URA plans new community space at Dhoby Ghaut MRT station

URA plans new community space at Dhoby Ghaut MRT station

The open space above the Dhoby Ghaut MRT station will be Singapore’s latest venue for community activities and performances.

This is all part of the Urban Redevelopment Authority (URA)’s plan to increase the number of public spaces along the Orchard Road area.

By July next year, the plot of land at Dhoby Ghaut will be transformed into a new space that will host community events and performances.

The project is part of URA’s strategy to provide variety along the Orchard Road shopping belt.

Fun Siew Leng, Director, Urban Planning and Design, URA, said: “We’d like to continue to safeguard some of these vacant state land for future rejuvenation for the area. So in the interim, we thought that it’s better to put it to a better use. We put some facilities and amenities there and the public can get to enjoy the space better.”

The site sits at the crossroads of three rail lines and features an integrated borderless design.

The centrepiece will be this outdoor amphitheatre that will serve as a stage for community performances.

The unique “basket-weave” design of aluminium screens can seat up to 500 for an “outdoor room” concept.

Chan Soo KIan, Design Director, SCDA Architects, said: “It’s a little bit of form follows function and form dictating function. We’re working with various forces. We’re also responding to the unique site conditions as it’s next to the MRT and next to several drop off and bus stations. So we had to approach from the point of view that this structure would not have a front or a back.”

“There’ll be more land area for people to do their activities and there won’t be so many buildings,” said one member of the public.

“Great because people need more space, more places like this to have morning exercise,” said another.

The project will cost around S$4 million.

URA says feedback was gathered from community stakeholders and their input incorporated into the final design.

Community stakeholders included the People’s Association and the Singapore Management University to better understand their needs. - CNA/ch
Source : Channel NewsAsia  - 27 March 2008

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Singapore URA unveils sales conditions for two reserve list sites

Singapore URA unveils sales conditions for two reserve list sites
SINGAPORE : The Urban Redevelopment Authority has released detailed sales conditions for two reserve list sites at Clemenceau Avenue/Havelock Road and Upper Changi Road North/Flora Drive.

The site at Clemenceau Avenue is slated for hotel development.

The parcel is close to the popular entertainment districts of Clarke Quay, Boat Quay and Robertson Walk.

It has an area of about 5,500 square metres and a permissible gross floor area of 11,555 square metres.

Consultant Knight Frank expects a three to four-star business hotel to be built with up to 270 rooms.

It is estimating the land price to be in the range of S$600 to S$650 per square foot per plot ratio, or up to S$81 million in total.

A second site released at Upper Changi Road North parcel can be used for residential development.

The site has an area of 30,682 square metres and a maximum permissible gross floor area of 42,956 square metres.

Knight Frank says the new development could yield up to 400 units, which could be sold at between S$650 and S$720 per square foot.

This will result in a land price of about S$83 million to $111 million, or up to S$240 per square foot per plot ratio. - CNA/ch

Source : Channel NewsAsia  - 27 March 2008

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Last year’s boom in investment sales likely to continue in ‘08

Last year’s boom in investment sales likely to continue in ‘08

By JEREMY NLAKE
IT was an eventful 2007 for the Singapore property investment sales market, which hit a record $55.29 billion in volume of transactions. This was 81 per cent higher than the previous record of $30.59 billion in 2006. The robust momentum in the investment market was largely driven by active acquisition of development sites by developers in both the private and public sectors. The office sector was also very active.
 
Total residential investment sales amounted to $34.43 billion in 2007, representing 62 per cent of total investment sales and an increase of 118 per cent year-on-year.
 
 
The investment market was exceptionally active last year for the following reasons:
A reversal of the ‘perfect storm’ - a combination of factors that allowed Singapore’s property market to hit the sweet spot.
Strong economic growth of 7.7 per cent in 2007.
Office and residential market property booms.
Strong interest from foreign real estate investors, both corporate and individuals.
Emergence of Singapore as a service centre hub for Asia, for example private banking, back offices, medical centre and education.
Feel-good factors such as the Formula One and integrated resorts.

The private sector investment sales market took the lead in 2007, accounting for 79 per cent of total investment sales or $43.63 billion. Public sector sales contributed the remaining 21 per cent or $11.66 billion.
 
Altogether, 39 government sites were bought by developers during the year, made up of three ‘white’ sites, 12 residential sites, eight commercial sites, six hotel sites and 10 industrial sites.

In addition, five residential sites at Sentosa Cove were sold for a total of $1.11 billion in 2007.

Significant public land sales in 2007 included a prime ‘white’ site at Marina View (Land Parcel A), which was awarded to Macquarie Global Property Advisors (MGPA) for $2.02 billion, and a commercial site at Beach Road, which was sold to a consortium comprising City Developments, the Istithmar Group and the Elad Group for $1.69 billion.

