Complete Property Market Updates of Singapore

FRASERS Centrepoint Trust has completed the first revamp of a multimillion-dollar plan to jazz up its malls.

Anchorpoint Shopping Centre was relaunched last Thursday after a $13 million makeover, setting the stage for similar transformations at Frasers’ Northpoint and Causeway Point shopping centres.

The suburban mall in Alexandra Road used to house mainly furniture stores. The makeover, which took a year to complete, has turned it into an ‘outlet mall’ filled with food and beverage stalls, and shops selling year-round discounted fashion merchandise.

Anchorpoint opened for business in March, when the renovations ended - and the results so far have been impressive.

Average rents are now about $7.50 per sq ft (psf), up from $5.40 psf in late 2006, when the revamp plans commenced, said chief executive Christopher Tang.

Occupancy has also risen, from 92 per cent to 98 per cent, while gross revenue, according to the trust’s second- quarter results this year, has doubled over the previous year.

The previously lacklustre sales were because the mall did not have ‘the right tenant mix’ with the furniture stores, said Mr Lee Hsien Yang, the chairman of Fraser & Neave, Frasers’ parent company.

Frasers plans to transform Northpoint and Causeway Point, as well as add three soon-to-be-built malls - Yew Tee Mall, Bedok Mall and Northpoint 2 - to its $989 million portfolio by 2010.

Northpoint 2, which will cost $38.6 million to build, will add 80,000 sq ft of retail space to the existing Northpoint mall in Yishun by the middle of next year.

Frasers also plans to grow its existing portfolio of suburban malls in Malaysia and is looking to enter Vietnam, said Mr Tang.

Source : Straits Times - 19 May 2008

Demand and rentals likely to stay healthy as supply remains limited, say analysts

THE housing market in Singapore has started to turn bearish and investors are duly retreating from residential properties and property-related stocks.

But there are other classes of properties that may be worth a look for those still seeking to profit from property investments.

Offices seem the most obvious choice. The segment is still going strong even in the current market malaise, fuelled by a persistent supply crunch and strong demand for space from expanding businesses.

Investors may fear they have missed the boat, with office prices having soared 32.6 per cent last year alone. Growth in prices and rents has also started to moderate.

However, property consultants say it may not be too late to cash in on the office boom.

Demand is likely to stay healthy in the short- to medium-term even as new supply remains limited. Only one million sq ft of new space will be completed this year, according to Corporate Locations, which helps companies lease office space.

‘There is currently an excess of demand over available space,’ said Mr Moray Armstrong, executive director of office services at property consultancy CB Richard Ellis, in a recent report.

‘Landlords will still be able to achieve high rents on rent reviews or lease renewals, due to the absence of alternatives for occupiers.’

Property firm Colliers International also still sees ‘immense potential upside’ in office rents and values, noting that office values are still about 27 per cent lower than their peak in the mid-1990s.

Buoyant yields

Recently, office prices have started to flatten out with fewer transactions taking place. Rents, however, are projected to keep rising at least until 2010, when more substantial space comes onto the market.

Prices of offices inched up just 1.1 per cent in the first quarter, but rents jumped 7.3 per cent. This indicates that annual rental yields are on the rise and may climb further, property experts say.

Traditionally, yields of office space have been higher than most other types of property. In the last two years, net rental yields for offices largely ranged from 5 to 7 per cent - almost double the usual rental yield for homes, which is about 2 to 4 per cent.

The strong rental yield may also mean that investors can get away without forking out cash for the mortgage payments, said Colliers in a research paper last month.

It said the current fixed interest rate loan for commercial properties is between 4 and 4.5 per cent for the first two years, which means the rent will probably be enough to cover the mortgage instalments.

Higher yields also mean that investors in strata-titled office properties would be able to double their investment in a much shorter time than for homes, said Colliers. It projects 13 to 14 years for offices to reach that stage, compared to 18 to 29 years for homes.

Higher risks

With the greater returns from office investments also come greater risks, warns Colliers.

For one thing, it is more difficult to obtain financing, as banks generally lend only 60 to 70 per cent of the property’s sale price or market value, compared to between 80 and 90 per cent for homes. And interest rates tend to be higher for office loans.

Also, buyers cannot use their Central Provident Fund savings to pay for office purchases.

