RETAIL rents in the prime Orchard and Scotts roads belt, other city areas and the suburbs were all unchanged in the first quarter of this year, according to DTZ Research.

They are still down as much as 10 per cent in some areas from their Q3 2008 peaks, but have now stabilised across the island, DTZ’s data show.

In Q1, the gross rent for prime first and upper-storey retail space in the Orchard and Scotts belt remained at $39.70 per sq ft per month (psf pm) and $20.50 psf pm respectively.

DTZ says the market managed to absorb new supply – from the opening of Ion Orchard and 313@somerset – that came on stream in 2009 and in Q1 this year.

First-storey rents in the Orchard and Scotts belt are down about 6 per cent from the peak at Q3 2008.

Rents in ‘other city areas’ took an even bigger hit during the economic slowdown, falling about 10 per cent from Q3 2008.

But the slide has stopped after five consecutive quarters of decline. Prime first and upper-storey retail space in these areas remained at $24.40 and $14.00 psf pm in Q1 2010.

Rents in suburban areas, which fell only marginally during the downturn, also held firm during Q1 – at $33.50 and $22.80 for first and upper-storey space respectively.

According to Chua Chor Hoon, head of DTZ’s South-east Asia research team, the retail industry has been boosted by more tourist arrivals and rising consumer confidence this quarter.

‘As tourist arrivals are expected to grow and local consumption improves, demand for retail space is likely to increase,’ Ms Chua says. ‘On the back of a brighter outlook for the retail industry, prime retail rents are expected to rise moderately.’

DTZ expects some 2.3 million sq ft of new retail space to be added this year, 15 per cent lower than the 2.7 million sq ft added in 2009.

Source: Business Times, 23 Mar 2010

DELAYS to the planned Kallang Sports Hub have left some stores in a nearby shopping mall languishing.

Operators of some of the smaller stores in Leisure Park Kallang, a six-storey, 200,000 sq ft mall with about 100 tenants, say the lack of walk-in traffic has left them struggling to make ends meet, even as anchor tenants like an ice-skating rink, bowling alley and movie theatre continue to pack crowds in.

At least six smaller stores have closed as a result, while several others are losing money or have trouble paying the rent. Two other stores say business is so bad they plan to drop the shutters soon.

However, Mr Han Chee Juan, the director of Jack Investments, the mall’s landlord, said there is little that can be done. He said the delays to the Sports Hub were unexpected, but added that ‘we just have to deal with it’.

‘When the Sports Hub is ready, then there will be a critical mass,’ said Mr Han, who pointed out that the mall is doing what it can to get traffic, like offering a shuttle service to and from nearby estates, offices and the Kallang MRT station.

He admitted that Leisure Park Kallang is a ‘low-lying mall with thin public transport’. However, he said the stores that failed had only themselves to blame: ‘In a ‘designated’ mall, tenants need to bring in products that will attract customers to the mall, they need to have their own pull.’

The real-estate veteran defined a ‘designated mall’ as one which does not rely so much on walk-ins, but depends on tenants to draw in the customers.

The tenants in trouble, said Mr Han, did not prepare themselves well enough, and offered poor products that did not attract shoppers.

But some tenants who spoke to The Straits Times – despite warnings from the landlord not to do so – blamed their woes partly on bad mall management. They acknowledged that the delays to the Sports Hub have hurt business, but accused Jack Investments of not doing its part to help draw customers. They added that the landlord has also been unwilling to discuss ways to improve the situation.

Eight tenants said that as a result, they have been losing as much as $10,000 a month over the last year. But quitting is not an option as they are bound by two- or three-year rental contracts.

Ms Philomena Cannon-Brookes, 39, the owner of JWT Kid’s Gym, said she has tried more than 20 times – and failed – to meet her landlord for talks. ‘It is really bad here,’ she said. ‘We are unable to sustain ourselves.’

Tethered to a three-year lease from 2008, she said the sports hub was one reason she set up shop there. But business was poor from the start, and her losses hit $5,000 a month almost as soon as she opened. That sum has ballooned to $10,000 a month now, and she has put in a request for a rental cut or to be let off the lease early.

There has been no reply from Jack Investments, she said.

Mr Eric Teow, the owner of Growing Paints, which conducts art classes for children, is another whose business is in trouble. The 49-year-old has not paid rent since last September and has been served with an eviction notice.

