the rental hikes with a 54 per cent increase in H107 to average $13.10 per square foot per month from $8.50 at end-2006, surpassing the previous peak of $11.25 psf recorded in 1990. For the same period, average monthly rents in Marina Centre increased 48 per cent to $11.80 psf from $8 psf.

Many tenants found their renewal rents had increased by at least two to as much as three times their previous rents. Some professional services groups opted for less costly fringe city locations while those companies that do not require a presence in the city decided it was timely to decentralise. Many industrial and technology-based companies that used to occupy office buildings were also compelled to take the logical step of substituting business park/high-tech industrial options for office space as the rental gap widened.

We also saw an increasing trend of financial institutions separating and locating their backroom operations away from their city offices, a rational strategy given the cost efficiencies and for ‘business continuity’ reasons.

A number of the banks we spoke to were rather sanguine about the rental hikes as comparatively, prime rents in other Asian financial centres like Tokyo and Hong Kong are still more expensive; for example, Hong Kong’s average Grade A rents are about a third higher than Singapore’s.

With just 2.18 million square feet of new supply scheduled to be completed between now and 2009, ie less than one million sq ft a year, the tight office situation is expected to persist till 2009. In 2010, 1.8 million sq ft of new supply, mostly Grade A space emanating from the Marina Bay Financial Centre, will enter the market followed by large-scale completions from new Government Land Sales (GLS) of development sites in Marina Bay, as well as the redevelopment of obsolete buildings in the CBD like Ocean Building, from 2011 onwards.

In the interim, the government has introduced some strategies to mitigate the tight supply situation. Several disused state properties were immediately made available for lease via public tender and the first ‘transitional office’ development site with a 15-year lease at Scotts Road was successfully tendered to provide near-term relief.

In addition, new office redevelopment sites in the CBD and suburban centres like Tampines have been sold or are being fast-tracked for sale under the GLS programme. All the above will provide a supply pipeline of over 12 million sq ft of office space in the medium term.

In addition, there will be potential new supply of business park space at Changi Business Park, Alexandra Business Park and One-North, which will provide alternative space options for businesses that qualify under the zoning criteria.

On the part of corporate occupiers, many have also implemented workplace strategies to maximise their space utilisation in line with today’s lifestyle and trends. For example, flexible concepts like ‘hot-desking’, ‘hotelling’, or ‘work anywhere, anytime’ allow staff to opt to work from home or to work part-time, and have contributed to more efficient use of office space.

Notwithstanding the rental trends above, cost of office space is only one aspect of a company’s overall costs and should be set against other more important considerations, like market access, business environment and availability of talent, among others. In a nutshell, the real issue for many businesses is a city’s or a country’s overall ‘value proposition’.

There are some pro-business initiatives that the government could adopt to alleviate the current space crunch. Reviewing the business park and industrial use guidelines for greater flexibility or allowing the conversion of well-located, under-utilised industrial premises into offices for back-of-house operations and for SMEs are possibilities. In addition, the development of other non-CBD offices, for example, in the Paya Lebar sub-regional centre, could be expedited in tandem with those in the CBD.
Source : Business Times - 09 Oct 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong
(+65)91002985
mindy@mindyyong.com
http://www.hotvictory.com

ngapore KepLand to redevelop Ocean Building

ngapore KepLand to redevelop Ocean Building

By UMA SHANKARI

KEPPEL Land will redevelop its Ocean Building and Ocean Towers office buildings into the new state-of-the-art Ocean Financial Centre (OFC), it said yesterday.

Towering: When completed in 2011, the Ocean Financial Centre will offer 850,000 sq ft of office space
When completed in 2011, the 43-storey OFC will offer some 850,000 sq ft of prime Grade A office space.

Since KepLand owns the land OFC will come up on, it will only have to fork out for the development costs. Construction is expected to begin in the first quarter of 2008.

Ocean Building, which is now being demolished, has some 402,000 sq ft of net lettable area (NLA); Ocean Tower has another 229,000 sq ft.

The new centre will be built on land cleared when Ocean Building is demolished, integrating with Ocean Towers’ podium.

Once OFC comes up, Ocean Towers’ office block - which is above the podium - will then be taken down, said Tan Swee Yiow, KepLand’s director of Singapore commercial.

He said that tenants in Ocean Towers as well as past tenants in Ocean Building have shown interest in taking up space at the OFC.

Ocean Building’s major tenants included financial companies Credit Suisse, Ernst & Young and HSBC, while big tenants at Ocean Towers included law firm Drew & Napier and DMG & Partners Securities.

