Complete Property Market Updates of Singapore

Into its 40th year, JTC Corporation will be shifting its focus to industrial master-planning and strategic projects by selling assets in the flatted factories and business park segments, said Prime Minister Lee Hsien Loong at its anniversary dinner yesterday.

PM Lee highlighted the organisation’s evolving role as competition from rapidly emerging economies intensifies. From building and managing industrial facilities, JTC will now turn its attention to master-planning industrial estates, allocating land for industries and preparing land with the right configuration of facilities.

‘JTC’s priority is to meet the industrial land and infrastructure needs of existing and emerging industry clusters, be it the chemical companies at Jurong Island, the pharmaceutical players at Tuas Biomedical Park, or the new aerospace hub at Seletar,’ he said.

To take on these tasks, JTC will divest its flatted factory and business park assets substantially - it is selling its ready-built industrial facilities to Mapletree at the end of this month.

The private sector will play a greater part in developing these market segments instead. ‘Private developers like Boustead, Mapletree, Soilbuild and United Engineers have built up considerable expertise in flatted factories and business parks, and are well able to meet industry demands,’ said PM Lee.

Just last Monday, Soilbuild Group Holdings clinched a JTC award to build, own and operate a business facility at Tanjong Kling.

In turn, JTC will focus on filling market gaps. It is already involved in special projects which the private sector may find too large, risky or complex to handle, although they may foster future economic growth. The one-north development for the media, life sciences and infocomm industries is one such example.

Another challenge for JTC is to create more usable space to maximise the country’s economic potential. ‘Land will always be scarce in Singapore, but with human creativity and ingenuity, we can find new ways to do more with the limited amount of land we have,’ PM Lee said.

Such plans are already in the works. JTC is studying the use of very large floating structures out at sea for the storage of petrochemicals and oil products. It is also exploring the feasibility of increasing water depths around Tuas View to create more usable industrial waterfront land.

According to PM Lee, manufacturing remains an important growth engine for Singapore. Having done well in shaping the industrial landscape, JTC will have to remain dynamic to sustain the sector’s competitiveness.

JTC chairman Cedric Foo said the organisation will conduct a strategic review exercise to meet the new challenges.

Around 600 of JTC’s clients, partners and former management attended the dinner yesterday. Long-time customer Natsteel Asia, which leases about 38ha of land, appreciates the agency’s support over the years.

Natsteel’s senior vice-president of systems operations Eng Poh Tzan also hopes that JTC will keep land rentals affordable to help businesses.

Source : Business Times - 7 Jun 2008

The $700 million first phase of the project to store oil in underground caverns beneath Jurong Island has been held up, with full-blown construction now expected to start at the end of this year or early 2009.

The hold-up surfaced when JTC Corporation called this week for tenders for an insurer to cover the design and construction of the first phase, comprising five caverns to hold 1.485 million cubic metres of crude oil, naphtha, condensate and gas oil.

Government agencies here usually appoint insurers ahead of construction of major underground projects - especially one this big that involves several parties. So far, construction is under way on two 130-metre vertical shafts to allow surface access to build and operate the caverns.

Tenders for construction proper - called last November - are still being evaluated, a JTC spokesman said yesterday. And the indications are that an award may be made only at year-end.

Sources suggest JTC needs more time to evaluate the tenders, given the demanding design and engineering requirements.

Still, the delay is a surprise, given that JTC indicated in a pre-qualifying tender in April last year that it expected the first two of the Phase 1 caverns to be operating by December 2010. Sources say despite the hold-up, JTC still wants to meet this target date, though it will be difficult to do so.

The market for oil storage is clearly not a reason for the delay. There is no lack of demand or excess capacity here, despite new players like Emirates National Oil Company and Hin Leong’s Universal Terminal starting up recently.

‘Demand for oil storage in Singapore is still strong,’ an industry official told BT. ‘Everyone is running full, including the new tank farms.’

