Complete Property Market Updates of Singapore

December 31, 2007

Big plans afoot for Marina Bay

Filed under: Market Watch — Propertymarketupdates @ 11:55 pm

Event organisers and developers of Marina Bay have visions for the area as a huge public area, starting with the New Year’s Eve celebrations, reports CLARISSA TAN

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IT’S not called the Bay of Celebration for nothing. Come New Year’s Eve, more than 150,000 people will converge on Marina Bay, and especially on the Esplanade. They will watch as the waterfront, already bathed in lights and the glow of thousands of floating spheres, is greeted with a burst of fireworks and music at the stroke of midnight.

The spheres, all 5,000 of them, carry the wishes of people across Singapore. Members of the public have penned their hopes and visions on the white balls, which have been progressively deployed on the waters since mid-December.

One of the biggest hopes, of course, lies with the event organisers and developers of Marina Bay, who have visions for the area as a huge public area.

‘It is our hope that Marina Bay will be the ‘Bay of Celebration’ with a series of nationwide activities and celebrations,’ said Fun Siew Leng, director of urban planning and design at the Urban Redevelopment Authority.

‘It is fitting that Singapore’s New Year’s Eve tradition is held at Marina Bay, as the area reflects our ties with tradition and our wishes for the future.’

She said the URA works in ‘close collaboration with the stakeholders’ of Marina Bay at such public festivities, which includes the National Day Parade in August. The URA has worked with the Esplanade arts centre on the New Year countdowns since 2005, she said.

Marina Bay is set to be the heart of Singapore’s new downtown. Over the next few years, the area, already home to the central business district and many museums and civic buildings, will see the completion of another massive financial centre, several luxury residential towers, and an integrated resort that will house hotels and a casino.

The developers appear keen to promote Marina Bay not only as a centre of finance and high living, but also as a fun space for everyone.

The area will be fitted out with parks and waterfront walkways for the use of pedestrians, joggers and the general public.

Events such as the Countdown also aim to involve various community groups such as Youth Challenge, the Singapore Indian Development Association and Yayasan Mendaki.

Aspirations

‘When people from all walks of life come together to wish not only for themselves, but also collectively as a community, the occasion becomes a celebration of the aspirations of our people,’ said the Esplanade’s chief executive officer, Benson Puah.

Perhaps the most ambitious project concerns the waters of Marina Bay. Already, the Singapore River and Kallang Basin are the playgrounds of dragon boat rowers and wakeboarders, but greater plans are afoot.

The four water bodies of Greater Marina Bay - the Singapore River, the Kallang River, Marina Channel and Marina Bay - will provide an enlarged platform for national and international events, said Ms Fun.

‘Our vision is to make the Greater Marina Bay the premier waterfront lifestyle destination for residents and visitors,’ she said.

For instance, Marina Bay will be the venue for international high-speed sports events, with a 2.5 km power-sporting circuit for races.

At the Kallang Basin, a 35-hectare zone of water will be dedicated to canoeing and dragon boat races. Another five hectares at the Kallang River will be for other activities like wakeboarding.

Marina Channel will have a one-kilometre race course for rowing competitions, while the Singapore River will feature activities that showcase its history and heritage.

A waterfront loop of nearly 12 km is being built around Marina Bay, Marina Channel and the Kallang Basin, said Ms Fun.

The URA worked closely with the boards of Public Utilities, National Parks and Tourism, as well as with the Sports Council and the Singapore Land Authority to draw up this ‘water-activities master plan’, she added.

If skidding on the water is not your kind of thing, then you can survey the scene more serenely from the air.

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The Singapore Flyer, the world’s largest observation wheel, will be opened in March, but already corporate groups are snapping up tickets for the inaugural ‘flights’ in mid-February, said a spokesperson for sales and marketing agent Adval. ‘We have set aside 20 per cent capacity to cater to walk-ins when the Flyer opens to the public on March 1, so as not to disappoint our visitors who turn up hoping to get up,’ she said.

Flying high

The Flyer will give a 360 degree view of the bay and the city skyline, as its capsules rotate up to 165 metres in the air. ‘No other location in Singapore will be able to provide such a comprehensive view of the island-city and beyond, to the surrounding isles of Malaysia and Indonesia,’ said the spokesperson.