‘It is not that I don’t want to pay rent. I can’t,’ said Mr Teow, who has a three-year lease and pays $5,000 a month. ‘The Sports Hub didn’t happen, so the management has to do its part. They can’t just keep collecting the same amount of rent.’

The situation faced by the smaller stores stands in contrast to that of bigger outlets, such as the Cold Storage supermarket, which are packed, especially on weekends. When The Straits Times visited the mall on Sunday, the upper floors, which housed the ice-skating rink, food court, cinema and bowling alley, were teeming with people. The smaller shops, however, stood empty.

Analysts said one reason some outlets are doing well is that they are unique: The rink, for example, is the only one in Singapore. The supermarket also serves a relatively well-off neighbourhood, the Tanjong Rhu condominium cluster, about a 10-minute walk away.

Leisure Park Kallang re-opened in 2007 after a $70 million facelift. The 35ha Kallang Sports Hub was to have been completed this year, but financial concerns like high construction costs led the project to be pushed back several times. It is now slated to be completed by 2013.

In response to queries, Jack Investment said it would meet tenants to discuss the difficulties they face and see how it can help. Mr Han added that a boost for business is just over the horizon: The Stadium MRT Station, which will open on April 17, will lift mall traffic by 10 to 25 per cent, he reckons.

Source: Straits Times, 23 Mar 2010

DEVELOPERS continue to roll out new residential projects. TID Pte Ltd – a joint venture between Hong Leong Group Singapore and Japan’s Mitsui Fudosan – is expected to preview the 65-unit Nathan Suites at Nathan Road, opposite the Malaysian High Commission, within the next two weeks.

The 24-storey freehold development is expected to be priced at about $2,100 per square foot on average. The units, which comprise two, three and four-bedroom apartments as well as penthouses, range from about 915 sq ft to 4,800 sq ft.

This week, potential home buyers can look forward to at least three new project releases. All three have 99-year leasehold tenure. Two of them are on Sentosa Cove – Ho Bee’s and IOI’s Seascape, and City Developments Ltd (CDL)’s The Residences at W Singapore Sentosa Cove.

The third, which is in the Central Business District – is 76 Shenton by Hong Leong Holdings. The 39-storey development is expected to be priced around $2,000 psf on average.

The 202-unit condo comprises one and two-bedroom units. Response to this project will be seen as a gauge of whether demand for smallish units – often sought by speculators – has been affected by the recent introduction of seller’s stamp duty for residential properties bought and sold within a year.

Over in Sentosa Cove, Ho Bee and IOI are expected to release an initial 40 units at the 151-unit Seascape at a private preview for VVIPs later this week. Prices are expected to start from about $2,700 psf, BT understands.

The eight-storey development, which also has an attic, is expected to be completed either late this year or early next year. Seascape comprises three- and four-bedroom units. There are no smaller units.

Rival CDL’s 228-unit condo, The Residences at W, has two-, three- and four-bedroom units. Two bedders start from 1,227 sq ft, three bedders from 1,625 sq ft and four bedders from 2,067 sq ft.

The six-storey project, which also has an attic level, faces the waterway. It is expected to be completed before year end. CDL is expected to announce its pricing later this week.

Last month, Real Estate Developers’ Association of Singapore (Redas) president Simon Cheong said developers will be bringing forward their property launches over the next few months to satisfy strong demand from homebuyers.

‘Redas’s members are committed to fast track supply to satisfy demand to minimise excessive speculation in the property market,’ said Mr Cheong. ‘Hopefully when demand is satisfied, there will be less pressure for future anti-speculative measures.’

Source: Business Times, 23 Mar 2010

Hong Kong’s New World Development said the group plans to invest US$1 billion to open shopping malls in China in the next 5-7 years, banking on strong consumption in the world’s third-largest economy.

The group includes New World Development, New World China, New World Department Store China and NWS Holdings, whose core business is in residential property, retail properties and hotels in greater China.

The group was trying to push a new-concept mall called K11 that combines art and shopping, executive director Adrian Cheng told Reuters an interview yesterday.

‘The K11 concept shopping mall will have exponential growth in terms of rental income after it has been open for three years,’ said Mr Cheng, 30, grandson of chairman and Hong Kong tycoon Cheng Yu-tung, who made his wealth from jewellery and property.

