OVERSEAS Union Enterprise Ltd (OUE) said yesterday that 22 per cent of the net lettable area (NLA) at 50 Collyer Quay has been pre-committed.

The initial line-up of tenants include European bank Skandinaviska Enskilda Banken AB (PUBL); Bain & Company SE Asia Inc, a leading global business consulting firm; and law firm Allen & Overy LLP.

The Grade A 18-storey office block – located where Overseas Union House used to stand – has a total NLA of 412,000 sq ft. Construction of the office tower is expected to be completed in the first quarter of next year.

On top of redeveloping Overseas Union House, OUE is also conserving the Change Alley Aerial Plaza Tower. Upon completion, the entire development will comprise a total gross floor area of 503,469 sq ft, net lettable area of 412,000 sq ft, and 245 carpark spaces on four basement levels.

BT reported in February that some property consultants expect 50 Collyer Quay to be worth about $900 million. The lease on the site has been topped up to a fresh 99-year term.

Source: Business Times, 8 Jul 2010

The latest firms to lease space in OFC are BNP Paribas Singapore and ANZ

IN A show that prime office space is back in demand, Keppel Land said that the new Ocean Financial Centre (OFC), set to be completed in the second quarter of next year, is now 63 per cent pre-committed.

The latest companies with plans to lease space in OFC are BNP Paribas Singapore and Australia and New Zealand Banking Group Ltd (ANZ).

At the topping out ceremony for the spanking new building yesterday, ANZ said that it will move into the financial centre in Q2 of next year, where it will take up 209,000 sq ft of space – amounting to about a quarter of OFC’s net lettable area of 850,000 sq ft.

This is double the space that the bank currently occupies at OUB Centre, which it will vacate.

ANZ will be OFC’s largest tenant among firms that have made known plans to take up space in the property.

ANZ Singapore’s CEO Bill Foo said that the new premises will be able to accommodate its expansion plans.

The Australian bank said in May that it will hire 500 or more people here over the next 12 months as it ramps up its newly acquired retail, commercial and wealth management assets of British bank RBS.

ANZ’s current head office at OUB Centre is about half the size of the space it will occupy at OFC.

The bank currently holds about 270,000 sq ft of space across Singapore – including its head office, support offices and retail branch network.

Said Mr Foo: ‘The new building will help us to consolidate into one dominant location and this is where you have a lot of synergies and also efficiencies.

‘It will also bring in a lot of departments of the bank, which will help us to function a lot more competitively . . .’

BNP Paribas will be occupying 58,000 sq ft of space in OFC.

Other tenancies clinched earlier at OFC include Drew & Napier, DMG & Partners Securities, Verizon Communications and Ifast – all of which will move out of Ocean Towers.

Asking rents at Grade A office buildings have been rising.

Last month, CB Richard Ellis said that prime office rents finally picked up in Q2 after a one-and-a-half- year slump.

The average monthly Grade A office rent was $8.45 per square foot, rising 5.6 per cent quarter-on- quarter.

Yesterday, Keppel Corp’s CEO Choo Chiau Beng also reiterated Keppel Land’s interest to sell its stake in the first phase of the Marina Bay Financial Centre to K-Reit Asia.

This will be done at a price that will ‘satisfy both sets of shareholders, Keppel Land shareholders and K-Reit shareholders’, said Mr Choo.

He added that Keppel Land may eventually pare down its stake in the investment trust to boost liquidity, if a good offer comes.

K-Reit, Mr Choo said, has a very strong balance sheet. ‘What we see is that with this balance sheet growing and later on issuing new shares to buy buildings, Keppel group’s stake will gradually go down.

‘We are in no hurry to get rid of it . . . We will only sell our share down so long as it doesn’t destroy any shareholder value for us.’

Source: Business Times, 8 Jul 2010

(NEW YORK) Retailers shuttered more stores in US shopping centres during the second quarter, further delaying a rebound in the struggling retail real estate market, according to research firm Reis Inc.

Shopping centres and strip malls have been pounded harder than other types of real estate, hurt by weak consumer spending, anaemic job growth and an oversupply built to serve new housing that never materialised.

‘Until we see stabilisation and recovery take root in both consumer spending and business spending and employment, we do not foresee a recovery in the retail sector until late 2012 at the earliest,’ said Victor Calanog, Reis director of research.