JTC said last year there was strong interest in the underground storage caverns. An official said in October that Jurong Aromatics Corporation, which plans a US$2 billion complex here, will be one of the first customers.

Industry observers feel the initial delay may be due more to technical or construction issues - like competition for engineering/construction expertise amid the local building boom, including the construction of two big petrochemical complexes on Jurong Island and the two integrated resorts (IRs).

Four of the five Phase 1 rock caverns will store 330,000 cu m each, and the fifth 165,000 cu m.

The caverns and associated tunnels will be constructed by drilling and blasting sedimentary rock, JTC has said.

In all, Phase 1 involves ‘about 7km galleries and tunnels for an excavated volume of about 2.5 million cu m beneath Banyan Basin’, it said.

A planned Phase 2, adding another 1.3 million cu m of storage, would double the project’s capacity.

Source : Business Times - 5 Jun 2008

LOGISTICS group CWT Ltd stands to realise a gain of $85.7 million from the sale of one of its biggest warehouse facilities in Singapore.

The company yesterday said it has entered into a conditional agreement with a buyer to sell and lease back its newly-completed Logistics Hub 2 in Tanjong Penjuru.

CWT did not disclose the name of the purchaser but said it is a ‘property fund’ focusing on the Asia-Pacific region. The sale price for the proposed transaction is $115.2 million.

Upon completing the sale, CWT will lease back the building for five years with an option for an additional three-year period.

The firm said in a statement it expects to realise a gain of about $85.7 million from the transaction, based on the aggregate net book value of $28.1 million.

Of the gain, $55.5 million will be recognised as a one-time gain and the balance of $30.2 million will be accounted as a deferred gain to match off against the leaseback commitment.

To illustrate the financial impact, CWT said profit attributable to shareholders in FY2007 after the sale and leaseback would be $90.29 million, compared with $34.79 million before the transaction.

CWT said it plans to use the proceeds to reduce its bank borrowings, to fund its local and regional expansion, and for working capital.

The deal is subject to the approval of JTC and company shareholders. In addition, due to the nature of the warehouse, CWT must complete an environmental baseline study and submit the results to JTC and other relevant parties before the sale can go through.

The company currently owns two integrated logistics hubs in Tanjong Penjuru, which combine to provide nearly 850,000 sq ft of warehouse space for handling hazardous materials and chemical goods.

Both facilities were launched in March this year following an investment of more than $80 million.

Source : Business Times - 4 Jun 2008

TO encourage private sector participation and promote an active industrial property market, JTC Corporation yesterday awarded the development of its stack-up factory to Singapore Exchange-listed Soilbuild Group Holdings.

This is the first time JTC has awarded such a project to a private developer.

Soilbuild has won the tender to build, own and operate a business facility on a site at Tanjong Kling, with a land area of 565,800 sq ft and a maximum gross floor area of 1.41 million sq ft. The site is on a 30-year lease, with an option to renew for a further 30 years.

A five-storey development is slated for completion by early 2010. It will comprise 45 modular and regular-shaped units, with sizes ranging from 23,700 to 60,300 sq ft. Total development cost is likely to be around $208 million.

Soilbuild expects the development, which is near Jurong Island, to cater to large corporations or MNCs in the marine engineering, oil and gas exploration and petrochemical-related industries.

Another two bidders took part in the concept and fixed-price tender. According to JTC, Soilbuild’s proposal stood out because of enhanced features in the concept, such as a layout that facilitates heavy vehicular movement within the building.

Soilbuild’s win complements the emergence of its business space portfolio as a significant new growth engine. ‘The expanding portfolio of business properties will enable us to tap on the robust demand from investors and grow our recurrent income stream in the coming years to support a progressive dividend policy,’ said executive director Low Soon Sim.

Soilbuild now has almost 3.3 million sq ft of business space projects in the pipeline. Shares of the developer closed unchanged at 95 cents yesterday.

In its statement yesterday, JTC noted an increase in demand for industrial space in the past three years due to robust growth in the manufacturing sector.