‘We plan to open K11 malls in seven cities in China in the next 5-7 years and our plan is to invest around US$1 billion for the development,’ he added.

Mr Cheng’s comments came after the Hong Kong market closed on yesterday. New World Development’s shares were down 2.55 per cent, lagging the broad Hang Seng index’s 2.05 per cent fall.

Source: Business Times, 23 Mar 2010

Vacancy rates for Australian offices are likely to rise further on new supply and should peak by the fourth quarter this year, setting the stage for recovery in 2011, research firm Jones Lang LaSalle said yesterday.

Yields on office properties peaked at 7.78 per cent in Q3 2009 with values falling 25 per cent from their peak in December 2007, but completion of new buildings will continue to push up vacancy rates, the research firm said.

‘There was a fairly large supply pipeline that was under construction before the financial crisis hit,’ said David Rees, regional director and head of research for Jones Lang LaSalle (JLL).

‘Although we are saying this is sort of the bottom of the cycle, we are not saying it’s going to be a big bounce back in 2010. It’s more of a ‘U’ rather than a ‘V’.’

An average office vacancy rate for central business districts (CBD) of major Australian cities is expected to peak at around 9.6 per cent in the October-December quarter this year, up from 8 per cent in the fourth quarter last year. The Sydney and Melbourne CBDs, both concentrated with finance and insurance companies, will likely be the first markets to recover, Mr Rees said.

‘Banks and brokers are back in hiring again, so demand for space is rising. And secondly, both of those markets have quite limited supply construction pipeline. So they don’t have a big overhanging space.’

Office rental growth will likely start to pick up in 2011, and Mr Rees expects a high single-digit to low double-digit growth over the next 2-3 years.

Meanwhile, the retail sector is on the mend with yields on regional malls peaking at 6.6 per cent in Q4 last year. But Mr Rees said rising interest rates and the withdrawal of the government’s fiscal stimulus measures will likely put a damper on consumer spending and limit rental growth for retail properties.

Source: Business Times, 23 Mar 2010

Marie-Yvonne Paint, a real estate agent in Montreal, has the kind of problem most of her counterparts in the United States can only dream about.

‘We have a shortage of inventory right now,’ said Ms Paint, who focuses on the exclusive and expensive municipality of Westmount. ‘It’s very annoying. We have buyers ready to buy and not much to show.’

Her experience is not an isolated example. Like most of the world, Canada’s real estate market slumped during the recession. But now, instead of worrying about the recovery of the real estate market, some Canadians are concerned about the prospect of a price bubble.

The Canadian Real Estate Association reported that the average price of existing homes rose 19.6 per cent in January compared with January 2009, the latest in a string of substantial gains dating back through last autumn. By contrast, the average price of existing homes rose 2.6 per cent in the US in the same period, according to the National Association of Realtors.

Such drastic percentage gains are not just a reflection of the market’s earlier depths. In some Canadian cities, particularly Toronto and Vancouver, prices appear to be heading towards record levels.

‘It’s no surprise the housing market responded to low interest rates,’ said Craig Alexander, the deputy chief economist of the Toronto-Dominion Bank. ‘The real question is what’s going to happen in the next year. It can’t continue at the current pace, otherwise a bubble will form.’

Canadian homebuyers, of course, are not unique in having access to low-interest mortgages. But Mr Alexander and others attribute the Canadian market’s revival to a series of measures that ensured that the recession in Canada did not turn into a real estate disaster.

Perhaps chief among them is the country’s retail banking system, which is effectively an oligopoly dominated by five national banks, including Toronto-Dominion.

Most of the time, that arrangement is less than popular among Canadians, who think that a lack of competition leads to, among various things, low interest rates on savings and high service fees.

Public resentment has repeatedly caused politicians to block mergers between the banks. But in the lead-up to the credit crisis, the closed-shop nature of banking in Canada proved to be the government’s, and the economy’s, best friend.

Mindful of government oversight, Canadian banks by and large avoided the structured-debt products that imperilled many of their American counterparts. They also maintained comparatively tight controls on mortgage lending to consumers. When zero per cent downpayments on mortgages were widely available in the US, Canadians were typically required to put down at least 10 per cent. American-style amortisation periods stretching beyond 25 years were also relatively unknown in Canada.