‘Ocean Financial Centre, with its commanding location in Raffles Place and the New Downtown, will be the preferred business address of major financial institutions and multi-national corporations,’ said KepLand managing director Kevin Wong.

The development is smaller than two other comparable office developments nearby - the massive Marina Bay Financial Centre (MBFC) and One Raffles Quay (ORQ).

Two office towers in MBFC’s first phase will add up to about 1.65 million sq ft of NLA. The office tower in the second phase is expected to offer another one million-plus sq ft of office space as well.

Similarly ORQ, which was completed last year, has slightly over 1.3 million sq ft of NLA.

Marketing for OFC will begin next year, Mr Tan said. The building is not likely to be injected into KepLand’s listed trust K-Reit Asia until development is completed in 2011, Mr Tan added.

OFC is designed by world-renowned architectural firm Pelli Clarke Pelli, whose portfolio of commercial developments in major financial cities includes the World Financial Centre in Beijing and Petronas Towers in Kuala Lumpur.

The building will have some ‘green’ features, such as the largest solar panel system on a commercial building in Singapore and the first hybrid chilled water system on the island.

OFC will be the fourth building to rise at the same site following redevelopment. The first Ocean Building was built in 1864.

Source : Business Times - 09 Oct 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong
(+65)91002985
mindy@mindyyong.com
http://www.hotvictory.com

Singapore Subsales picking up after lull as sellers temper their demands

Singapore Subsales picking up after lull as sellers temper their demands

Lock in profit if margin is good, some agents advise
By KALPANA RASHIWALA

(SINGAPORE) After a lull of about six weeks, activity seems to be picking up in the subsale market on the back of the stock market rally and more reasonable demands from sellers.

‘It’s not as good as before sub-prime but much better than during the subprime, from mid-July to mid-August,’ said CB Richard Ellis executive director (residential) Joseph Tan.

‘There have been definitely more inquiries and there’s been more response to ads. Whether this will lead to more subsale volume is hard to say,’ he added.

Jerrytan Residential Pte Ltd executive director Jason Tan too has seen a ‘mild pick-up’ in subsales of condos in Districts 9 and 10 in the past couple of weeks or so ever since the stock markets in the US and Singapore started rising again.

ERA Realty Network divisional director Andrew Soh too has seen more subsale deals in the last two to three weeks in the Sentosa Cove and Marina Bay locations. A unit at Oceanfront condo at Sentosa Cove was sold for $2,550 per square foot in the subsale market two weeks ago, reaping the seller a handsome profit of over $2 million as he had purchased the unit (also in the subsale market) in September last year for $1,750 psf.

Jerrytan Residential’s Mr Tan says: ‘Sellers are lowering their expectations after the reality check provided by the sub-prime stock market crash. But they’re still making healthy profits as they may have bought the units a little while ago.’

For instance, the owner of a unit at The Grange recently sold his 2,300 sq ft apartment in the subsale market for about $2,500 psf or a total of about $5.76 million, against his original purchase price of about $1,450 psf from the developer around July 2005. His net profit after factoring in agents’ fees, stamp duty and legal fees would be around $2.2 million.

In some instances, the spur to sell in the subsale market and take a profit now is that the projects may be receiving Temporary Occupation Permit (TOP) within the next year and those who bought their units on deferred payment schemes from the developer, paying only 20 per cent of the purchase price so far, will soon have to pay up another 65 per cent of their purchase price.

‘Our advice to these investors is that if there is a good margin from their investment, they could lock in their profit now. They can always reinvest in another property,’ Mr Jason Tan says.

‘Buyers picking up units through the subsale market are also starting to feel more confident again, after the stock market’s recovery. They’re prepared to hold the properties as a mid- to long-term investment but are also eyeing the possibility of selling much sooner, when the projects receive TOP. The outlook is still good, as there will be limited supply of completed brand-new developments in Districts 9 and 10 over the next six to 12 months,’ he added.

However, ERA’s Mr Soh sounds more cautious. ‘Supply in the subsale market is more than demand. I may be wrong but I think the high-end residential property clock is at 9 o’clock. My advice is to take a profit now and not be too greedy. Supply in the subsale market is greater than demand. It’s tough to find buyers in the subsale market now, unless you go overseas.’

Colliers International’s analysis of caveats captured by the Urban Redevelopment Authority’s Realis system shows that the months of May, June and July saw the most subsale activity in the first eight months of 2007, with more than 600 such deals in each of these three months.