The Flyer is being marketed with some rather savvy ideas. The giant wheel provides a ‘unique moving venue in the sky’ for people to host birthdays, company functions and even weddings.

Betrothed couples can buy a ‘Solemnisation Package’, reserving a floral-decorated capsule for two rotations (one hour) as they make their vows in front of up to 26 guests.

As for Feb 14, around 60 couples have already booked the Valentine’s Day Package.

The Flyer is close to the starting and finishing points of Singapore’s first Formula One Grand Prix, which will take place at night and on the streets of Marina Bay, in September 2008.

With all this going on, it would be hard indeed to ignore Marina Bay. The hope is to catapult Singapore to the big league where public events and celebrations are concerned.

Speaking of the countdown, URA’s Ms Fun said: ‘It is our wish to see it grow into an annual iconic event, placing Singapore alongside London, New York, Tokyo and all major cities, as the world bids farewell to one year and embraces the next.’

It remains to be seen whether the Marina Bay festivities will one day be mentioned in the same breath as that in New York’s Times Square.

Until then, it wouldn’t hurt to write your wishes on a ball and throw it on the sparkling river.

Source : Business Times - 27 Dec 2007

Morgan Stanley seeks pot of gold in workers’ dorms

Filed under: Property Deal, Property Investment — Propertymarketupdates @ 11:55 pm

Morgan Stanley has expanded its Singapore real estate investment portfolio to include an unusual asset class - foreign workers’ dormitories.

An entity understood to be linked to the US bank recently bought three dormitories from JTC Corp for $153 million and is said to have teamed up with a local party to purchase more such properties from the private sector, sources say.

‘It may seem an unglamorous property type but the yields can be very attractive and Morgan Stanley has clearly sensed a business opportunity in an area that other foreign funds and property investment groups may not have spotted yet,’ a source says.

Morgan Stanley is said to be targeting dormitories whose tenants include blue-chip companies that lease space in these facilities for their foreign workers.

DTZ Debenham Tie Leung executive director Ong Choon Fah notes that foreign institutional investors have been diversifying their property investments in Asia, including Singapore, over the years.

‘Traditionally, most institutional investors go for income-generating commercial properties like offices and retail, as well as industrial (specifically logistics and warehousing). And then serviced apartments started featuring in their portfolios. In Asia, these investors have started to look at non-traditional assets that offer higher yields as well as (residential) property development, because of yield compression for the traditional asset classes they used to focus on.

‘Yields on these segments have fallen as more and more investments chase limited assets. You now have superannuation funds from Australia, Reits, and sovereign wealth funds, private equity…,’ Mrs Ong says.

She suggests that student housing is another sector that foreign funds may target. ‘Studies have shown this to be quite a stable source of income. In places like the US and Europe, anything with P&L (income flow) can be Reited or be attractive to institutional investors - like senior housing, nursing homes, self-storage facilities, even prisons,’ Mrs Ong notes.

The three dormitories that Morgan Stanley has purchased from JTC are Kian Teck Dormitory in Jurong, Tampines Dormitory and Woodlands Dormitory. Kian Teck Dormitory has 411 units with two types of units - one that can house six to 12 persons per unit, and another for seven to 14 persons per unit. Morgan Stanley unit Avery Strategic Investments bagged the properties following a public tender that closed earlier this year. It was the highest of eight bidders for the dormitories. The sale was completed in the fourth quarter.

There are currently over 20 other major dormitories for housing foreign workers in Singapore. Dormitory rentals have been on the rise, especially in the past 12 months. ‘There’s a shortage of dorms islandwide mainly because of the construction boom. That’s why some property investors are starting to look at these facilities,’ an industry observer says.

Some industry watchers suggest that property yields for dormitory investors could be around 20 per cent or even higher. ‘It depends to a large extent on the length of the balance lease term on the land - the shorter the remaining lease, the higher the return a potential investor will seek. There’s a whole range of land leases for dormitories in the market - freehold, 60 years, 30 years and some even as short as 3 + 3 years,’ an industry observer explains.

Source : Business Times - 27 Dec 2007

Tourist arrivals, hotel rates at record highs in Singapore

Filed under: Hotel — Propertymarketupdates @ 11:54 pm

SINGAPORE received a record number of visitors last month and hotel rates were also at fresh highs, the tourism authorities said on Wednesday.

The Singapore Tourism Board said 837,000 visitors arrived in November, the largest number ever for that month.

