But a clampdown on govt spending may plunge it back into recession, it warns

(LONDON) Britain’s services sector enjoyed its strongest growth for two years over the past three months and manufacturing grew strongly, but tougher times may be ahead as firms are gloomier about the future, a survey suggested yesterday.

The British Chambers of Commerce’s Quarterly Economic Survey showed the private-sector recovery gathering pace. The business lobby’s chief economist, David Kern, said the survey pointed to economic growth of 0.6-0.7 per cent in the second quarter, around double the rate earlier this year.

However, he warned that this growth was unlikely to be sustained, as an impending clampdown on government spending risked plunging the economy back into recession.

‘Although we’re champions of manufacturing, it’s a worry for the whole economy that services are not strong,’ he said, pointing out that private-sector services activity was still half its long-run average, despite the recent pick-up.

‘We now have in place very tight fiscal policy for the next few years. We think it’s necessary, but this means the risk of a double-dip recession is greater and makes it more necessary for the Bank of England to keep interest rates low.’

The new Conservative- Liberal Democrat coalition is planning spending cuts of around 25 per cent across government departments to slash a deficit running close to 11 per cent of economic output.

‘This year we won’t see much impact from the fiscal tightening because the stock cycle is strong and earlier fiscal stimulus is still in place,’ Mr Kern said. ‘But I think the biggest impact on the economy and jobs will come late this year and next year.’

The domestic sales balance for the services sector rose to +12 from +6 in the first quarter, the highest reading since Q1 2008, and the orders balance rose two points over the quarter to +5, also a two-year high.

The manufacturing balances showed a much bigger improvement. The home sales balance shot up to +30 from +1 and orders surged to +19 from -3, both the highest since 2007.

The survey also showed that the long-awaited boost to exports from a past fall in sterling seemed to have materialised, with the manufacturing export sales balance at its highest in almost four years.

However, manufacturers also reported a surge in price pressures, with a balance of +30 in Q2 compared with +8 in Q1, the highest since Q3 2008. The BCC said 80 per cent of firms reported that they were under pressure to raise prices.

That was mainly due to higher raw materials costs, rather than wage costs, and should therefore be less worrying for the Bank of England, as its policymakers largely discount one-off rises in the cost of raw materials when they consider whether to raise interest rates.

‘It’s critical at this point of the cycle to keep rates as low as possible for as long as possible,’ Mr Kern said. ‘Fiscal policy will inevitably increase the deflationary factors in the economy.’

The central bank is widely expected to keep borrowing costs at 0.5 per cent when its meeting concludes tomorrow, although one member, Andrew Sentance, voted for a quarter- point hike last month.

‘Clearly at a time when a higher fiscal contraction policy is imminent, to hike rates is the wrong thing to do,’ Mr Kern said. — Reuters

Source: Business Times, 7 Jul 2010

Residents, politicians oppose govt plan to redevelop 110 years old settlement in KL

THE enormous potential of the enclave notwithstanding, the proposed redevelopment of a Malay settlement located in the shadows of the Petronas Twin Towers in Kuala Lumpur may take a while to materialise as the settlement has become another political football.

The redevelopment of the 90ha Kampung Baru enclave has been mooted on numerous occasions over the past two to three decades, with Prime Minister Najib Razak being the latest to do so in February.

The total land value could exceed RM20 billion (S$8.6 billion) if its potential were to be fully realised, he said of the 110-year-old settlement where land transacts at an estimated RM350 per square foot (psf).

The desire to unlock its value is understandable given that it is a mere 10-15 minutes’ walk to the iconic twin towers, where the surrounding real estate sells for RM1,500 to RM2,000 psf.

That it remains unchanged is due to various reasons, the main one being the fragmented and complex ownership brought about by syariah inheritance laws, which has resulted in many small subdivided plots.

Putrajaya plans to establish a special body run by a government trustee, which together with state-linked corporations such as national asset management firm Permodalan Nasional and the pilgrims’ fund, will build a mix of skyscrapers, shopping malls, condominiums and residential units in the enclave.