‘This momentum is expected to continue as more investment projects are anchored in Singapore, creating downstream opportunities for supporting industries,’ it said.

To optimise land use, JTC has been exploring ways to improve the design of its stack-up factory development to better meet the needs of various industries.

Source : Business Times - 3 Jun 2008

TUAN Sing Holdings, which is looking to divest its hotel assets, is seeking a stake in Katong Mall, which was put up for collective sale last week.

In a statement released over the weekend, Tuan Sing said that it is looking to dispose of $107 million in loans it had extended to its associate Gul Technologies Singapore (Gul Tech) through an asset swap with the controlling shareholders of Tuan Sing for certain strata units in Katong Mall.

The asset swap will involve 129 strata shop units at Katong Mall with an aggregate purchase consideration of about $63.1 million. This was arrived at based on the aggregate value of the properties of $130.1 million, representing 70 per cent of the open market value of Katong Mall, but less outstanding borrowings of $66 million and rental deposits and advance rental of about $1 million, which will be retained by the vendors.

The purchase consideration will be satisfied by Tuan Sing and certain of its subsidiaries novating the Gul Tech loans in favour of the vendors of the Katong Mall units, which are companies under the controlling shareholders of Tuan Sing. This is subject to a $44 million loan waiver by the controlling shareholders.

Tuan Sing said that the proposed assets swap would be beneficial as it allows the company to secure a ‘realistic and tangible recovery of the loans, albeit that Tuan Sing would have to recognise a partial write-down of the loans’.

It will also transform Gul Tech’s equity from a negative to a positive net asset position with the controlling shareholders waiving about $44 million of the loans.

Tuan Sing said that it had already made provisions for the loans in prior years, and estimated that the net effect of the partial writedown on equity is about $0.7 million.

The company also said that it planned to dispose of its 50 per cent held hotel assets worth about A$615 million (S$799 million) to third parties as and when opportunities arise.

Tuan Sing will hold two separate extraordinary general meetings on June 16, 2008, to seek shareholders’ mandate for the two transactions.

Source : Business Times - 2 Jun 2008

The 120,000 sq m complex will be opened in October

IT HAS yet to be named, but the first phase of Fusionopolis - a complex with two towers and a podium - is almost fully taken up already, ahead of its official opening slotted for this October.

RICH TENANT POOL: The Asian Food Channel, the Thales Technology Centre and NRG Engineering have already moved into Fusionopolis. Upcoming tenants include the Institute for Infocomm Research. — PHOTO: JTC

The soaring complex, which comprises two towers - one with 24 floors and the other, 22 floors - and a podium, will be named next month.

The complex is one of 10 buildings that make up Fusionopolis, a 30ha purpose-built infocommunications and media research and development site at the one-north area off Buona Vista Road.

According to a JTC Corporation spokesman, ‘nearly all of the 120,000 sq m of space in the complex has been taken up’.

Three tenants have already moved in: the Asian Food Channel, the Thales Technology Centre and NRG Engineering.

Other tenants that will be moving into the complex include some of the nation’s top high-tech research institutes, such as the Data Storage Institute, the Institute for Infocomm Research and the Institute of High Performance Computing.

Besides offices and five floors of retail and food and beverage outlets, including supermarket chain Cold Storage’s newest Market Place outlet, JTC has set aside space for sports and lifestyle activities.

There will be rooftop pools, fitness clubs and a theatre devoted to experimental art forms - all designed to cater to the needs of those working and living there.

To accommodate staff living in the complex, there will also be 50 serviced apartments. Each ‘work loft’ will be about 60 sq m in size.

They are part of the architect’s vision of creating a ‘work, live, play, learn’ environment for the complex, which was designed by the late, internationally renowned Dr Kisho Kurokawa.

This design and vision, said the JTC spokesman, will hopefully ‘foster synergistic collaborations between the public and private research institutes and energise the vibrant infocomm and media industry’.