Average room rates for hotels also set a new milestone of $226 a night, the highest ever in any month and up almost 30 per cent over last year, the board said.

The Republic’s hotels earned record room revenues of $175.4 million, an increase of almost 24 per cent from last year, it said.

Visitor arrivals were 4.6 per cent higher than a year earlier, fuelled by strong arrivals from China, India and Australia, the board said.

‘In November 2007, Singapore welcomed 837,000 visitors… this sets a new record for the month of November,’ it said.

Singapore also hosted the annual Association of Southeast Asian Nations (Asean) summit and its related regional meetings which likely boosted November’s figures, as official delegations occupied several city hotels.

Lacking natural attractions, Singapore has embarked on a major campaign to spruce up its tourist appeal.

It has plans for new attractions including two casino resorts, expected to open by 2010, and is trying to become an arts and entertainment centre. It is to host its first Formula One Grand Prix late next year. — AFP

Source : Straits Times - 26 Dec 2007

Singapore economy on course despite November blip

Filed under: Singapore Economy — Propertymarketupdates @ 11:54 pm

Singapore’s economy remains on track to hit the higher end of the government’s full-year gross domestic product growth target of 7.5-8 per cent, despite a blip in manufacturing output in November, economists said.

Most economists are sticking by their full-year GDP estimates, with Citigroup pegging its forecast at 7.8 per cent and Standard Chartered at 8 per cent. CIMB-GK now expects GDP growth to be 7.9 per cent, down from its earlier forecast of 8.5 per cent.

‘I don’t see GDP growth falling outside the official range. It’s likely to be at the higher-end of the 7.5-8 per cent range,’ CIMB-GK economist Song Seng Wun said.

Data from the Economic Development Board yesterday showed manufacturing output in November dipped 1.5 per cent from a year ago after a 2.2 per cent rise in October. Contraction in biomedical manufacturing, precision engineering and general manufacturing industries clusters offset expansion in other clusters.

The output decline last month was smaller than expected, compared to a median forecast of a 2.5 per cent contraction in a Reuters poll of nine economists.

Economists noted that the main drag in November was the biomedical segment, which is typically volatile month-on-month and which slumped 33.4 per cent in November from a year ago, while the underlying manufacturing production trend remains stable.

The decline in biomedical production is due to a 35.6 per cent fall in pharmaceutical output as some active pharmaceutical ingredients were not produced. There was a 15 per cent decline in the production of medical devices led by lower demand from Europe and the US, the EDB said.

The precision engineering cluster also dipped slightly by 0.3 per cent year-on-year in November as declines in the production of precision modules and components erased the growth in machinery and systems output.

Also displaying weakness, the general manufacturing industries contracted 0.2 per cent in November from a year earlier as declines in miscellaneous manufacturing industries offset increases in the output of food, beverages and tobacco products.

But the transport engineering cluster bucked up the manufacturing sector in November, expanded by a robust 31.9 per cent year-on-year last month. This was spurred by a 53.5 per cent growth in the marine and offshore engineering segment, which cushioned contractions in the aerospace and land transport segments.

‘Shipyards continued to be occupied with existing contracts for ship repairing, shipbuilding, ship conversion and fabrication of oil rigs,’ the EDB said in a statement yesterday. ‘Some vessels were due for completion in the first half of next year.’

Putting on a strong recovery, the electronics sector continued its year-on- year growth in November for the fourth consecutive month, posting a 5.3 per cent growth led largely by the semiconductors segment, which grew 16.7 per cent on sustained export demand.

Despite the decent electronics output growth, economists believe that risks of an ease in electronics demand in the coming months remain in the face of an economic slowdown in major consumer market - the US - next year.

‘The electronics sector is not entirely out of the woods, there’s still a lot of question marks about the sustainability of its recovery,’ Mr Song of CIMB-GK said. ‘There’s always a risk that electronics output may still be very volatile in the coming few quarters.’

Citi economist Zheng Kit Wei also believed that electronics production could remain under pressure in the coming months.

‘Electronic exports have contracted for 10 consecutive months,’ he said. ‘Demand conditions could remain sluggish over the next quarter or so, with our composite Tech Leading Indicator pointing south.’

Pricing weakness amid tough competition could be a reason why the strength in electronics output has not translated to electronic exports, Stanchart economist Alvin Liew said.