For US strip centres, the vacancy rate in Q2 rose 0.1 percentage point from Q1 to 10.9 per cent, slightly below the 11 per cent in 1991 during the prior real estate bust, according to the Reis quarterly report, released yesterday.

Retailers gave up 1.85 million square feet of occupied space in Q2 at neighbourhood shopping centres, while developers opened less than 400,000 square feet of new strip mall space.

That compares with an average of about seven million to eight million square feet of shopping centres built each year from about 2001, according to Reis.

Unlike the office or apartment real estate sectors, a meaningful recovery in retail real estate is expected to be very sluggish, Mr Calanog said.

Rents are not expected to return to 2008 levels before 2016, he said.

‘It’s really the one sector where because of persistent overbuilding across time, things will really get way down and even a recovery defined by a bottoming out will be pretty tepid,’ he said.

A recovery also will depend on type of real estate, tenants and location, he added.

Asking rents fell 0.3 per cent from Q1 to US$19.07 per square foot, the lowest since the end of 2006, according to the report.

Factoring in months of free rent and other perks landlords offered to attract and retain tenants, effective rent fell 0.5 per cent to US$16.58 per square foot, the lowest in nearly five years.

Reis said that roughly half of its clients plan to take advantage of the cheap rents in their expansion plans.

‘Only about 20 per cent expressed such sentiments in the first quarter, and none were in a position to plan for expansion in 2009 for obvious reasons,’ Mr Calanog said.

‘If rents are so cheap now and they can lock it in, maybe it is time to expand,’ he said. ‘Some people will benefit from this. But it’s not going to be the retail landlord.’

At large US malls, the vacancy rate rose 0.1 percentage point from Q1 to 9 per cent, the highest since Q1 2000, when Reis began tracking regional malls.

Asking rent fell 0.2 per cent to US$38.72 per square foot, marking the seventh straight quarter of decline. Asking rent was the lowest in more than four years. Reis does not track effective rent at regional malls.

Some publicly traded retail real estate landlords are expected to fare better than the overall market.

Many of them, including Simon Property Group, Kimco Realty Corp, Developers Diversified Realty Corp and Equity One Inc, are scheduled to issue Q2 reports starting the end of July. — Reuters

Source: Business Times, 8 Jul 2010

Lack of available supply sparking demand for the few deals being offered

(NEW YORK) US commercial real estate sales in the first half totalled about a quarter of the average of the previous six years as owners kept properties off the market, impeding investors with record funds for purchases.

Buyers and sellers completed US$34.2 billion of deals through June, or 26 per cent of the average first-half dollar volume since 2004, according to preliminary figures from Real Capital Analytics. The total was about 12 per cent of the 2007 peak, when US$277.7 billion of properties changed hands in the same period, data from the New York-based real estate research firm show.

Sales climbed 58 per cent from last year’s first half, when purchases dried up after the US credit crisis and recession sent values tumbling. A dearth of available properties has sparked demand for the few deals being offered, according to Alan Kava, co-head of Goldman Sachs Group Inc’s Real Estate Principal Investment Area in New York.

‘People are frustrated that not a lot has been trading,’ Mr Kava said. ‘When something does come to market, that lack of supply is causing almost a feeding frenzy. People have real estate funds that are not on an infinite time line – they need to put capital to work.’

Private equity real estate funds have a record US$104 billion of equity available for US deals, research firm Preqin Ltd reported last month. Blackstone Real Estate Advisors has the most to invest, with Goldman Sachs second, according to Preqin.

More than half of the US$8.4 billion available for Goldman Sachs’s property funds is reserved for overseas investments, Mr Kava said. Blackstone has about US$12 billion for real estate purchases, said Peter Rose, a spokesman for the New York-based private-equity firm.

In top markets such as New York and Washington, owners who owe more than their properties are worth are finding new sources of equity and lenders are willing to restructure their loans, said Sam Chandan, Real Capital’s chief economist.

In less attractive markets, banks have been extending loans, waiting for higher prices so they don’t record losses, according to Mr Chandan. That has kept troubled assets off the market, he said.

There also is little incentive for owners who bought as the market climbed to sell now. Values in April were down 41 per cent from their October 2007 peak, according to the Moody’s/REAL Commercial Property Price Index.