By sector, the residential sector took the lead in investment sales in 2007. Total residential investment sales amounted to $34.43 billion in 2007, representing 62 per cent of total investment sales and an increase of 118 per cent year on year.

A total of 116 collective sales were transacted in 2007, generating investment sales of $13.64 billion, exceeding the $8.2 billion from a total of 79 collective sales concluded in 2006 and is the highest ever.

Interestingly, many, including a number of overseas institutions and individuals, were observed to have purchased bulk apartments in residential projects before or after each project was officially launched for sale.

There was the purchase of 16 units at The Orchard Residences by a Thai investor for $135 million and a fund linked to MGPA acquired 162 units at The Cascadia for a total of $280.36 million. Also, a joint venture between US-based Wachovia Group and City Developments acquired 44 units at Cliveden at Grange for $432.43 million.

Investment activity in the office sector remained strong throughout the year, with increasing foreign investor participation, supported by strong market fundamentals.

Total office investment sales generated $14.19 billion worth of sales or 26 per cent of the year’s total investment sales. This was nearly triple the $4.79 billion recorded in 2006. On the back of an upbeat office market, prime office properties continued to be highly sought after by Reits and foreign funds as they expanded their investment reach in Singapore.

About $4.86 billion worth of private en bloc office buildings and strata-titled office properties was acquired by these investors which in turn gave them a 54 per cent share of the $8.97 billion in total private major office transactions in 2007. The most significant transaction was the acquisition of Temasek Tower by MGPA at $1.04 billion.

Other notable office sales included the sale of Chevron House to a US fund for $730 million and the sale of 78 Shenton Way to Commerz Grundbesitz Investmentgesellschaft (CGI), a German fund, for $650.78 million. The deal was CGI’s first foray into the Singapore property market.

Another German fund, SEB Asset Management, displayed strong interest in office properties by acquiring the SIA Building, 12 floors at Springleaf Tower and 10 floors in 79 Anson Road for a total of $965.91 million in 2007.

In addition, New Star Asset Management, a UK fund, acquired Parakou Building for $128 million and One Phillip Street for $99.02 million.

Reit-related office sales in 2007 included Keypoint at Beach Road which was acquired by Allco Commercial Reit for $370 million, inclusive of income support of up to $10.5 million for two years to be provided by the vendor. Both Keppel Land and Cheung Kong Holdings divested their one-third stakes in One Raffles Quay to K-Reit and Suntec Reit respectively, for $941.5 million each.

Looking ahead, strong office demand and potential for further rental escalation will lead to more buying of quality office properties in 2008. The sustained influx of foreign investors should continue to lead to brisk activity in the office investment market and provide strong support to prices.

Despite some volatility resulting from the global credit crunch and the slowing down of the US economy, investment sentiment will remain positive albeit a little cautious in 2008, due to the healthy economic forecast for Singapore.

Mounting inflationary pressure, the divergence of the weakening US dollar, the high level of liquidity in the investment market and the perception of promising returns have combined to make Singapore real estate an attractive investment alternative.

Investment activity in the office sector is likely to continue to outperform other property sectors given the limited supply coming on stream in the short term.

Foreign funds and Reit-related parties will also continue to lend support to the investment market, showing keen interest particularly in offices, retail and industrial assets.

The writer is executive director, investment properties, at CB Richard Ellis

Source : Business Times - 27 March 2008

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Singapore Dhoby Ghaut set to turn super hip

Singapore Dhoby Ghaut set to turn super hip

By SARA LIM

COME early 2009, the vacant space above Dhoby Ghaut MRT Station may just be the hippest spot in town, playing host to flea markets, soccer matches, buskers and community performances.
Unveiling a plan to transform the area, the Urban Redevelopment Authority (URA) said yesterday it will spend an estimated $4 million on a sculptured outdoor amphitheatre and a cafe pavilion on the yet-unnamed open space.

Architect Chan Soo Khain, winner of the inaugural President’s Design Award for Architecture and Urban Design, has been commissioned to handle the project.

According to Mr Chan, the amphitheatre will be the centrepiece that invites people into the space. Designed to ‘melt back into the landscape’, the partly-sheltered theatre will have a spiral design with woven aluminium louvres inspired by a rattan basket.

It will be built into the ground, with a structural height of no more than 4-5 metres. ‘We wanted to create a unique arrival experience, that of walking down a ramp into the theatre,’ Mr Chan explained.

The interlocking curves of the amphitheatre will divide the land into three zones: a paved plaza area at the western end; an open field at the eastern end; and the amphitheatre itself, which will house a stage and associated amenities such as changing rooms.
 