Given the weakness in manufacturing output in October and November, economists are now expecting some moderation in the fourth quarter GDP flash estimates, which is due to be released in early January, from the 8.9 per cent year- on-year growth in the third quarter.

CIMB-GK expects the Q4 GDP year-on-year growth to come in at 7-7.3 per cent, Stanchart is predicting Q4 GDP growth at 7.6 per cent and Citi is projecting a 7.2 per cent growth.

Source : Business Times - 27 Dec 2007

HDB offers 4th DBSS site at Bishan

Filed under: HBD Reviews — Propertymarketupdates @ 11:53 pm

The HDB has put on the market a 163,800 sq ft land parcel in Bishan under the Design, Build and Sell Scheme (DBSS) - the fourth such site to be offered under the scheme.

Market watchers estimate that the Bishan Street 24 site could fetch $200-$240 per square foot per plot ratio (psf ppr).

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The three previous DBSS sites went for $114 to $234 psf ppr.

‘This site is quite attractive,’ said Nicholas Mak, director of research and consultancy at Knight Frank. ‘We can expect interest from many developers, especially those who also have a construction business.’

Construction companies turned developers will be able to manage the construction costs better, Mr Mak said.

Cost management is crucial, as any developer will not want to price flats coming up on the site higher than resale flats in the vicinity, as that would make the new flats unattractive to buyers.

This site has a maximum gross floor area of 573,300 sq ft, and a maximum building height of 153 metres. It is estimated that the site could take about 390 homes.

The site is attractive as it is an established estate with an MRT station and bus interchange just a few streets away, experts said.

Under the DBSS, the developer who wins the site designs, builds and sells the flats as public housing. The developer will have flexibility in designing and pricing the flats.

Flats sold under the DBSS come with a 99-year lease and will be offered to buyers under similar HDB eligibility conditions like those for flats developed by the HDB itself.

The HDB sold its maiden DBSS site to Sim Lian Group in January 2006 for $114 psf ppr.

The second site, at Boon Keng Road, was sold to Hoi Hup Realty, together with Sunway Concrete Products and Oriental Worldwide Investments Inc, for $234 psf ppr in June.

The third site, in Ang Mo Kio, was awarded to United Engineers earlier this month, after it put in the top bid of $212 psf ppr.

All three DBSS sites saw competitive bidding, with several bidders in each case.

Source : Business Times - 27 Dec 2007

Singapore residential market is world’s hottest this year

Filed under: About Singapore, Regulators, Singapore Economy — Propertymarketupdates @ 11:53 pm

SINGAPORE’S booming housing market is the world’s hottest this year, with local home prices recording the fastest increase.

Residential property prices in the Republic surged 24.3 per cent, after adjustments for inflation, ahead of other bullish markets such as Shanghai in China and Bulgaria, said property investment research house Global Property Guide.

In a report published online, the firm said Singapore’s strong performance, like those of Japan and South Korea, was due to robust economic growth.

The survey was compiled using the latest official data from 42 countries, though other statistics were used for a few markets, such as Japan and the Philippines, where such figures were not available.

The latest Urban Redevelopment Authority (URA) numbers used in the survey show that Singapore home prices registered a 27.6 per cent annual jump at the end of September, significantly higher than the 7.6 per cent posted a year ago.

This nominal, non-inflation adjusted figure was below the 30.6 per cent recorded by Bulgaria in September and the 27.9 per cent recorded by Shanghai in October.

But in real terms, after adjustments for low inflation of only 2.66 per cent, the Republic leapfrogged these two markets to reach the top spot, said the report.

Singapore’s strong showing underscored a more general recovery in Asia, where several markets gained momentum in the first three quarters of the year.

Global Property said this reflected, to some extent, continued recovery from the 1997 Asian financial crisis.

In contrast, the United States housing market crashed due to the sub-prime mortgage crisis, while high interest rates were behind the slowdown in European house prices.

‘In Europe, most countries registered unimpressive year-on-year house price changes in 2007, aside from Norway and Estonia,’ the report said.

Looking to the year ahead, Global Property said property prices in much of Asia are still undervalued compared with pre-Asian crisis levels, despite strong increases this year.

It expects potential improvement in rentals in Singapore.

‘We believe gross rental yields are now too low, at 2 to 3 per cent.