Industrial landlord JTC charges rental rates of $4.67 per sq ft for the business park.

Fusionopolis Phase 2A, with 103,000 sq m of floor space, will have dry and wet laboratories, as well as Singapore’s largest clean-room facility, when it is completed next year.

Phase 2B, which is also scheduled to be completed by next year, is a 16-storey mixed office and retail building with a maximum gross floor area of 50,271 sq m.

JTC has shortlisted 10 building names following an online competition, and it is expected to announce them next month.

SOMETHING FOR EVERYONE

The complex will offer tenants and visitors not only offices, retail shops and food outlets, but also space specially allocated to sports and lifestyle activities.

There will be rooftop pools, fitness clubs and a theatre devoted to experimental art forms.

For staff living in the complex, there will be 50 serviced apartments, done up as ‘work lofts’.

Source : Straits Times - 2 June 2008

Highest increase in occupancy costs over 12 months is Ho Chi Minh City

AFTER the sharp increase in prime office occupancy costs, Singapore has emerged as the ninth most expensive office market in CB Richard Ellis’s (CBRE) latest semi-annual Global Market Rents survey.

Singapore was ranked 11th in the last survey in November last year and 24th in the May 2007 survey.

The last time it was one of the 10 expensive office markets in the survey was 1991, when it ranked sixth.

However, on a brighter note - for those concerned about Singapore’s competitiveness - the latest survey shows that the island no longer holds the title of posting the highest increase in occupancy costs over a 12-month period.

That ‘honour’ went to Ho Chi Minh City, which posted a 94.4 per cent jump in office occupancy costs - in local currency - over the 12 months ended March 31, 2008. It was followed by Moscow (up 92.7 per cent) and Singapore (86 per cent).

In the previous survey, published in November last year, Singapore posted the highest 12-month increase in occupancy costs, while in the May 2007 study it took fifth spot.

‘The pace of rental growth in Singapore is moderating and we sense that the peak of the market is close at hand,’ said CBRE’s executive director (office services) Moray Armstrong.

‘With significant new office supply coming on stream through the next few years, we are confident that Singapore’s medium- to long-term term competitiveness in premises costs is assured.

‘It’s also noteworthy that the range of alternative lower-cost premises options (for example, business park space) has been bolstered. This is a sign of the commercial property market’s growing maturity in response to Singapore’s status as a global business city.’

CBRE figures show the average monthly Singapore prime office rental rose 92.3 per cent last year to $15 psf in Q4 2007, after appreciating 50 per cent in 2006.

For Q1 this year, the average monthly prime office rental was $16 psf, up 6.7 per cent from the preceding quarter.

CBRE projects that the figure will edge up to $17 psf by end-2008 and $17.50 psf by end-2009.

CBRE’s latest Global Market Rents survey shows London’s West End retained its position as the world’s most expensive office market, while Moscow climbed to second spot, followed by Tokyo’s Inner Central Five Wards, Mumbai’s Nariman Point and Tokyo’s Outer Central Five Wards.

‘Office occupancy costs are continuing to defy sluggish economic conditions and the credit crunch, as they rise faster than global inflation,’ noted CBRE’s global chief economist Raymond Torto.

‘These cost increases are dominated by emerging markets, caused by both supply and demand imbalance and the depreciation of the dollar relative to local currencies. In some of these emerging markets, Class A office space is seriously lacking.’

Overall, Europe, Middle East and Africa dominated the list of markets with the fastest-growing occupancy costs, accounting for five of the top 10 and 19 of the top 50 markets.

Worldwide, 88 per cent of the 173 office markets monitored posted higher occupancy costs.

CBRE said that its definition of occupancy costs covers rent, plus local taxes and service charges.

The occupancy cost figures are adjusted to reflect different measurement practices from market to market.

Source : Business Times - 29 May 2008

THE government continues to roll out new sites for sale against the backdrop of a quieter market.