When completed, the 1.3 hectare space will be open to the public at all times, functioning like a neighbourhood park in the city centre. The land will serve the community for at least 10-20 years as there are no plans to develop it in the medium term.

URA said open spaces enhance and enrich community life and add more vibrancy to the city. It is hoped this new project will add variety to existing public parks and open spaces in the city centre.

‘We hope this new open space will reinforce a sense of belonging to the city,’ said URA chief executive Cheong Koon Hean.
Source : Business Times - 27 March 2008

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Church puts up Singapore Telok Kurau site for tender sale

Church puts up Singapore Telok Kurau site for tender sale

Marketing agent CBRE pegs guide price at $40m
THE Presbyterian Church in Singapore has put up for sale a large 9,445 square metre (101,662 square foot) site in the Telok Kurau area.
The church said in a statement yesterday that the sale by tender is part of its strategy to unlock the value of selected properties to support the financial needs of the church, as well as its missions and school ministries.

CB Richard Ellis has been appointed marketing agent for the site which is at 116 Lorong J, Telok Kurau and 119 Lorong K, Telok Kurau. The legal owner is the Trustees of the Presbyterian Church in Singapore Registered.

The Urban Redevelopment Authority has granted an Outline Permission for the construction of a five-storey condominium development with a plot ratio of 1.4.

The development site is located a short drive away from Parkway Parade, East Coast Park and education institutions such as Tao Nan School (Primary) and Victoria Junior College.

Developers have the option to purchase the site with a leasehold tenure of 105 years or 999 years commencing Jan 26, 1939.

CBRE pegged the guide price at $40 million or about $607 per square foot per plot ratio.
 
Development charge is estimated at $46.44 million for a condominium development.

Under the Master Plan 2003, the site is zoned civic and community institution. Other potential uses are strata landed housing development or civic, community and cultural development. These uses incur a lower development charge.

Potential uses will, however, be subject to evaluation by the competent authority.

But for a condominium development, the developer can build about 118 units assuming an average size of 1,200 square feet each. The tender exercise closes at 3 pm on April 30, 2008.
Source : Business Times - 27 March 2008

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Foreigner factor in Singapore property here to stay

Foreigner factor in Singapore property here to stay

Rising rents, influx of foreign talent set to spur demand for homes, say analysts
By KALPANA RASHIWALA

THE attraction to foreigners of buying a non-landed home in Singapore isn’t expected to wane in the mid- to longer-term, say property experts.
 
 
Jones Lang LaSalle’s head of research (SE Asia) Chua Yang Liang expects the ratio of foreign buying to be maintained in the short term - because of sub-prime uncertainty - but to increase moderately in the medium to longer term.

‘A key factor is that residential rents have moved up quite a fair bit, and the low interest rate environment will encourage more foreigners and PRs (living here) to consider taking up home ownership,’ he added. This, of course, is assuming that they can get loans.

Another factor that will contribute to the trend is the government’s policy of encouraging more immigration into Singapore to power the Republic’s economic growth, say market watchers.

Knight Frank executive director (residential) Peter Ow notes that non-PR foreign investors were last year a major buying force especially in the Core Central Region (CCR), drawn by the story of Singapore’s transformation into a global city and its ambitions to be a hub in many fields - including financial, healthcare, education, R&D.

‘The implication is that Singapore’s property prices, especially in CCR, will be more affected by events in the rest of the world such as the sub-prime crisis which is now unfolding.

‘But that’s not necessarily a bad thing. If the situation worsens overseas and international investors view Singapore as a safe haven, that could draw more foreign funds to the local property market, especially in the CCR,’ Mr Ow reckons.

‘Increasingly, we may see more foreigners who will be able to afford properties in CCR. That also explains why some high-end residential developers are feeling pretty confident that prices will not slide in the luxury tier, as demand is being supported by foreign investors looking for a place to park their monies,’ Mr Ow said.

A 12 percentage-point slide in Singaporean buyers’ share of private apartments/condo purchases in the Outside Central Region - which covers mass-market suburban locations, the staple of Singaporean upgraders - between 2000 and 2007 revealed in JLL’s study may have implications on that perpetual Singaporean dream - of upgrading to a private condo.

‘The authorities may have to ramp up supply of the high-end of public housing, like the Design, Build and Sell Scheme (DBSS), and executive condos (ECs) to cater to local home buyers,’ Mr Ow suggests.

ECs are condominium housing that have resale and other restrictions in the first 10 years, while DBSS are public housing flats designed, built and sold by private sector developers.

DTZ executive director Ong Choon Fah also says these housing types will help meet the aspirations of Singaporeans who feel priced out of private housing. ‘There’s a right product for everybody. We must understand that in a global economy, there is open competition. We must embrace meritocracy. Anybody can buy the product if they can pay. To survive, Singapore must keep attracting the best.’