‘Nevertheless, Singapore is attracting and admitting more foreign-born workers - which is positive for prices,’ it said.

Elsewhere in the region, Global Property also recommended Cambodia, Thailand, Japan, Australia and New Zealand to property investors.

It, however, cautioned against investing in Europe, apart from a handful of Eastern European states, because of high valuations after a long period of price appreciation.

In the Middle East, it found Egypt attractive for its high rental yields and low taxes, but warned of a possible oversupply in Dubai as more properties come on stream over the next two years.

STRONG GAINS

While Singapore ranks behind Bulgaria and Shanghai in nominal house price growth, the Republic is the world’s best performer in real terms, given its low inflation rate of only 2.66 per cent, says Global Property Guide.

Source : Straits Times - 24 Dec 2007

New entrants flock in as property sector booms

Filed under: Property Deal, Property Investment — Propertymarketupdates @ 11:53 pm

Six companies, some better known in other businesses, make maiden real estate buys

The property boom over the past two years has drawn many new players who are looking to reap the high returns that property development has to offer.

Six companies made their maiden property purchases this year, data compiled by property firm CB Richard Ellis (CBRE) show. Among them are companies that have made a name for themselves in other businesses, such as construction company KSH Holdings and brokerage firm Kim Eng Holdings. Others are lesser known, like Duchess Development which was formed by two stockbrokers.

In addition, three other companies - BBR Holdings, Popular Holdings and Eastern Holdings - first made their appearance in 2006 with land purchases. This year, they have gone on to snap up more sites.

‘When the market is good, it draws in players who may not have been active before,’ said CBRE executive director Jeremy Lake.

He noted that many of the new entrants are construction companies that might have decided to take on development risks, after watching their developer clients reap big profits. During a property boom, such risks are lessened.

‘If you get your timing right in property, the profits can be substantial,’ Mr Lake said.

Experts said that the same trend was seen during the last property boom, which lasted from 1993 to 1996.

Companies that did not look at property development in the past are now beginning to do so because of the fatter margins.

One example is SuperBowl, which teamed up with its parent company Hiap Hoe to buy two sites for a total of $211.3 million.

SuperBowl’s managing director Teo Ho Beng told BT that while the company will continue to focus on its core leisure and entertainment business, it will also increase its exposure to property development where the margins are better.

Similarly, KSH Holdings sees good opportunities in property development. The company’s chairman and managing director Choo Chee Onn said that his company invested in residential sites this year because the opportunities opened up at the right time.

‘Going forward, we will buy more sites if the right opportunities arise,’ Mr Choo said in an interview. The company spent $180.8 million on two residential sites this year.

The first site, which KSH acquired in June with three other partners, was the construction company’s first purchase of a land parcel.

Other companies branching out from their traditional core businesses for the first time this year include electrical and mechanical engineering firm Tee International.

However, new developers and developers looking at boutique projects still account for only a small chunk of total purchases in 2007.

CBRE’s data shows that the bulk of sites sold this year went to big players such as companies linked to banker Wee Cho Yaw (UOL Group, Kheng Leong, United Industrial Corp and Singapore Land), Malaysian tycoon Quek Leng Chan’s GuocoLand and property giant CapitaLand.

New and boutique developers together bought some $2.4 billion worth of land sites in 2007, which account for about 5 per cent of total investment sales so far this year.

In 2006, such developers accounted for about 4 per cent of all investment sales, while in 2005, the figure was about 3 per cent.

However, property analysts warned that these new entrants are by no means guaranteed success. For starters, most bought sites in the more central areas of Singapore, where the price gain is expected to moderate this year even as construction costs are set to keep climbing, leading to a drop in margins.

‘For the high-end residential segment, there is now risk of a potential correction,’ said OCBC Investment Research analyst Winston Liew.

New developers might not have the resources to keep construction costs down unless they are contractors themselves, experts said.

Next year, established developers who have carved out niches are likely to do best, analysts said.

‘Going into 2008, we look for developers with specific niches and themes to outperform the sector as a whole,’ said CIMB property analyst Donald Chua. The research firm believed that listed smaller-cap developers are likely to trade at a discount to target valuations in 2008.

OCBC’s Mr Liew advocated being defensive when choosing property developer stocks. ‘We prefer developers that are domestic focused with substantial pre-sold projects, opportunities to unlock value from investment properties and finally offering valuation upside,’ he said.

