S’pore out of Top 20 list of costliest office locations

S’pore out of Top 20 list of costliest office locations

SINGAPORE is now a relative bargain for office tenants. Thanks to a sharp fall in rents, it has fallen right off one key ranking of the world’s 20 most expensive office locations.

It sat in 26th spot as at June 30, having tumbled 20 places from No. 6 just six months earlier, according to a global office report yesterday by Colliers International.

Indeed, average office rents here are now below the 20-year historical average of $8.40 per sq ft (psf) a month, after diving nearly 55 per cent from their peak a year ago, said another report from Jones Lang LaSalle yesterday.

Its preliminary data showed that average gross effective rent of prime Grade A properties in the main central business district area fell by 12.6 per cent quarter-on-quarter to $8.30 psf a month in the current third quarter.

The Colliers ranking showed that Hong Kong remained in the No. 1 spot ahead of cities such as London, Moscow and Tokyo.

It said Singapore’s office property market was one of the most severely hit by the global financial crisis in the first half of the year. It registered the second biggest drop of 42.3 per cent in Grade A office rents to US$55.53 (S$78) psf a year.

Latvian capital Riga posted a drop of 49.6 per cent, the largest in the first half of the year, while New Delhi came in third with a 38.6 per cent fall. Hong Kong saw a 22.4 per cent fall during this period.

Unlike Hong Kong, Singapore has a supply problem. The Colliers report showed that Singapore ranked No. 8 among the cities with the most office supply in the pipeline.

Singapore has 10 million sq ft of office space under construction - likely to keep rents in the doldrums for a while more, despite the improving economic outlook, said Colliers International’s director of research and advisory, Ms Tay Huey Ying.

‘Singapore will stay out of the Top 20 ranking for at least the next 12 months, which means it will remain a very competitive location.’

Jones Lang LaSalle said market activity has risen significantly in the third quarter but much of the demand is a ‘flight to quality’ rather than evidence of expansion.

This was the case at 78 Shenton Way Tower 2. Commerz Real said yesterday that it has secured an anchor tenant - its first - for the building, which was completed in June.

The Singapore branch of American Home Assurance Co, an operating unit of Chartis, will take up about 85 per cent of 64,000 sq ft of space for 10 years, with an option to extend for a further three years.

The firm will move there next January from its present offices in Martin Road.

So far, increased activity is not enough to absorb new supply, as core CBD office stock grew 600,000 sq ft in the third quarter with the completion of 71 Robinson Road, Mapletree Anson and 78 Shenton Way Tower 2, said Jones Lang LaSalle.

‘Under pressure to secure occupancy, some landlords continue to be aggressive on rentals,’ it said. ‘There have also been instances of landlords offering cash subsidies to attract prospective tenants in order to keep effective rentals high.’

Rent-free periods while negotiated on a case-by-case basis, are also becoming more widespread as landlords seek to maintain headline rents, it added.

With firms still cautious, new leases are likely to be signed at competitive rates and that will continue to weigh on the market, said Ms Tay.

JOYCE TEO

Source : Straits Times - 23 September 2009

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Global trade, recession and recovery

Global trade, recession and recovery

Q How has the crisis changed the world in terms of trade?

In the short term, we have to look to the G-3 nations like Japan, Europe and the United States, because that’s where the real demand is. But in the longer term, we had all better speak Mandarin.

We export a lot to China - and China is our No. 3 major market now - but although it is a big market, a lot (of what we export there) are intermediate products.

And if you really zoom in and ascertain how much of those are for domestic consumption, the answer would be about 34 per cent.

Therefore, even though the Chinese are spending a lot of stimulus money, we may not benefit entirely. So it is interesting for us to figure out our role with China. But in the long term, we can see a big wave coming and that is China.

Q You’ve seen the impact of the Pan-El fiasco and the 1997 Asian financial crisis, the dot.com bust and Sars on businesses and our economy. Is this the worst recession for Singapore to date?

Not in terms of people going around shopping and buying cars and properties.

Is this the worst recession? In terms of statistics, yes, but in terms of hurting the pockets of individuals, I don’t think so.

You sense it, not just in Singapore, but even in Hong Kong and China.

Aside from the government stimulus plans like the Jobs Credit scheme, another reason (why the impact of the recession has not hurt us this time round), could be that our population is now bigger and richer.

In 1997, we were a smaller population. Now we are a country with a larger population, so even when 4 per cent of people are hurt (by job cuts), there is still a larger 96 per cent out there who are living life as normal, so therefore you don’t feel it.

But of course, if you’re part of that 4 per cent, you’ll feel it. So, it’s been quite an interesting year.

Q Many firms are reporting a surge in orders recently. Is a recovery in sight?

Recently I met (the people at) a global company. They told me: ‘The second quarter was very good and the third quarter, looking very good but can’t see the fourth quarter.’ So I asked: ‘Why? Tell me.’

And they said that the third quarter is the period where students go back to school in the Western markets, so they would need to buy new things at the start of the school year.