Getting the 1,000-plus owners to agree on a development model was already proving a challenge. (Even within families, members disagree on the action needed.) Attempts by the Selangor Pakatan Rakyat (PR) coalition state government to offer an alternative redevelopment plan could make it even more difficult.

Barisan Nasional (BN) politicians have accused the federal opposition coalition of trying to hijack Kampung Baru to score political points with the Malays. The BN’s Federal Territories (FT) Minister, Raja Nong Chik Zainal Abidin, has asked Selangor Chief Minister Khalid Ibrahim not to interfere as the enclave lies within the FT.

Notwithstanding the political wrangling, talks between the residents and the FT minister appear to be yielding little. In one instance, Nong Chik proposed allowing non-Malays to lease the commercial buildings on a 40:60 ratio with the Malays. Even though Malays would continue to own the land outright, his proposal was shot down by the residents, despite arguing it would enhance values.

Non-Malays should be allowed to lease the commercial properties for practical reasons – they have greater purchasing power, Pulai member of Parliament Nur Jazlan Mohamed told BT. Recently appointed Urban Development Authority chairman Nur Jazlan said the area has the potential to be immediately successful ‘provided we have the right mix’.

He suggested the government use the Land Acquisition Act to overcome the stalemate. Although there are political risks, he is of the view that the residents will come round to the idea provided they can see progress and benefit from it.

In any event, KL-ites are arguably already opposition-i nclined as in the last general election, 10 out of 11 parliamentary seats fell to PR candidates. ‘You should not give up value for politics,’ he remarked.

Based on a conservative plot ratio of five, CH Williams Talhar & Wong director Foo Gee Jen estimates the land could yield up to 50 million sq ft of gross lettable area of office space.

Even so, the property consultant is not holding his breath. ‘It will take years and I doubt it will be a straightforward case because of the socio-politico constraints.’

Source: Business Times, 7 Jul 2010

AT least two new condos are expected to be released this week – 368 Thomson and The Terrene @ Bukit Timah.

UOL Group and LaSalle Investment Management are jointly developing The Terrene on the former Rainbow Gardens site in the Toh Tuck/Jalan Jurong Kechil area.

The 999-year leasehold, 5-storey project will have 172 units, ranging from one bedders (starting from 506 sq ft) to five-bedroom penthouses (of up to 3,025 sq ft). It will be close to two green lungs – Bukit Timah Nature Reserve and Bukit Batok Nature Park – and about half a kilometre from the Beauty World MRT Station, which is being built.

Prices of typical units are expected to be in the $1,200-1,400 psf range. However, one bedders could touch around $1,500 psf. Ground floor apartments with private enclosed areas could be priced closer to the $1,000 psf mark, BT understands.

In October last year, UOL announced it had taken a half-share in the Rainbow Gardens site, which had been bought by the LaSalle Asia Opportunity II fund in a collective sale a few years earlier.

Terrene is being marketed by Knight Frank and Jones Lang LaSalle.

For UOL, the preview of The Terrene follows the virtual sell-out of its Waterbank at Dakota, a 616-unit condo fronting Geylang River and next to Dakota MRT Station. The 99-year leasehold condo’s launch in April was timed with the opening of the station.

Over in the Balestier/Thomson Road area, City Developments Ltd is getting ready to preview 368 Thomson later this week on the former Concorde Residence site.

Prices in the 36-storey freehold development are expected to range from $1,300-1,500 psf. The condo’s 157 units range from one-bedders to penthouses, with unit sizes of 689 sq ft to 3,391 sq ft. The project is being marketed by Huttons.

Meanwhile, over in the Bedok Reservoir location, Frasers Centrepoint and Far East Organization have sold 93 of the 150 units released since June 25 at the Waterfront Gold condo. The average price for the 99-year leasehold project is $950 psf. Waterfront Gold comprises 361 units and will be the first condo in Singapore to feature a skypark. This will be on the roof of the 15-storey project.