The Sail @ Marina Bay, Citylights, Icon and The Lakeshore, were the most widely traded projects in the subsale market in the May-July period with 151, 93, 90 and 68 transactions respectively.

However, subsales fell drastically by more than 50 per cent to just 299 transactions in August. ‘Usually, caveats are lodged upon the option being exercised, so a slowdown in subsales from mid-July would only be reflected in the caveats about two weeks later, starting August,’ says the firm’s director of research and consultancy Tay Huey Ying.

She forecasts that subsale activity will stage a rebound.

Source : Business Times - 09 Oct 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong
(+65)91002985
mindy@mindyyong.com
http://www.hotvictory.com

Singapore Subsales picking up after lull as sellers temper their demands

Singapore Subsales picking up after lull as sellers temper their demands

Lock in profit if margin is good, some agents advise
By KALPANA RASHIWALA

(SINGAPORE) After a lull of about six weeks, activity seems to be picking up in the subsale market on the back of the stock market rally and more reasonable demands from sellers.

‘It’s not as good as before sub-prime but much better than during the subprime, from mid-July to mid-August,’ said CB Richard Ellis executive director (residential) Joseph Tan.

‘There have been definitely more inquiries and there’s been more response to ads. Whether this will lead to more subsale volume is hard to say,’ he added.

Jerrytan Residential Pte Ltd executive director Jason Tan too has seen a ‘mild pick-up’ in subsales of condos in Districts 9 and 10 in the past couple of weeks or so ever since the stock markets in the US and Singapore started rising again.

ERA Realty Network divisional director Andrew Soh too has seen more subsale deals in the last two to three weeks in the Sentosa Cove and Marina Bay locations. A unit at Oceanfront condo at Sentosa Cove was sold for $2,550 per square foot in the subsale market two weeks ago, reaping the seller a handsome profit of over $2 million as he had purchased the unit (also in the subsale market) in September last year for $1,750 psf.

Jerrytan Residential’s Mr Tan says: ‘Sellers are lowering their expectations after the reality check provided by the sub-prime stock market crash. But they’re still making healthy profits as they may have bought the units a little while ago.’

For instance, the owner of a unit at The Grange recently sold his 2,300 sq ft apartment in the subsale market for about $2,500 psf or a total of about $5.76 million, against his original purchase price of about $1,450 psf from the developer around July 2005. His net profit after factoring in agents’ fees, stamp duty and legal fees would be around $2.2 million.

In some instances, the spur to sell in the subsale market and take a profit now is that the projects may be receiving Temporary Occupation Permit (TOP) within the next year and those who bought their units on deferred payment schemes from the developer, paying only 20 per cent of the purchase price so far, will soon have to pay up another 65 per cent of their purchase price.

‘Our advice to these investors is that if there is a good margin from their investment, they could lock in their profit now. They can always reinvest in another property,’ Mr Jason Tan says.

‘Buyers picking up units through the subsale market are also starting to feel more confident again, after the stock market’s recovery. They’re prepared to hold the properties as a mid- to long-term investment but are also eyeing the possibility of selling much sooner, when the projects receive TOP. The outlook is still good, as there will be limited supply of completed brand-new developments in Districts 9 and 10 over the next six to 12 months,’ he added.

However, ERA’s Mr Soh sounds more cautious. ‘Supply in the subsale market is more than demand. I may be wrong but I think the high-end residential property clock is at 9 o’clock. My advice is to take a profit now and not be too greedy. Supply in the subsale market is greater than demand. It’s tough to find buyers in the subsale market now, unless you go overseas.’

Colliers International’s analysis of caveats captured by the Urban Redevelopment Authority’s Realis system shows that the months of May, June and July saw the most subsale activity in the first eight months of 2007, with more than 600 such deals in each of these three months.

The Sail @ Marina Bay, Citylights, Icon and The Lakeshore, were the most widely traded projects in the subsale market in the May-July period with 151, 93, 90 and 68 transactions respectively.

However, subsales fell drastically by more than 50 per cent to just 299 transactions in August. ‘Usually, caveats are lodged upon the option being exercised, so a slowdown in subsales from mid-July would only be reflected in the caveats about two weeks later, starting August,’ says the firm’s director of research and consultancy Tay Huey Ying.

She forecasts that subsale activity will stage a rebound.

Source : Business Times - 09 Oct 2007

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong
(+65)91002985
mindy@mindyyong.com
http://www.hotvictory.com