Source : Business Times - 27 March 2008

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Wait-and-see stand in property plays

Wait-and-see stand in property plays

The impact of the US economy would play a big part in deciding the course of the property market here this year, says CHUA CHOR HOON

PROPERTY markets in Asia-Pacific were largely insulated from the US sub-prime fallout last year, basking in strong economic growth and sustained demand.
 
Hong Kong (above) and Singapore are still attractive despite higher prices and rentals because of their more developed infrastructure and connectivity.
Going into 2008, market conditions appear stable and the region’s economies are holding up well. Still, much will depend on how the problems in the United States play out.

With the attraction of lower prices and growth opportunities, investor interest in regional property was high last year. This translated into investments worth US$118 billion for Asia-Pacific. Singapore attracted the highest quantum of investments, followed by Australia.

Singapore’s investment sales last year stood at a record $41.5 billion, 68 per cent more than in 2006. In the first nine months alone, sales had already surpassed that of 2006 by 38 per cent. This was due mainly to the robust economy, good property market performance and active collective sales in the first half of 2007. Although there was a 30 per cent quarter-on-quarter decline in investment activity in the fourth quarter of 2007, local factors seemed to hold more sway in investment decisions than the US sub-prime crisis.

For example, in the office sector, prices of prime space in Raffles Place have more than doubled, leading to yield compression. In the residential sector, prices in prime districts have also risen more than 50 per cent. The withdrawal of the deferred payment scheme added to the cautious mood.

Collective sales, which drove the investment market in the first half of 2007, also slowed due to a tightening of regulations which lengthened the process of putting a development up for tender.

Among Asian countries, Singapore’s office rental grew the most due to strong demand, mainly from the financial sector, coupled with limited supply. Hong Kong and Shanghai were the next strongest markets. Prime residential rentals in Singapore saw the biggest jumps too, due to high expatriate demand amid a reduction in supply as many developments in the prime districts underwent collective sales. In contrast, prices of luxury units in Kuala Lumpur and Shanghai fell due to oversupply. Retail rentals were stable for most Asian countries, except for Shanghai which saw tremendous growth of almost 120 per cent. Singapore’s prime retail rents rose moderately by 6.6 per cent.

2008 outlook

For now, market conditions seem stable and most of the Asia-Pacific economies are holding up well. However, if the sub-prime fallout persists and the US and European Union economies continue to slow, both export-driven economies and tertiary economies will be affected. The GDP growth rates for the Asian countries are forecast to fall slightly, with the exception of Thailand which is likely to see better GDP growth now that the elections are over. In the Asia-Pacific region, China and India are expected to be most immune to the sub-prime crisis as they have strong domestic demand to buffer the fall in export demand.

There is evidence that European and US funds are directing their attention to this region where they see growth opportunities in countries such as China, Vietnam, India, Thailand, Hong Kong and Singapore. With rising affluence and a wealthier middle class, there is strong domestic demand for housing in China, India and Vietnam. Vietnam’s official accession to the World Trade Organization (WTO) in 2007 will pave the way for a more open market economy and attract more foreign investments. Thailand’s property market has not risen as much as other Asian markets in the last two years due to its political situation and prices are relatively attractive.

Hong Kong and Singapore are still attractive despite higher prices and rentals because of their more developed infrastructure and connectivity. On the other hand, some Asian funds are also looking at Europe and US now that their prices have become more competitive.

On the whole, there is increasing investor interest from Japan, Korea, China and the Middle East. The Japanese are reviewing options to lift restrictions for Japan real estate investment trusts (J-Reits) to invest in overseas real estate. The rise of sovereign wealth funds from Asia and the Middle East will also contribute to the investment market.

The fundamentals supporting the Singapore property market are strong, with low interest rates and many exciting events and economic investments coming on stream. These would bring in more tourists and jobs. However, for the moment, many property investors and developers are adopting a wait-and-see stance. Developers in Singapore are holding back launches and some funds are holding off making investments at least for the first half of 2008, before the extent of the slowdown in the US economy and its impact globally are clearer.

The impact of the US economy would therefore play a big part in deciding the course of the property market this year. Although fundamentals are strong, sentiment plays a big part.

Nevertheless, there is a silver lining to the caution brought about by the sub-prime problem. Many property markets around the world are in bubble territory on the back of strong economic performance and many investors are getting carried away with the notion that prices will keep rising. If the sub-prime woes had happened later, prices and rentals would have continued to rise. And any fall, happening much later in the property cycle, would have been more painful.