Property consultants say home sales are still slow, with many potential buyers still glued to the World Cup, which ends in the wee hours of Monday next week. More developers are then expected to begin releasing projects again.

‘Buyers will do their homework and evaluation, but the good thing is that the Singapore stock market has still fared relatively better than some overseas markets,’ notes DTZ executive director (consulting) Ong Choon Fah.

‘The underlying desire to buy a private residential property here is still there among owner occupiers and local investors, as there’s still a lot of liquidity. And our market is quite unique, with a large part of our population living in public housing, which provides a natural feed to the private housing market,’ she added.

Source: Business Times, 7 Jul 2010

MOST companies here expect business to keep growing for the rest of the year despite headwinds from the world’s largest economies, according to a survey by recruitment firm Ambition.

About nine out of 10 of 445 Singapore-based executives surveyed expect growth in the second half, while the others think their company will perform the same as last year. Complementing these expectations is active hiring, with 69 per cent of respondents saying they took on staff in Q2 to meet growth demands. New hires made up the bulk of recruitment as opposed to replacement headcount – a sign that companies are gearing up for further growth.

The area with the greatest hiring buzz is sales and business development, with 55.1 per cent of respondents saying they are looking to grow headcount in this area. Banking and financial services industries are growing their operations and middle-office teams, said Ambition.

Risk and compliance teams are also expanding, with 24.7 per cent of respondents expressing a wish to expand in this area. The optimistic outlook comes despite the US and European economies struggling to regain their footing and government-funded stimulus programmes winding down.

Last Friday, the US Labor Department reported that 125,000 jobs were lost in June, confirming Wall Street’s fears that the world’s largest economy has taken a turn for the worse. Similarly, tight budgets and lacklustre consumer spending are taking the shine off Europe’s recovery.

Ambition said that while the US and Europe are still trying to regain some sense of economic balance, Asia is in growth mode.

‘This remains calculated and considered, and there is still a strong focus on cost management, but investment in the region is most definitely under way,’ it said.

It expects hiring to continue at the current pace this year and into 2011.

The survey of executives from 275 companies was carried out in April and May. Respondents were from 12 areas, such as accounting, sales and marketing, and human resources.

Source: Business Times, 7 Jul 2010

SINGAPORE-listed Hotel Grand Central has signed conditional agreements to buy an Australian hotel and its business for A$47 million (S$55.1 million).

The price for the Courtyard by Marriott Surfers Paradise, Queensland, works out to about A$116,000 per room. The freehold four-star hotel, which has 405 rooms, is located at the corner of Surfers Paradise Boulevard and Hanlan Street, Surfers Paradise. It forms part of Centro Surfers Paradise – the largest shopping centre in the district.

‘A comprehensive review of the hotel will be undertaken with a view to re-branding the property as Hotel Grand Chancellor, Surfers Paradise, upon settlement,’ Hotel Grand Central said yesterday in a statutory filing with Singapore Exchange.

The 31-storey hotel, which has a restaurant and two bars, five conference and meeting rooms, a gymnasium and pool, is being sold by Marriott Vacation Club, BT understands.

Jones Lang LaSalle Hotels brokered the transaction.

Hotel Grand Central said the purchase is subject to it being satisfied that the property is suitable for its requirements, following due diligence.

The acquisition, when completed, will expand the group’s portfolio of Australian hotels to eight. It already has properties in Brisbane, Adelaide, Melbourne and Tasmania.

Hotel Grand Central also owns four hotels in New Zealand and two in Singapore, at Kramat Lane in the Orchard Road area and Belilios Road in Little India.

It said that had the acquisition of Courtyard by Marriott Surfers Paradise taken place at the start of the financial year ended Dec 31, 2009, its earnings per share for the year would have been 7.64 cents, up from 7.47 cents pre-acquisition.