The latest to be offered are two industrial sites - a confirmed list plot in Woodlands with Business 2 zoning being launched for tender, and a smallish plot at Kallang Pudding Road for Business 1 use that is now open for application under the reserve list.

Both sites are being offered on 60-year leasehold tenures and have 2.5 plot ratio (ratio of maximum potential gross floor area to land area).

Colliers International director (industrial) Tan Boon Leong predicts the 61,757 sq ft Kallang Pudding site, located in the established MacPherson/Al- junied industrial belt, will attract more attention with bids likely to be around $90-100 per square foot of potential gross floor area.

In contrast, the 180,835 sq ft plot at Woodlands Industrial Park E5 may fetch bids of only about $20 to $25 psf per plot ratio (psf ppr), Mr Tan reckons.

He notes that a 30-year leasehold site next door was sold last year for about $28 psf ppr but that was with a lower plot ratio of 1.0.

‘The latest plot has the highest plot ratio for an industrial site offered by the government in the Woodlands area since 2000. Industrialists generally don’t like operating in high-rise industrial facilities - because of the inconvenience and time consumed in moving goods and people up and down - especially in outlying areas like Woodlands and Tuas.

‘So the developer of this site may not be inclined to build up to the maximum plot ratio of 2.5, especially given rising construction costs. Any potential bidder will ask himself: ‘Should I bid high for the land and take a risk to build something industrialists may not like?’

With a Business 2 zoning, the site can be developed for a wide range of uses such as clean/light industry, general industry and warehouse.

‘The site is near established industries specialising in auto parts, hardware, furniture, scrap metal and waste management,’ Urban Redevelopment Authority said.

The tender for the Woodlands plot closes on July 22.

The Kallang Pudding Road plot, despite its triangular shape, is expected to be hotly contested.

‘It is suitable for development into an upscale flatted factory and sold on a strata-titled unit basis. The plot is very close to the main trunk road in the area - Aljunied Road,’ Mr Tan said.

The Business 1 zoned plot can be put to clean and light industrial, and warehouse use.

Source : Business Times - 28 May 2008

New exercise targets efficient use to free up more space for private sector

GOVERNMENT agencies in the Central Business District have been told to re-evaluate their office space needs in light of the current office space crunch, even if these agencies own their buildings.

It is understood that the Ministry of Finance (MOF), which oversees all government office relocation projects for government ministries and statutory boards, has recently issued a directive asking these government bodies to look into the possibility of compacting their offices.

Asked to comment, a spokesman for MOF said: ‘MOF and MND (Ministry of National Development) are working with government agencies to make more efficient use of office space. This is part of the government’s effort to better manage its resources.’

While MOF did not reveal to what extent this exercise is being undertaken, it is expected to be on top of the 20,000 sq m of office space that Finance Minister Tharman Shanmugaratnam said the government would free up in February.

The Urban Redevelopment Authority (URA) for one, has confirmed that it is indeed looking at compacting its office space at the URA Centre on Maxwell Road to make space available to the private sector.

A spokeswoman for URA said: ‘We will be consolidating our office space to achieve greater space efficiency. We are still reviewing and are unable to say at this stage how much space can be freed up for rental.’

URA also said that it expects the consolidation to be completed by 2009/2010.

This latest exercise is a slight departure from earlier government office space crunch measures in that the agencies involved are not expected to move out of the CBD.

As such, URA will not be following the Singapore Land Authority (SLA) to Revenue House at Novena. Nor will it be following the Economic Development Board (EDB) to Fusionopolis at one-north in Buona Vista.

‘All the URA divisions will be staying at The URA Centre,’ added its spokeswoman.

But while SLA and EDB - currently located at Temasek Tower and Raffles City respectively - do not own their offices, URA does.

The 16-storey URA Centre, which was opened in 1999, was designed by Kenzo Tange Associates at a cost of $118.9 million.

And it could now prove to be a generator of considerable rental revenue.

Cushman and Wakefield managing director Donald Han says that rents at nearby Capital Tower and Temasek Tower are currently $16-$18 and $12-$13 psf per month respectively.