‘The problem is more on the supply side than the demand side,’ said Dan Fasulo, a Real Capital managing director. ‘Our investors are regularly complaining there’s not enough quality listings available for purchase.’

Demand for properties is strongest in New York, Boston, Washington and San Francisco, ‘where domestic and foreign investors alike have sought to acquire high-quality assets’, said Mr Chandan.

Those four markets accounted for 20 per cent of first-half sales, compared with about 15 per cent last year, according to Real Capital. For office buildings, the largest category, the cities made up almost 35 per cent of the volume, up from almost 32 per cent last year.

Manhattan totalled US$2.92 billion of completed sales in the first half, up 70 per cent from a year earlier. About US$1.42 billion were office deals, up 62 per cent.

SL Green Realty Corp, New York’s largest office landlord, was both a buyer and seller. The company agreed in May to sell a 45 per cent stake in Manhattan’s McGraw-Hill Building at 1221 Avenue of the Americas to Canada Pension Plan Investment Board for US$576 million, a deal that values the building at about US$500 a square foot, according to Real Capital.

It also purchased 600 Lexington Ave for US$636 a square foot, and agreed to buy 125 Park Ave, a tower across 42nd Street from Grand Central Terminal. That deal was valued at about US$507 a square foot, based on data in a company statement.

Those prices reflect a rebound off market lows reached last year, when similar midtown Manhattan properties sold for about US$350 a square foot, said Mr Chandan. In 2006 and 2007, readily available loans that were packaged and sold as commercial mortgage-backed securities helped drive prices for top Midtown skyscrapers beyond US$1,000 a square foot.

‘We basically went around the world talking to capital sources, in Asia, Europe, Middle East, Canada, and domestically, and hearing the same thing,’ said Andrew Mathias, SL Green’s president and chief investment officer. ‘People’s confidence in Manhattan was not at all shaken, because of the extraordinary supply/demand metric that exists here, where you have very, very limited new supply, and the interest rate environment.’

The company paid US$523 million for its two acquisitions, combining both closed and contracted deals. Its sales of partial property interest totalled US$663 million.

The biggest completed deal of the year so far was Monsanto Co’s purchase of Chesterfield Village Research Center, a research and development complex in Chesterfield, Missouri, from Pfizer Inc, according to Real Capital. Monsanto paid US$435 million, said Kelli Powers, a spokeswoman for the St Louis-based company.

Distressed building sales probably will remain scarce, Mr Chandan said. There are US$184.6 billion of troubled properties facing foreclosure or bankruptcy, out of a total US$239 billion since the credit crisis started in 2008, according to a June 1 Real Capital report. – Bloomberg

Source: Business Times, 8 Jul 2010

CAPITALAND’S wholly owned service residence business unit, The Ascott Limited, has secured contracts to manage two more properties, one each in Xi’an and Shenzhen.

This follows the group’s recent expansion into Chengdu with the opening of Somerset Riverview, Chengdu in April.

The latest additions – Somerset Gaoxin, Xi’an and Somerset Grandview, Shenzhen – are scheduled to open in 2012 and 2013 respectively.

Lee Chee Koon, Ascott’s managing director for North Asia, said: ‘China is an important market for Ascott.

‘Besides growing in cities such as Beijing and Shanghai, we have been expanding rapidly in other cities like Xi’an and Shenzhen where there is high demand for service residences.’

The group’s Citadines Xi’an Central and Somerset Garden City, Shenzhen have achieved occupancy of above 80 per cent.

It will open Ascott Maillen Shenzhen this year, and two more Citadines-branded service residences in Xi’an by 2012.

The two latest Somerset-branded properties will increase the group’s portfolio to more than 5,500 apartment units in 29 properties across 13 cities.

Somerset Gaoxin, Xi’an is Ascott’s first Somerset- branded service residence in the city. It is located on Tang Yan Road, which is within the new commercial centre of the Xi’an Hi-tech Development Zone.

The project is part of a mixed development which comprises a clubhouse and a retail podium.

Somerset Grandview, Shenzhen is on Xinsha Road, close to the Futian Central Business District. The property is next to the Shenzhen Golf and Country Club and close to high-end office towers, shopping malls, and food and beverage outlets.