Source: Business Times, 7 Jul 2010

Investors here are increasingly moving to conservative asset classes, such as overseas properties in Australia, because of poorer risk appetite after the recent global financial crisis.

According to Westpac Private Bank, it has seen 18 percent of its Australia and New Zealand multi-currency home loans coming from Singapore in the past nine months, up 6 percentage points over the same period last year.

Online investment solutions provider Fundsupermart.com said prices of private residential properties in Singapore have moved up significantly in the past few months.

Market observers said this has prompted investors to look elsewhere, more specifically – Australia. Cities popular among Singaporeans include Melbourne, Perth and Sydney.

With an estimated 8,000 Singaporeans studying in Australia currently, Westpac Private Bank said many parents are also considering buying real estate Down Under.

Mr Sean Straton, Premium Client Group head at Westpac Banking, said: “Singaporeans have been looking for assistance in financing properties in Australia and New Zealand. And I think it just comes down to the heart of an asset class that Singaporeans feel comfortable with. And certainly after the crisis, they feel that there’s some level of security.”

Mortgage and home loan broker Mortgage Choice said across Australia, Melbourne properties are the most expensive.

Source: Today, 7 Jul 2010

Orchard Road is about to see more retail competition. A new concept store ALT is aiming to target young female shoppers who love fashion from the current staple of malls on the prime shopping strip.

ALT will be spread over three levels at the Heeren shopping mall on Orchard Road. It is hoping to attract shoppers with its slate of Asian brands.

Its merchandise mix includes fashion, beauty and lifestyle products from Japan, Korea, Taiwan, Hong Kong, China and Thailand.

The store, managed by retailer BHG, said it is optimistic it can break even quite soon, given its prime location.

Sosuke Nishiwaki, executive director, BHG Singapore, said: “A lot of competition around will make people come to Orchard more, so we are quite confident that this area will generate a lot of profit.”

However, observers say it may be a challenge to sustain interest from shoppers, who are already spoilt for choice in the shopping strip.

They also cite the relatively small space occupied by ALT – at 23,000 square feet.

Charles Ng, director, Retail, Colliers International, said: “You can’t put that much products, range of products that can offer strong competition to the neighbouring malls.

“So if you ask me whether there is any impact, I’d say no – not really – but they offer a change, a new concept, something to look at. Who knows, it may take off.”

ALT is due to open this Saturday.

Source: Channel News Asia, 7 Jul 2010

Carrefour said it is not closing any of its stores in Singapore and Malaysia. In a statement, the company said it is “business as usual” for every store in the two countries.

It also said it had recently opened four hypermarkets in Malaysia this year and plans another four by year end.

Earlier this week, there was speculation that the French supermarket giant was in the early stages of selling its outlets in Singapore, Thailand and Malaysia.

Reports had said Carrefour could be offloading its Southeast Asian assets for up to US$1 billion.

In May, Carrefour’s CEO Lars Olofsson said he was open to offers for the company’s operations in markets where it isn’t in the top two spots.

Analysts cited Thailand, Malaysia and Singapore as likely candidates.

They added that the sale of assets in these countries would make sense as the company has other priorities for investment.

Under Mr Olofsson’s direction, Carrefour has focused efforts on its key European markets — France, Spain, Italy and Belgium.

France alone accounts for nearly half of the company’s annual revenues.

The fast-growing China and Brazil markets have also been priorities for the company.

Reports also said that the British supermarket chain Tesco was interested in Carrefour’s stores in Singapore, Thailand and Malaysia.

Other firms in the running for Carrefour’s shops in Thailand and Malaysia are said to be Big C Supercenter PCL, Dairy Farm International and Japanese supermarkets.

Analysts said if a single buyer emerges for all three countries, the deal will probably be wrapped up this year.

Source: Channel News Asia, 7 Jul 2010

Two foreign banks, ANZ and BNP Paribas, have become the latest to sign up for space at Ocean Financial Centre at Raffles Place. This raises the pre-commitment levels at the building to over 60 per cent.

