Archive for June 9th, 2009

More office tenants may move from suburbs to city

Posted on June 9th, 2009 by Mindy Yong.
Categories: Singapore Real Estate News.

More office tenants may move from suburbs to city

By Wong Siew Ying,

SINGAPORE: Market watchers said more office tenants may move from the suburbs back to the city by the second half of next year to take advantage of more competitive rentals. This could help to ease a possible supply glut in office space.

About 7.5 million square feet of office space is expected to come on stream by 2011. Analysts said some 84 per cent of that will be in the central area.

The large supply and economic downturn have already driven office rentals down 40 per cent since the peak in mid-2008.

Observers said a third of the tenants that moved out of the Central Business District (CBD) in the last two years due to high costs, may return to the city.

Donald Han, managing director, Cushman & Wakefield, Singapore, said: “If you have about S$1 to S$1.50 per square foot difference, you will look at potentially a reversal of tenants moving into the CBD when their lease comes to an expiry.

“We may potentially see about a million square feet coming back into the market place, assuming that the market improves over the next 12 to 18 months.”

On average, analysts said occupancy costs in suburban areas range from S$4 to S$4.50 per square foot, compared to S$8-S$10 for prime office rentals.

Despite falling rentals, some observers do not expect an exodus of tenants from the outskirts, but selective relocation at good value.

Moray Armstrong, executive director, Office Services, CB Richard Ellis, said: “In some cases, we are seeing developers who are prepared to underwrite part or in some cases, the whole cost of fitting out your premises, with those costs then amortized through the lease period. That will help stimulate some leasing transactions in the second half of this year.”

Market watchers said the pace of decline in prime office rentals has eased and the improvement is most visible in the Raffles Place area.

As of the middle of the second quarter, rentals here dipped by about 7 per cent, compared to a drop of 29 per cent on-quarter in the first three months of 2009.

For the full year, experts have projected that office rentals would fall by about 40 per cent.

- CNA/so

Source : Channel NewsAsia - 9 June 2009

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VTB Building said to have changed hands for $71 million

Posted on June 9th, 2009 by Mindy Yong.
Categories: Singapore Real Estate News.

VTB Building said to have changed hands for $71 million

Buyer is understood to be a JV between Yi Kai Group and Fission Group

By KALPANA RASHIWALA

VTB Building, an ageing freehold office block on Robinson Road, is said to have been sold for $71 million or about $1,061 per square foot (psf) based on existing net lettable area (NLA).

VTB Building: Is more than 30 years old and has a 9,052 sq ft land area and a gross floor area of just over 91,000 sq ft; Yi Kai and Fission are said to have bought the 16-storey building with an eye on tearing it down and redeveloping it into a residential project, subject to approval
The price is about 18 per cent higher than the offers of around $60 million that the property had drawn earlier, as reported by BT last month.

The buyer is understood to be a joint venture between Yi Kai Group and Fission Group. The two are jointly developing the Alexis condo near Queenstown MRT station which sold like hot cakes earlier this year.

The sale of VTB Building entails a relatively long completion period of six months, which is when seller VTB Capital, part of VTB group (formerly known as Moscow Narodny Bank), will deliver vacant possession on the property to the buyers. Yi Kai and Fission are said to have bought the 16-storey building with an eye on tearing it down and redeveloping it into a residential project, subject to approval from the authorities to rezone the site, which is currently designated for commercial use.

The long completion period for the transaction gives more options to the buyers. ‘They could, among other things, potentially be looking at flipping the property,’ a market watcher suggested.

Another possibility would be to retrofit the existing office block and optimising its NLA. That was an option that some of the contenders for the property, which are said to have included overseas players, looked at.

VTB Building is more than 30 years old and has a 9,052 sq ft land area and a gross floor area of just over 91,000 sq ft, which reflects a plot ratio of 10.05. Under Master Plan 2008, the site is zoned for commercial use with an 11.2 + plot ratio and 35-storey maximum height.

The property is close to the Cross Street MRT station, which is scheduled to open around 2012 under Downtown Line 1.

Assuming that Fission and Yi Kai redevelop VTB Building for residential use, their $71 million acquisition price translates to a land cost of about $700 psf per plot ratio (based on an 11.2 plot ratio and assuming no development charge is payable). The breakeven cost for a new residential project could be about $1,100-$1,200 psf.

VTB’s existing NLA is said to be 66,888 sq ft and roughly half of this space is currently empty. The remaining occupants, including VTB, will move out by year end. The bank is said to be considering a few locations in the CBD to lease premises, tapping current low office rents.

DTZ is understood to have brokered the VTB Building deal.

This is the third office block to have changed hands over the past month, after Parakou Building and Anson House. Parakou Building, a fairly new freehold property at the Robinson Road/McCallum Street corner, was purchased for $81.38 million or $1,280 psf of NLA by a unit of Cathay Organisation. Anson House changed hands for around $85 million or slightly over $1,100 psf of NLA. It was completed 11 years ago and is on a site with a remaining lease of around 87 years.

Source : Business Times - 9 June 2009

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