Chua Chor Hoon is senior director at DTZ Research, Singapore

Source : Business Times - 27 March 2008

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S-Reits alright for long-term gains

S-Reits alright for long-term gains

Investors with capital to deploy should take advantage of the high yields on offer, and get paid by waiting, says MARK EBBINGHAUS
OVER the past few years one of the greatest drivers behind the positive performances of the region’s market was liquidity. Now, following a change in the financial environment, which began around August 2007, the negative market performance that the markets are experiencing is being driven, in part, by illiquidity. As a result there has been an increase in volatility in Asia’s equity markets, with the S-Reit market being one of the sub-sectors significantly affected by these changes. And despite the volatility lasting for over seven months, there is still a lack of clarity as to when this is likely to abate.
 
 
In the first seven months of 2007 there were net capital inflows in excess of US$20 billion into Asia’s equity markets but this abruptly ended towards the end of July, with a significant reversal of market liquidity. Since then we have seen over US$40 billion of net outflows from Asia’s markets, after a period of near record equity issuance. As a result, liquidity has been sucked out of the system and markets have become extremely volatile.

We are now in an environment where volatility, as measured by the volatility index (VIX), is at record highs. In addition, risk aversion is also running at high levels, as measured by the emerging markets bond index (EMBI) plus sovereign spread.

From the data, it’s clear that the market is firmly in bearish territory, having moved rapidly from the previous years’ bullish sentiment. Much of what has occurred has been out of the region’s control, being driven instead by global capital markets and the significant re-pricing of risk. However, the knock-on effect has been that those markets perceived as being riskier, including the S-Reit market, have suffered a lot over the past seven months.

Not since the early days in the development of the S-Reit market, which was established in July 2002, have we seen distribution per share (DPS) yield spreads widen to over 350 basis points, which compares to the market’s peak in July last year where the spread was closer to 100 basis points. For some individual S-Reits we have seen the spread blow out far wider, with many S-Reits trading at a high single digit/low double digit DPS yield compared to the long bond in the mid two per cent range. That’s among the widest spreads in the world.
‘Institutional investors are sitting on near-record cash weighting and at some point we will see a tipping point where the global financial malaise washes through the system and investors regain confidence to deploy capital. When this occurs, we are likely to see a run of funds flow into the region and with it a significant rally in the markets.’
 
 
 
 
 
 
The perplexing issue for many is that we have not seen a deterioration in earnings quality of the mainstream S-Reit sector. What we have seen, however, is significant price volatility. It’s probably fair to say that the sector is not currently being driven by fundamentals but more by momentum. It’s probably also fair to say that momentum was largely what led the sector to all-time highs last year and that the sector probably ran too hard too fast. Today, to some extent, the S-Reit sector is paying the price for the excess in-flow of money in prior periods, combined with more discriminating investor appetite that is looking for value in many places, but wary of the illiquidity induced volatility.

Looking at the global Reit marketplace it really depends on what your reference point is in assessing value opportunities and justifying activity or inactivity alike. If your benchmark reference point is discount to net asset value (NAV) or absolute earnings yield then the S-Reits do not look particularly cheap. However, if you look at the distribution yield spread to the long bond or notional risk free rate, then the S-Reits look like some of the best value opportunities in the world, particularly when you combine this with base earnings stability and strong earnings growth prospects. When the market was attracting a lot of attention last year, investors were willing to factor in yield, organic growth and, importantly, acquisitive growth into their required rate of total return from an S-Reit investment. S-Reits were required to have an identified asset pipeline, if you didn’t you would not get credit for acquisitive growth. For those with a pipeline the market drove down the DPS yield in part due to the high earnings accretive effects of acquisitions. This resulted in an increase in the accretion of the growth.

Today’s pipeline is not viewed as positively by investors, mainly because it’s all about funding and if you have a pipeline the first thing an investor will ask is how you are going to fund your acquisitions. So, to some extent, S-Reit investors’ total return expectations have not changed significantly in the last year, but today the requirement is to deliver it through yield and organic growth only, excluding acquisitive growth. As such, the yield has had to effectively compensate for this, which has driven this metric up to near all-time highs, despite the risk-free and debt rates actually moving in the other direction, widening spreads on both counts.

This brings us to debt. Many investors feel - and there is sympathy with this line of thought - that in some instances capital management practices in the sector have been behind the pace in a rapidly changing global credit market environment. We have seen gearing levels gradually rise from the low 20 per cent range to over 30 per cent and we have seen debt providers become a lot more cautious in terms of refinancing and extending debt facilities.

Reit investors have witnessed real estate in the western world, notably the US, UK and Europe, revalued downwards, in some cases significantly, resulting in gearing levels increasing beyond what could be considered prudent and in some situations this has been deadly.

In a market where investors often shoot first and ask questions later capital management has been a major focus and another trigger issue significantly influencing investors’ trading activity. In short, illiquidity and capital management have combined to be major influences on the performance of the S-Reit sector, currently being driven - at least in trading activity - by generally non-traditional Reit investors, exacerbating volatility levels.