Analysts said demand and rentals for prime office space is expected rise in the short term as companies in the region continue to expand their businesses.

Putting the final touches at the topping-out ceremony, Ocean Financial Centre appears on track to being completed by the second quarter of next year.

Keppel Land which is behind the development, said it’s bullish on the demand for prime office space with an improving economy.

It expects the building to be fully let before completion.

Choo Chaiu Beng, CEO, Keppel Corp & chairman of Keppel Land, said: “The amount of prime grade A office is limited and we see that the demand will exceed the supply.

“Right now we are quite confident that we make the right decision to continue the construction despite the financial crisis and now we are finishing the building towards the recovery phase of the financial crisis.

“We can see that with the economy recovering and the international financial people moving to Singapore, the take up of Grade A prime offices has improved.

“What we see is that there will be increasing shortage of good quality spaces in the CBD. We are quite bullish that the building will be fully let out before too long.”

ANZ and BNP Paribas are among the latest to sign up for space at the building.

ANZ will take up nine floors but declined to say how much it’s paying for its lease except that it’s competitive enough to achieve rental savings.

Bill Foo, CEO, ANZ Singapore, said: “It will help us to consolidate into one dominant location and that is when you have a lot of synergies and also efficiencies. Plus also the fact of bringing in a lot of departments of the banks that will help us to function a lot more competitively.”

According to Jones Lang LaSalle, current Grade A office space rent is at S$7.95 per square foot.

Analysts think that prime office rents may rise by up to seven per cent for the rest of the year.

Dr Chua Yang Liang, head of Research, Southeast Asia, Jones Lang LaSalle, said: “Rents actually increased on a quarterly basis last quarter about two-over percent. We see that going forward this demand is likely to continue because most of the buildings we know and those that are coming up onstream next year – new ones – are already mostly pre-committed is quite high.”

Observers said the strong take up in prime office space has also been reflected in the upcoming Marina Bay Financial Centre, which will be fully complete by 2012.

Tower 1 and Tower 2 are already fully leased, with a small percentage of space reserved in Tower 2 for existing tenants’ expansion.

Tower 3 pre-commitment levels are currently at 55 per cent.

Nearby development 50 Collyer Quay has obtained pre-commitment levels of 22 per cent ahead of its completion next year.

Overseas Union Enterprise, which is behind the Collyer Quay project, made the announcement on a statement filed with the stock exchange.

Beyond next year, market watchers said demand for office space to hinge on macroeconomic factors, with the largest risk factors coming from concerns hanging over the Euro zone.

Jones Lang LaSalle said it is currently relooking its forecast for prime office space next year to take into account the potential risks such as companies scaling back their expansion plans.

Source: Channel News Asia, 7 Jul 2010

Mainboard listed Overseas Union Enterprise or OUE says its subsidiary, Clifford Development, has obtained pre-committed leases totaling some 88,000 square feet for its latest development 50 Collyer Quay.

This is equivalent to 22 per cent of the net lettable area of the project.

The initial lineup of tenants include global business consulting firm Bain & Company and international law firm Allen & Overy.

OUE will redevelop the former Overseas Union House into a new Grade A 18-storey office tower.

It will also conserve the Change Alley Aerial Plaza Tower and retrofit the Change Alley Pedestrian Overhead Bridge to provide quick and sheltered link to the Raffles Place MRT station.

Upon completion, the entire development will comprise a total gross floor area of some 500,000 square feet and a net lettable area of 412,000 square feet.

The office tower floor plates will range up to some 30,000 square feet, with two of the floors designated as trading floors.

The Change Alley Aerial Plaza Tower and Pedestrian Overhead Bridge are targeted to complete simultaneously with the office tower in the first quarter of 2011.

OUE Executive Chairman Stephen Riady says 50 Collyer Quay complements the firm’s strategy of focusing on high-end properties in prime locations and building up a stable rental income stream from such properties.

Source: Channel News Asia, 7 Jul 2010