Source : Business Times - 24 Dec 2007

Boom year for hotels in Singapore

Filed under: Hotel — Propertymarketupdates @ 11:52 pm

THE full rooms at the inns, from Geylang to Marina Bay, have been keeping hoteliers very busy - and jolly.

The year has been marked by the setting and breaking of record after record, and the numbers attest to their ‘it has been the best year ever’ chorus.

Strong tourism arrivals saw Singapore welcome its 10 millionth visitor on Saturday. Demand for rooms has been exceptionally high, with average occupancy in the high 80s percentage range throughout the year.

The shortage was so acute that travel agents had to put customers up in outlying areas such as Geylang because they could not get rooms downtown.

Three records have been set for average room rates. The highest, and most recent, was $219 in October.

The numbers for room revenues are even better. Four highs were set, surging above the last peak in 1995. October was an all-time record at $178.4 million.

The hotel industry’s joy is palpable, given the doldrums not so long ago. The robust demand means hoteliers can raise rates without too much worry.

‘Room rates have been undervalued for too long. The increase is way overdue,’ said Ms Stella Gillera, Mandarin Oriental’s director of sales and marketing.

Meanwhile, things could get even better, as the data for last month and this month have yet to be released, said hotel analyst Chee Hok Yean, executive vice-president of Jones Lang LaSalle Hotels.

She expects room rates to head up by another 15 per cent to 20 per cent, and room occupancy to remain between 85 per cent and 90 per cent next year.

Already, Pan Pacific Singapore and Royal Plaza on Scotts are increasing room rates by 20 per cent to 25 per cent, while Orchard Hotel’s are going up by about 10 per cent.

Meanwhile, new hotels are opening. The latest is St Regis Singapore, which welcomed its first guest on Saturday. The luxury hotel is charging $680 a night for its lowest-tiered rooms, and $10,000 a night for its presidential suite.

The opening of St Regis and 10 new hotels - adding some 1,700 rooms next year - should bring some slight relief to the room crunch, said Ms Caroline Leong, the Singapore Tourism Board’s director of travel services and hospitality business.

Given the boom in the sector and with more hotels opening, competition for labour will be tighter. Hotels are keen to ensure staff loyalty, which translates into better pay and perks.

Hotels have yet to announce year-end bonuses, but indications are that it will be a fat cheque for many just before Chinese New Year.

Mandarin Oriental’s Ms Gillera said: ‘Our staff should be very very happy.’

Source : Straits Times - 24 Dec 2007

Orchard Rd office unit fetches $2,497 psf

Filed under: Commercial, Rental News — Propertymarketupdates @ 11:52 pm

Previous deal in same building on higher floor done at $1,601 psf in April.

The strata office market is still running hot. A first-storey freehold office unit at United House, behind Le Meridien Singapore Hotel in Orchard Road, went for $2,497 per square foot of strata area at a Colliers International auction last week.

The last transacted price in the development was $1,601 psf for a 710 sq ft unit on the fifth level in April this year.

However, the highest unit price for a strata office unit here appears to be $3,050 psf, at The Central, a 99-year leasehold development above Clarke Quay MRT Station. Developer Far East Organization is said to have sold the entire 21st level of one wing of its V-shape, 25-storey office tower for $40.7 million several months ago.

The space comprises units #21-89 to #21-99, adding up to a total strata area of 13,337 sq ft. BT understands the buyer is a shipping company.

The $3,050 psf surpassed the previous record, set in the same building, when Far East sold the entire 24th level in the same wing for $2,850 psf, also this year.

While The Central’s mall has already opened, its office tower, and small office, home office (Soho) block are expected to be ready in the first half of next year.

In the Orchard Road area, unit #01-01 of United House was auctioned by Colliers on Dec 19 for $7.5 million. The road-fronting unit - with a strata area of 3,003 sq ft - is subdivided into two smaller units that have been leased out at a total monthly rent of $13,260, with the last lease expiring in October 2008.

This presents an opportunity for the property’s new owner - understood to be a low-profile Singapore investment company - to enjoy a higher yield when the lease is renewed or a new tenant found.

Grace Ng, Colliers deputy managing director (agency and business services) and auctioneer, attributes the unit’s appeal not just to current demand for offices but to United House’s potential for a collective sale.