Prime office space is a luxury these days and Mr Han reckons that government bodies that occupy space in the CBD, may need to ‘justify’ their occupation of the space, even if they own it.

It is not known what the efficiency of office space at government-owned buildings such as URA Centre is but Mr Han says anything above 150 sq ft per person, ‘is a luxury’.

‘The industry standard in the private sector is between 80-130 sq ft per person,’ he explained, adding that cutting space usage by 50 sq ft per person and improving ‘operational efficiency’ could amount to quite a lot of new, leasable space, especially at today’s rates.

Colliers International director (research and advisory) Tay Huey Ying also believes that the MOF directive could be revenue driven rather than just a move to help ease the office space crunch.

As Ms Tay points out, the URA and other government bodies do pay rent even if they own their own buildings. But it is not known what rent they pay. ‘The rents could be tied to market rates but it could also depend on the accounting system,’ she added.

Ms Tay nevertheless lauds the move. ‘At this point in time, any freeing up of space will help the supply crunch,’ she said.

Interestingly, Mr Han believes that with the announcement of new growth areas in the Draft Master Plan 2008, even more government agencies could be moving out of the CDB, if only to help kick-start these areas.

‘To be a catalyst in these areas, it cannot be left to the private sector because the lack of amenities will mean land prices in initial land sales sites will be low and this could lead to price distortions,’ he explained.

Source : Business Times - 27 May 2008

Public tender comes after a contentious collective sale approval last year

ONE of the landmarks of the east, Katong Mall, was put up for sale yesterday at an indicative price of $220 million to $250 million - amid some controversy.

The 99-year leasehold property comprises strata-titled commercial units used as shops and other businesses.

But the site can be rebuilt into a mixed development comprising residential and commercial units, said its marketing agent Jones Lang LaSalle (JLL).

Its public tender comes after a contentious collective sale approval process in September last year.

About 35 minority owners claimed they were not consulted in the drawing up of the sale agreement, and that the sale process was conducted under the old rules and not the new, stricter ones that took effect in October.

They also complained of a low reserve price, and said some majority owners had a potential conflict of interest as they were property developers - Nustavino and Habitat Properties - that could bid for the property.

Whether the consent of owners representing 80 per cent of the share value required for the sale had been obtained was also called into question yesterday.

One minority owner, Mr Robert Ong, told The Straits Times that five owners had withdrawn their signatures before the new laws kicked in on Oct 4.

‘This means the signatures collected could have fallen below the 80 per cent threshold,’ he said.

When contacted, JLL’s local director for investments, Ms Stella Hoh, said that the firm had the 80 per cent level to proceed with the sale.

On the conflict of interest issue, she said that even if the sale committee members were developers by trade, they were legally allowed to bid as long as they declared their position.

They would not take part in the tender decision-making and voting process, she added.

‘We believe this site will attract a lot of parties despite the current market, given that there are few private land sites for sale in this area.’

The four-storey mall has a land area of 78,158 sq ft with a gross plot ratio of 3.6. This works out to a gross floor area of 281,369 sq ft - an indicative sale price of $782 per sq ft (psf) to $888 psf per plot ratio.

Developers have an extra option: JLL said it has also obtained outline planning permission for a mixed development with an approved plot ratio of three - a gross floor area of up to 234,474 sq ft. This is subject to the relevant authorities’ approval and payment of a development charge.

Located at the junction of East Coast Road and Joo Chiat Road, the project could yield about 490 commercial units of 400 sq ft each, or 100 residential homes and 185 commercial units of 1,200 sq ft and 400 sq ft, respectively.

Savills Singapore director (business development) Ku Swee Yong said the site was an attractive location, with an increasing population catchment with upcoming condominiums nearby.

‘But given the current market, it remains to be seen whether there will be takers.’

Meanwhile, all eyes will be on the results of the public tender, which closes at 3pm on June 25.

Source : Straits Times - 27 May 2008