Investors hoping to reap windfall gains by buying older buildings with ‘collective sale potential’ should also be cautious, as the process is much more difficult for office buildings compared to condos.

How to buy an office unit?

Obviously, most casual investors are unable to afford entire office buildings. What they usually do is to buy strata-titled office units, which are sold singly. But these properties are few and far between.

There are probably fewer than 350 completed office and industrial buildings in Singapore that are available for sale on a strata basis, estimated Colliers.

Most of these, especially offices, are likely to be leasehold and more than 20 years old. These include Golden Mile Complex in Beach Road and High Street Centre in North Bridge Road, both of which have leases that started in 1969.

Investors looking for newer buildings can check out Suntec City Tower, Southbank at North Bridge Road and The Central near Clarke Quay. Units sold in these buildings between last July and February averaged $2,277 per sq ft (psf), $941 psf and $1,749 psf respectively, said Colliers.

Buyers of office units must first place an option fee of 1 per cent of the property’s purchase price, said Colliers. They have two weeks to decide if they want to exercise the option, by paying another 9 per cent.

After that, the buyer’s lawyer will conduct checks on the property’s title, tax, floor plans, tenancy schedule, and so on.

The sale is usually completed three months after the option is exercised, when the remaining 90 per cent of the price is payable.

Source : Sunday Times - 18 May 2008

Allocation of land to be done in phases as it becomes available, says JTC

THE first phase of the development of the Seletar Aerospace Park (SAP) is on track and detailed plans are already in place to cater to the needs of both existing and new tenants.

JTC Corp, which is spearheading the redevelopment of the aerospace park together with the Economic Development Board (EDB), revealed this when it took BT on a tour of the facilities last week.

Seletar Aerospace Park is a 300 hectare development which will house a cluster of aerospace MRO (maintenance, repair and overhaul) players, design and manufacturing specialists, training campuses and aviation-related businesses. The existing runway - built by the British air force over half-a-century ago - is also being extended to cater to bigger business jets.

Much of the current work centres on the East Camp area, around the houses, hangars and offices around Old Birdcage Walk and areas adjacent to the east side of the runway. This is where companies like Fokker Services Asia, Hawker Pacific, Honeywell, Dassault Falcon, Executive Jets Asia and others are currently located. Soh Eng Chen of JTC Corp’s Industrial Development Department, whose team is responsible for the SAP redevelopment, said most of the work on the first phase would be completed by the first half of 2009.

‘The houses have been refurbished to cater to numerous business offices, while new hangars with runway access will be built for those who need them,’ he said. He added that more land with runway access will be allotted in West Camp, where there will also be a multi-storey office complex for tenants. This building is expected to be occupied primarily by business jet operators, air charter companies and other aviation businesses.

Meanwhile, current East Camp tenants (who include players like Air Transport College, Execujet Asia and Life Support Equipment) will have to plan their move to new locations within the park. In all, excluding runway land, some 140 ha of industrial land has been set aside for businesses by JTC.

But Mr Soh said that while all tenants would have the opportunity to site themselves in new premises, land allocation would be done in phases as it becomes available. The challenge which JTC faces is that the area is not a greenfield development, and as such, it has to address the issue of relocating existing businesses and residents.

‘Many of these companies are operating out of decades-old and dilapidated office structures,’ said Mr Soh. The only existing tenants who will not move are ST Aerospace and Jet Aviation, both of whom have huge facilities at Seletar West Camp. Their current land use is deemed optimal. Mr Soh revealed that enquiries have been coming in from potential new tenants.

Meanwhile, two of the industry’s most prominent players have already booked themselves in.

Earlier this year, Rolls-Royce broke ground on its $320 million Trent aero engine facility at the SAP, while engine maker Pratt & Whitney is building its new US$30 million, 105,000 sq ft facility in the park. Meanwhile, ST Aero is spending $17.3 million to build a two-bay hangar, while Jet Aviation’s existing facility is also being extended.

In recent months, some existing tenants had expressed concerns about the availability of new premises and facilities amid the ongoing development. But JTC said it was addressing these concerns by engaging these operators and evaluating their needs.

The 10-year project - which is estimated to cost upwards of $60 million - is expected to provide a huge shot in the arm for Singapore’s aviation sector ambitions. The park is also expected to create 10,000 jobs and contribute $3.3 billion annually to the economy when fully operational.

Source : Business Times - 5 May 2008