‘In Canada, standards got nowhere near as low,’ said Timothy D Hockey, chief executive of TD Canada Trust, Toronto-Dominion’s Canadian retail banking operation. ‘When the crisis came upon us, the standards didn’t have to change.’

One result of that, said Phil Soper, president and CEO of Brookfield Real Estate Services of Toronto, is that the slump in housing starts and existing home prices was delayed by about a year in Canada until late 2008. Then, when interest among buyers began to return last year, Canada’s still-healthy banks were able to provide mortgages, and housing prices were not depressed by a glut of defaulted properties in forced sales.

Source: Business Times, 23 Mar 2010

Maybank says listing of new Reits could prompt re-rating of mis-priced sector

THERE could be opportunities for investors in mis-priced Malaysian real estate investment trusts (M-Reits), some of which are trading almost 40 per cent below their net asset value (NAV).

The impending listing of a couple of big new Reits – as well as mergers and acquisitions – could revive interest and prompt a re-rating of the sector, which has fallen under the investment radar despite attractive gross dividend yields of 7 to almost 9 per cent.

M-Reits emerged from last year’s global financial crisis intact, and growth could re-start this year amid a pick-up in M&A activity as the economy improves, according to Maybank Investment analyst Ong Chee Ting.

Three Reits have already stated their intent to add a combined RM1 billion (S$422.3 million) of assets, financed by cash and new units.

Transactions are expected to rise this year after an easing of Foreign Investment Committee (FIC) guidelines last year that did away with a key vetting process on share transactions for acquisitions, mergers and takeovers.

For property transactions, FIC approval is only required if bumiputra or government interest would be reduced and the real estate is valued at RM20 million or more.

In a sector report yesterday, Maybanks’ Mr Ong says commercial properties have maintained their capital values, with shop and strata-titled offices in the Klang Valley recently transacted at gross rental yields of 5-6 per cent per annum in the secondary market.

He expects capital values to stay high this year, even though interest rates could be lifted as much as 75 basis points. Because 12-month fixed deposit rates are 2.75 per cent, investors would accept lower net rental yields, he reckons.

An anticipated boon to M-Reit sector this year could be the much-delayed listing of Sunway City Reit, with RM3-4 billion of assets that would make it the country’s largest.

Sunway City, in which the Government of Singapore Investment Corporation has about a 20 per cent stake, owns numerous valuable assets including malls, offices and hotels. It has indicated that five or six of its properties would be injected into the Reit, and Mr Ong believes a draft prospectus will be made public in a month or two.

Similarly, he believes CapitaLand could revive the planned listing of a retail Reit even though last year it grouped its Malaysian assets with other regional ones into CapitaMalls Asia and listed that entity.

The listing of a CapitaLand retail Reit in Malaysia was approved by the Securities Commission, although it is unclear if this has since lapsed. If such a Reit were to be listed, it would add another RM2-3 billion of assets to the sector.

Another, from a Qatari group with serviced residences in the Middle Eastern emirate, would add RM600 million to RM1 billion of assets.

Together, the M-Reit sector could swell by up to RM8 billion of assets this year.

Given the average asset size of the 12 existing Reits is RM735 million – and two have assets of less than RM165 million – newcomers would give the sector much-needed heft.

At RM1.55 billion, the YTL-controlled Starhill Reit is Malaysia’s biggest by asset size, but is trading around 30 per cent below its NAV. At RM2, Axis Reit is the only Reit trading above its NAV of RM1.79.

Source: Business Times, 23 Mar 2010

RETAIL rents across most of Singapore held steady in the first quarter of this year, a new report showed.

This ended five straight quarters of decline in some areas, as tourist arrivals grew and consumer confidence rose, according to the report by DTZ Research.

In the premier shopping belt of Orchard Road/Scotts Road, retail rents remained constant as the market absorbed new supply that came onstream in the first quarter of this year.

Gross rents of prime first- and upper- storey retail space in this area stayed at $39.70 and $20.50 per sq ft (psf) a month respectively in the first quarter.

More supply is due this year, though the estimated 2.3 million sq ft of new retail space expected this year is 15 per cent less than the historic high of 2.7 million sq ft last year, according to DTZ Research. A flurry of activity last year saw the addition of prime Orchard Road malls such as Ion Orchard, Orchard Central, 313@Somerset and Mandarin Gallery.

This year’s new supply will include the space at The Marina Bay Shoppes, Nex in Serangoon Central, Knightsbridge at Grand Park Orchard hotel, Bedok Point and Clementi Mall.