The strata office market in other parts of Singapore also continues to buzz. At Suntec City, units on the 23rd and 27th floors have changed hands at prices ranging from $2,250 psf to $2,313 psf lately, according to caveats captured by SISV Services’ Realink system.

At International Plaza in Anson Road - another favourite for strata office investors - a unit on the 30th floor was sold for $1,586 psf in October.

Nearby, at Shenton House, a couple of adjoining units on the 15th storey changed hands last month at about $1,500 psf. A 10th floor unit at High Street Plaza was sold for $1,714 psf a few weeks ago.

Source : Business Times - 24 Dec 2007

Retail sector rising, but rents could follow suit

Filed under: Commercial, Rental News — Propertymarketupdates @ 11:49 pm

As far as retail space is concerned, the weakening market sentiment now grabbing the headlines might well belong to another planet. Retail rents are expected to rise next year - especially in prime areas such as Orchard Road - fuelled by strong demand and limited prime space.

Jones Lang LaSalle (JLL) expects rents to rise between 4.5 and 4.8 per cent in the Orchard area, while CB Richard Ellis (CBRE) is forecasting an increase of 4-8 per cent. And rents at suburban malls could go up 2-5 per cent in 2008, says CBRE.

In Q3 2007, the Orchard area achieved about $40 to $41 per square foot (psf) per month, according to JLL. And for the same quarter, retail rents increased 3.3-3.5 per cent year on year.

With occupancy rates around 95-98 per cent in Orchard Road malls, demand is clearly alive and well.

But Pua Seck Guan, CEO of CapitaLand Retail, CapitaMall Trust Management and CapitaLand Financial, is quick to point out that any increase in rent has to be relative to increases in retailers’ takings, so as to ensure sustainable growth.

‘Sales this year, over last year, are 5-7 per cent higher due to the economy and sales productivity,’ he says. ‘Customer traffic has seen a 27 per cent increase over the past four to five years. This outweighs the rent increases.’

According to him, rent renewal rates this year are 12 per cent higher than the expired rent, which he deems reasonable owing to GDP growth and rising inflation. ‘Moving forward, we expect to see an 8-12 per cent increase over the next two to three years,’ he told BT. The leases are generally three years for specialty stores.

While the injection of new retail space next year will help pace retail rents, take-up is expected to increase with the new supply. CBRE puts new supply for 2008 at 2.57 million sq ft, thanks to upcoming shopping malls such as ION Orchard, Orchard Central and West Coast Plaza.

Consumer spending has been on the rise. According to Citibank economist, Zheng Kit Wei, private consumption rose 4.5 per cent in the first three quarters of this year, which is substantially higher than the 2.5 per cent increase last year. Retail sales are expected to remain robust in the high single digits.

‘The unemployment rate has fallen to a 10-year low of 1.7 per cent,’ says Mr Zheng. ‘Wages have risen almost 7 per cent in the first three quarters of the year, nearly double the 3.2 per cent increase last year. This has put more cash into consumers’ pockets and given them greater confidence to spend more.’

Mavis Seow, executive director of retail services for CBRE, says retail sales to date this year total $23.8 billion on the back of the hot property market, optimistic economic outlook and steady stream of tourist arrivals.

And with the launch of the Singapore Flyer and the inaugural Formula One night race next year, as well as the upcoming integrated resorts, sales are expected to keep going strong, if not improve, says Chua Yang Liang, head of research (South East Asia) for JLL.

Retailers, too, are expecting cash registers to ring into the New Year, thanks to the festive season and fat bonuses. Tan Yew Kiat, general manager of homegrown fashion label bYSI, is forecasting a sales increase about 25-30 per cent this Christmas.

bYSI, for one, plans to capitalise on the additional supply of space by launching a flagship store when Orchard Turn opens in October next year.

As for shoppers, they can look forward to new concept stores, flagship stores and new entrants to the market. This year has seen a lot of demand from retailers in terms of new brands compared with last year, says CapitaLand’s Mr Pua, who cites examples such as Cortefiel as well as new stand-alone stores like Kate Spade and Agnes B.

‘Fashion is on its way up, although I think there’s still strong growth for jewellery and watches and even healthcare and beauty products,’ he reckons. ‘This year has been particularly encouraging across the board.’

Source : Business Times - 22 Dec 2007

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