In the main, the fundamentals of the S-Reit sector are in reasonably good shape. There is very limited earnings risk and there are promising organic earnings growth prospects. The demand and supply metrics in the physical asset market remain generally sound and there are unlikely to be any significant shocks to the system from that quarter. It’s generally not so much about earnings but the pricing is being driven by illiquidity and increased global risk premia.

Having said that, there are a number of messages that institutional investors are sending to S-Reits, with the bottom line being: ‘If you do not listen to us we will not buy!’

Institutional investors are sitting on near record cash weighting and at some point we will see a tipping point where the global financial malaise washes through the system and investors regain confidence to deploy capital. When this occurs we are likely to see a run of funds flow into the region and with it a significant rally in the markets.

In the meantime, for those with something longer than a monthly investment horizon and wishing to deploy capital, buy S-Reits, take the high yields on offer and effectively get paid to wait for the rally.

At the end of the day, quality investments are likely to yield the right results over the longer term. However, in the case of S-Reits, both asset and management quality are paramount and getting this right from an investor’s point of view is critical.

Mark Ebbinghaus is managing director, head of real estate, lodging and leisure, Asia, UBS Investment Banking Department

Source : Business Times - 27 March 2008

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Rising demand for Built-to-Suit space

Rising demand for Built-to-Suit space

With CBD office rentals continuing to increase, companies are looking for cheaper alternatives, write CHRIS ARCHIBOLD and TAHLIL KHAN

WHILE demand for central business district (CBD) office space remains very strong, some significant trends have emerged in the way a number of multinational companies view options in terms of location and type of premises for future occupation.
 
The two most active industries looking at BTS schemes are financial institutions and IT companies. A lot of the interest has centred on Changi Business Park as one of the key advantages, besides the availability of greenfield sites, is the direct land allocation process.
This has come about from Singapore’s drive towards a knowledge economy as well as current market dynamics. Historically, the Singapore economy was largely based on trading and labour-intensive manufacturing industries. In the 1990s, there was a significant drive towards the information technology (IT) sector which grew as a result of the dotcom era. During the late 1990s and early 2000s, there was a concerted effort to encourage R&D activity and more recently, the government has been encouraging various sectors. That notably includes positioning Singapore as a regional financial hub.

The growth of the financial services sector in Singapore has had a marked effect on the economy and on the accommodation demanded by global financial players. Many of these large financial houses have now reached a critical mass whereby they are looking to split their operations into both front and back offices.

The Singapore office market bottomed out in the second half of 2004 and saw a rental rise of 23 per cent in 2005 followed by 63 per cent in 2006 and a further 67 per cent in 2007 with fourth quarter Grade A CBD rents at $16 per sq ft a month. This dramatic increase in rents has been fuelled by lack of supply and unprecedented levels of demand from many MNCs, most notably from the financial sector.

The high-tech sector has also seen increases in rents of 12.5 per cent, 11 per cent and 97 per cent in 2005, 2006 and 2007 respectively. While 2007 saw a virtual doubling of high-tech rents, the increases from the bottom of the market till today have been nowhere near as dramatic as the office market which has trebled. We have a scenario today where there is a significant gap between office and high-tech rents.

The gap between average CBD core office rent and rents for high-tech space has widened from 140 per cent in the second half of 2004 to about 200 per cent in the fourth quarter of 2007. This is because of the higher increase in CBD core office rentals as compared to high-tech rents during this period.

With CBD core office rentals continuing to increase, companies began looking for cheaper alternatives. Some major financial institutions have chosen to relocate their backroom operations to high-tech space, thus pushing up high-tech rentals. The strong demand for such space at the tail end of 2007 and beginning of 2008 has resulted in high-tech rentals increasing at a faster rate than CBD core and decentralised area office rentals, narrowing the rental gap between office and high-tech space.

Nevertheless, compared to office rents, high-tech rents are more compelling than ever before from an occupational cost perspective. Given that all MNCs are looking to lower occupational costs, and with a disparity of around $11 - $13 psf per month between core CBD rents and high-tech rents, there is an opportunity to make substantial savings which makes a compelling case for corporate real estate managers (CRE) and chief financial officers (CFOs).

Given the above, we are witnessing unprecedented growth in the demand for high-tech business park space from both traditional occupiers and financial institutions. There are a number of reasons for this recent phenomena, including the following:
Cost savings,
Consolidation of operations,
Critical mass,
Diversification of locations (business continuity).