Retail rent in other city areas – Marina and Bugis, Beach Road, Bras Basah and North and South Bridge Roads – held steady after five straight quarters of decline. Gross rents of prime first- and upper-storey retail space in these areas stabilised at $24.40 psf and $14 psf per month.

In suburban areas, retailers’ resistance to high rents was reflected in a marginal drop of less than 3 per cent during last year’s downturn, said DTZ Research.

Monthly gross rents held firm in the first quarter at $33.50 psf a month for prime first-storey suburban space and $22.80 psf a month for upper-storey suburban space.

At the end of the first quarter, islandwide retail space stood at 32.8 million sq ft, with the completion of TripleOne Somerset, Scape in the Orchard area and Festive Walk at Resorts World Sentosa.

‘As tourist arrivals are expected to grow and local consumption improves, demand for retail space is likely to increase,’ said Ms Chua Chor Hoon, head of DTZ South-east Asia research.

‘On the back of a brighter outlook for the retail industry, prime retail rents are expected to rise moderately by around 2per cent to 5 per cent this year.’

Source: Straits Times, 23 Mar 2010

Vietnam faces the risk of asset bubbles and price busts similar to 2008, though it may maintain economic growth, a senior World Bank official said here yesterday.

Decisive steps helped tame soaring inflation in 2008, and then the authorities performed an effective U-turn to maintain growth in the face of the global slowdown, said James Adams, World Bank vice-president for East Asia and the Pacific.

‘Now we are again in a situation where some import challenges remain for the government, but we remain convinced that Vietnam’s pragmatism and sometimes heterodox measures have provided an important framework to sustain growth and we think that likely can, in fact, be maintained,’ Mr Adams said.

But, listing some of the challenges, he cautioned: ‘On the relative prices front, and this goes back to the overheating of two years ago, the economy remains very open, capital markets are thin, and so there are risks of dangerous volatility in asset prices.’

The Ho Chi Minh Exchange index fell 80 per cent from a life high of 1,170.67 points in March 2007 before bottoming out at 234.66 in early February 2009. It has risen since, and yesterday the market closed at 511.58 points.

Property prices in Vietnam have also experienced boom-and-bust cycles.

Yesterday, State Bank of Vietnam governor Nguyen Van Giau said gross domestic product growth in the first quarter would be about 6 per cent from a year ago, exceeding expectations.

Source: Business Times, 23 Mar 2010

Industry encouraged to develop expertise in recycling of waste from demolition

THE Building and Construction Authority (BCA) announced a new $15 million Sustainable Construction Capability Development Fund during the opening ceremony of Samwoh’s Eco-Green Park.

The fund is part of the effort to encourage industry players to adopt Sustainable Construction (SC) practices and technologies, and eventually steer the industry towards self-sustenance in the demand and supply of SC materials in Singapore.

‘Depletion of natural resources in the long run will very likely lead to higher material prices. We must take pro-active steps now to enhance the resilience in the supply of our construction materials.’ said Grace Fu, Senior Minister of State for National Development (MND) and Education, after announcing the new fund.

Developing capabilities in recycling waste materials from demolition of buildings and in the use of recycled materials for construction will be the focus of the SC fund.

The BCA hopes that the fund, which will support training, promotion and education programmes within the industry, and more extensive test-bedding of SC technologies and materials, will lead to industry players integrating SC into designs, building processes and business operations.

The fund will also be used to support an expected increase in demand for SC materials.

Adoption and upgrading of new technologies among demolition contractors, recyclers and ready-mix concrete suppliers, to adapt to the SC materials, will also be supported by the SC fund.

Ms Fu highlighted MND Research Fund for the Built Environment, used to fund Samwoh’s newly opened Eco-Green Park, as an example of a project that would qualify for the new SC fund.

Samwoh’s Eco-Green Park is hailed as the first building in Singapore to use recycled concrete aggregates (RCA) in its structural concrete elements.

The three-storey building cost $4 million to construct, and the flooring of the top storey is composed entirely of RCA.

Samwoh continues to test and develop new construction materials recycled from waste arising from the demolition of buildings and roads.

When asked if the fund would grow in the future, Ms Fu stated that this was just the beginning and SC was an area that would see long term attention.

Source: Business Times, 23 Mar 2010