But for the fourth quarter, the buyers have yet to order as they are no longer looking at long-term contracts, but instead are buying in short-term batches.

If that is the behaviour of buyers, then suppliers who are configured to supply these quick and short-term orders will survive.

Fortunately, a lot of our companies went through the tough times in the 1997 crisis and even in 2002 and 2003, and many have restructured their supply chains to become more efficient.

That is why the moment there is a pick-up in orders, they are ready.

Source : Straits Times - 23 September 2009

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GIC profits from Citi stake

GIC profits from Citi stake

It makes US$1.6b from selling part of its holdings in US bank

By Fiona Chan

THE Government of Singapore Investment Corp (GIC) has sold about half its stake in United States banking giant Citigroup over the last week, reaping a profit of US$1.6 billion (S$2.3 billion).

It plans to hold onto its remaining 4.9 per cent stake, which has a US$1.6 billion paper profit at current prices, GIC said in a statement yesterday.

The state investment firm sold shares amounting to a 4.5 per cent stake in Citi on the open market between Sept 11 and Monday. Citi shares traded at US$4.12 to US$4.61 in that period, having quadrupled since March as global stock markets rallied on increased investor confidence.

GIC said the sale was meant to trim its holdings in Citi to about 5 per cent - the stake it had originally intended to have.

‘A stake below 5 per cent reflects GIC’s goals and desire to be a portfolio investor,’ it said. ‘GIC will continue its investment in Citigroup as we are confident of its long-term prospects.’

Including the paper gain, this means that GIC has made a profit of almost 50 per cent on its original investment in Citi 20 months ago, despite the bank’s turbulent performance since then.

In January last year, GIC had invested US$6.88 billion in Citi, only to face a potential huge paper loss when Citi shares plunged to below US$1 apiece in March this year after the bank bled heavily in the financial crisis. At one point, GIC was staring at US$5.5 billion in potential unrealised losses, according to reports then.

GIC’s happy ending is the result of two judgment calls that turned out to be the right ones, said GIC’s chief investment officer Ng Kok Song yesterday.

The first was choosing to invest in a bank too big to fail. ‘We had assessed that, in a crisis, Citigroup would receive US government assistance because of Citigroup’s systemic importance in the US financial system,’ he said.

This proved true when the US government injected billions to rescue the beleaguered bank late last year.

The second good judgment call was in the kind of shares that GIC bought: perpetual convertible preferred stock, which paid quarterly dividends and could be converted into common stock.

‘We did not invest directly in the common stock. We wanted some protection against downside risk because of the uncertain economic outlook,’ said Mr Ng.

This meant that when Citi issued more shares to sell to the US government in return for the capital injection, severely diluting the stakes of common stock holders, GIC’s stake was protected.

GIC’s other major Western bank investment is in UBS, which is understood to be still showing a paper loss, although this has narrowed considerably since the beginning of the year.

Temasek Holdings, which had also invested billions of dollars in banks, is estimated to have suffered substantial losses from its sale of stakes in Barclays and Bank of America.

In February, GIC agreed to convert its preferred Citi shares into common stock at US$3.25 apiece. It received 2.2 billion shares, or 9.4 per cent, becoming Citi’s second-largest shareholder after the US government.

The original conversion price, at US$26.35 a share, would have been turned into a stake of up to 5 per cent if converted at the time.

GIC’s average cost now works out to US$2.95 for each share, after including the US$631 million in dividends it received from its preferred shares before the conversion, completed on Sept 11.

The US$1.6 billion paper profit for GIC’s remaining stake is based on Citi’s last closing price of US$4.43 on Monday.

Fund manager Wong Kok Hoi, chairman of APS Asset Management, said GIC may have chosen to sell its shares now as Citi shares have surged since March.

‘The banking landscape… has changed permanently,’ he said. ‘One should not expect bank shares to hit a high in coming years because financial conditions have undergone structural changes, which will make it difficult for banks to make the kind of profit they have done in the past.’

For now, investors appear to be still assured of Citi’s prospects.

The bank’s shares have largely held up over the last week, despite GIC offloading over a billion shares into the market, and news that the US Treasury may start selling its 34 per cent stake in the bank.

Source : Straits Times - 23 September 2009

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Intermediate Terrace @Kismis Green for Sale

Intermediate Terrace @Kismis Green for Sale

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Bungalow @ DUNSFOLD DR For Sale

Bungalow @ DUNSFOLD DR For Sale

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Corner Terrace @ Jalan Senang for sale

Corner Terrace @ Jalan Senang for sale

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Semi detached @ Jalan Pari Burong for sale

Semi detached @ Jalan Pari Burong for sale

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Intermediate Terrace @ Loyang view for sale

Intermediate Terrace @ Loyang view for sale

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Property Type: Intermediate Terrace
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One Leicester1@Leicester Road For Rent

One Leicester1@Leicester Road For Rent

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The Glacier @ 258 Joo Chiat Place For Sale

The Glacier @ 258 Joo Chiat Place For Sale

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Property Type: Condominium
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