The current supply of high-tech space is extremely limited and hence the emerging trend for forward thinking MNCs is to enter into built-to-suit (BTS) projects. This can be either owner-occupied by the MNC or leased from a BTS developer on a long-term basis. It is worth noting that for a BTS project to be financially viable (for both occupiers and the developers) they generally have to be of a certain scale, approximately 100,000 sq ft and above.

The major considerations for MNCs looking at BTS projects in decentralised locations are as follows:
Good corporate image with modern office-like facade and landscaping,
Strong supporting amenities such as food courts and ancillary retail,
Competitive rentals,
Efficient transportation systems including access to MRT, buses and taxis,
Greenmark certification as a minimum - many MNCs now have corporate mandates that dictate Corporate Social Responsibility (CSR),
Ability to create a quality working environment. Our surveys on the workplace environment have demonstrated that a quality working environment increases productivity. Lower rents per sq ft enable MNCs to dedicate more area for staff facilities and welfare. In the main, the areas that are considered by MNCs for BTS projects fall into four preferred locations: Changi Business Park (CBP), Jurong East including International Business Park (IBP), One-north and Science Park.

Market talk indicates there are likely to be other locations which may be designated as high-tech locations such as Paya Lebar. The reason the above locations are favoured is the current availability of quality sites that meet MNCs’ requirements. Recently, the 15-year leasehold transitional office sites (such as those in Newton, Mountbatten and Tampines) have provided occupiers with attractive propositions in terms of affordable rents in good locations which will facilitate BTS developments. The BTS trend has been borne out in a number of recent well-publicised acquisitions. In terms of the financial sector, these include acquisitions of substantial back office BTS facilities by DBS, Citibank and Standard Chartered Bank. OCBC is also rumoured to be in discussions on a BTS scheme in Changi Business Park. Recent BTS acquisitions by non-financial services companies include Tolaram Group in IBP and IMC Shipping in Changi Business Park.

There are numerous other corporates that are in discussions for BTS projects that will go live in 2008. Jones Lang LaSalle (JLL) is currently advising a number of large occupiers in various industries on their long-term strategies for Singapore. Table 2 details the industry profile of the occupiers that we are currently advising with regards to the potential acquisition of BTS facilities.

An interesting point to note is that based on JLL’s current instructions, the two most active industries looking at BTS schemes are financial institutions and IT companies. A lot of the interest has centred on Changi Business Park as one of the key advantages, besides the availability of greenfield sites, is the direct land allocation process which provides corporates with line of sight in terms of costs and certainty in terms of timing.

Given the current and increasing future importance of CSR, BTS facilities are giving major corporates an opportunity to reduce their environmental impact and impress shareholders with their drive to be good corporate citizens. Almost every recent commitment to a BTS project has incorporated at least the minimum level of greenmark certification. Some of the occupiers are aiming to achieve Gold Plus or even Platinum levels of certification.

Our house view is that Singapore will see a continuing trend of BTS facilities over the next couple of years, with the likely takers of BTS projects being full relocations (including front office operations) for the IT, consumer products and manufacturing industries and back office operations for financial institutions.

This will continue to be driven by current influencing factors, ie, rents and the lack of supply. In the case of financial institutions, this will also be driven by the fact that many now have the critical mass in Singapore required for a split front and back office location.

The impact of these BTS schemes on the office market and high-tech market remains to be seen and is very much dependent on the scale of BTS commitments over the next 12-24 months. Equally, this is also dependent on the percentage of space that is taken up as expansion requirements compared to take-up that is pure relocation from current buildings.

Chris Archibold is regional director, head of markets, Jones Lang LaSalle; and Tahlil Khan is associate director, head of industrial, Jones Lang LaSalle

Source : Business Times - 27 March 2008

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong

(+65)91002985

mindy@mindyyong.com

http://www.hotvictory.com

Singapore Shophouses star at auctions

Singapore Shophouses star at auctions

By GRACE NG

IT was a stellar year for the Singapore property market in 2007, and auction activity, a barometer of market confidence, did well in tandem.
Auction sales hit a record $407.43 million in 2007, the highest in eight years and a shade below the figure achieved in 1999 when the market was recovering from the Asian financial crisis.

The record figure was mostly due to a vibrant residential market in the first half of 2007 where sales were dominated by high-end condominiums and old apartments with en bloc potential. The other sectors which had contributed to this remarkable result were shops/shop houses and development sites.

Owners are increasingly turning to auctions to sell their property. In fact, their numbers have been doubling every year since 2005. Last year, the number of properties put up by owners hit a 10-year high, with 810 properties auctioned with a value of $264.7 million. This compares with $129.54 million for 2006.

The transparency of the auction method is the chief reason for its popularity. This assures sellers that they are getting a good price for their properties. Its popularity extends beyond individual owners to companies that are looking to divest or restructure their property portfolio.
 
The auction market this year is likely to see a 25 per cent drop in value transacted to $300 million, as we expect fewer high-end homes and old apartments with en bloc potential to be put under the hammer.

However, those sectors that have yet to experience sharp price increases are likely to see more activity this year. One such sector would be commercial properties like shophouses. According to Urban Redevelopment Authority numbers, residential prices climbed 31.2 per cent in 2007, while the retail sector only gained 13.2 per cent.

Spotlight on shophouses

Last year, a total of 527 shops/ shophouse units were put up for sale via auction by both individual owners and companies. A total of $78.1 million worth of such units were sold under the hammer, against just $28.75 million in 2006. That’s a jump of 172 per cent!

The sale value of shops/shop houses is expected to moderate to $50 million this year due to the cautious mood in the market.

With the US sub-prime debacle crimping sentiment in the property market this year, particularly the lacklustre residential sector, savvy investors could consider turning their attention to strata titled shops, private shophouses or HDB shops.

Shophouses, like other types of property, are assets that can hedge against inflation, enabling investors to benefit when the capital value appreciates in times of rising prices. Additionally, for owner occupiers, the shop/shophouse acts as a hedge against rental increases. By purchasing a unit, owner occupiers are typically converting their monthly rent to mortgage payments, which could turn out to be much lower.

Auctions are a good avenue to source for shops/shophouses that are affordable, strategically located, limited in supply and have attractive yield or en bloc potential.

Many strata titled shops were successfully transacted at auctions at affordable prices, many of them below $500,000. Such a price range is considered a bargain, particularly when some of them are located in the heart of town or next to future MRT stations.

For instance, two strata titled shops at Excelsior Hotel and Shopping Centre located at Coleman Street, near the City Hall MRT station, were sold for $318,000 and $340,000, respectively. Additionally, several shop units at Grandlink Square, near the future Paya Lebar MRT interchange, were sold at prices ranging from $51,000 to $226,000.

There are also many attractive picks among HDB shophouses put up for sale by mortgagees at auctions and such properties are usually attractively priced. These shophouses consist of shop space on the ground level and living quarters, often a three-room flat, on the upper level. Considering the high cash over valuation done on some HDB flats, HDB shophouses priced between $600,000 and $700,000 are some of the attractive options appearing at auctions. Some successful transactions include HDB shophouses located in Chai Chee and Bedok North Avenue 1, which were sold for $640,000 and $700,000, respectively.

Investors and business owners see shops and shophouses as alternative office space, which is facing a current supply crunch. Shophouse units located near or within the CBD are in high demand and they are usually near MRT stations. For instance, a three-storey shophouse unit with dual frontage at Stanley Street was sold for $4.21 million last year. Similar properties include shophouse units located at Outram Park and South Bridge Road, which were successfully auctioned off at $2.73 million and $2.6 million, respectively.

HDB shops/shophouses located in high pedestrian traffic areas like the town centre, MRT station or bus interchange are in demand and can fetch record prices at auctions. For example, a shop unit at Heartland Mall in Hougang was sold for $8.5 million, while another shophouse at Upper Changi Road, which is situated beside an upcoming mall and near the Bedok bus interchange and MRT, was sold for $7 million at an auction last year.

Similarly, an HDB shop at North Bridge Road was sold for $528,000 last year, while a shop at Crawford Lane located opposite a future hotel at Victoria Street, was sold for $495,000 this year.

Limited supply

There are a limited number of strata titled shop units available in the market as the majority of shopping centres in Singapore are owned by Reits like CapitaMall Trust, Frasers Centrepoint Trust and Macquarie MEAG Prime Reit.

For new developments like the Icon at Tanjong Pagar, the developer would usually hold on to the commercial component for lease instead of selling the individual units.

Conservation shophouses are popular with investors due to their limited supply and architectural characteristics. Last year, a three-storey conservation shophouse located in the Kampong Glam conservation area and near the MRT station was sold for $2 million. Another shophouse at Prinsep Street, opposite the future Singapore Art School, was sold at an auction for $3.78 million.

Attractive yield

One compelling reason why investors are keen on shops/shophouse units is because such properties can generate a yield of 4-6 per cent. The yield attained from such investment exceeds the paltry interest rate of fixed deposits which is currently under 2 per cent.

En bloc potential

Shop/shophouse units that are located within old developments usually attract keen bidding at auctions. Investors would have explored the possibility of such old developments being sold collectively in future. Last year, two shop units in Katong Plaza, which had en bloc potential, were successfully auctioned for $225,000 and $325,000, respectively.

Grace Ng is deputy managing director and auctioneer at Colliers International
 
Source : Business Times - 27 March 2008

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong

(+65)91002985

mindy@mindyyong.com

http://www.hotvictory.com