Both the 233-unit Somerset Gaoxin, Xi’an and 128- unit Somerset Grandview, Shenzhen will offer a range of apartment types from studios to three-bedroom units, catering to the different needs of both short- and long-stay travellers.

All apartments come with a fully equipped kitchen, ensuite bathroom and separate living and work areas.

Source: Business Times, 8 Jul 2010

(BEIJING) China has no plans to launch a new round of property market tightening in the third quarter, a senior official said in remarks published yesterday, refuting earlier media reports.

Wang Yulin, deputy research head with the Ministry of Housing and Urban-Rural Development, said the government would step up efforts to implement tightening measures which have already been announced to rein in the red-hot housing market, including curbs on purchases of multiple homes and restrictions on lending to property developers.

Minister of Land and Resources Xu Shaoshi said on Sunday that property prices would fall in Q3 as the tightening campaign continued, which was interpreted by some media as indicating that China was planning a new round of curbs.

‘Such media reports embellished his remarks,’ Mr Wang told the Oriental Morning Post in Shanghai. He added that China’s property market would not experience a hard landing this year. — Reuters

Source: Business Times, 8 Jul 2010

Prices in 70 Chinese cities rose 12.4% in May, the 2nd-fastest pace on record

(BEIJING) China’s home prices are set to fall as much as 20 per cent in a ‘healthy’ correction, said Michael Klibaner, head of China research at Jones Lang LaSalle Inc.

China’s property boom is ‘cash-driven’ rather than ‘leverage-fuelled’, which means there’s only a low chance of the type of forced selling that exacerbated the US housing market collapse, he said in a Bloomberg Television interview yesterday.

That view contrasts with Harvard University’s Kenneth Rogoff’s prediction on Tuesday of a ‘collapse’ in China’s property market that will hit the nation’s banking system.

Property prices in 70 Chinese cities rose 12.4 per cent in May, the second- fastest pace on record, heightening concern a bubble is forming in the nation’s housing market.

Shanghai’s new-home sales fell 70 per cent from a year ago in June, Changjiang Securities Co said in a report on Tuesday, adding to signs government measures including increased interest rates and down payments on second mortgages are cooling the market.

‘We actually expect a very healthy correction, something in the order of 15 or 20 per cent in terms of price correction,’ Mr Klibaner said yesterday.

‘But we don’t see any reason why there will be a risk of a crash at the moment.’ Jones Lang LaSalle is the second-largest publicly traded commercial property broker.

As China’s economy develops, ‘especially at the speed it’s growing, it’s going to have bumps’, said Mr Rogoff, speaking in an interview with Bloomberg Television on Tuesday.

‘You’re starting to see that collapse in property and it’s going to hit the banking system,’ said Mr Rogoff, 57, the former chief economist of the International Monetary Fund.

Mr Klibaner’s forecast echoes the view of Nomura Holdings Inc economists Sun Mingchun and Sun Chi, who said China’s average home price may fall as much as 20 per cent in the next 12 to 18 months.

That won’t have a big impact on China’s economy, they said in a July 5 report.

Chinese authorities intensified a crackdown on property speculation after announcing the economy expanded at an 11.9 per cent annual pace in the first quarter, the most since 2007. — Bloomberg

Source: Business Times, 8 Jul 2010

TODAY marks the opening of the ALT concept store at The Heeren Shops on Orchard Road.

The shop covers three floors and takes up the space that was formerly the HMV music store. This space amounts to over 23,000 square feet. The price range for the store is ‘moderate to the high side’.

The concept shop is split into three parts. ALT1, which covers the first floor, will feature ladies’ shoes and accessories, make-up and beauty accessories, some of which are imported exclusively for ALT from Korea and Thailand. ALT2, which covers the second floor, features clothes and women’s lingerie.

ALT3 covers the third floor and occupies over 12,000 sq ft of space. This floor presents a wider array of brands, and is categorised into many different zones throughout the level, such as novelty gifts, beauty and wellness, and lifestyle gadgets. It also features 500 sq ft of space dedicated to men’s grooming.

The store brings together different brands throughout Asia such as Broadcast, a Shanghainese label targeted at females in their 20s and 30s.

‘We are excited to have unique and exclusive brands at ALT, which will set the concept store apart from the others,’ said Sosuke Nishiwaki, executive director of BHG Singapore.

With the exit of HMV, Heeren was looking for something ‘fresh and alternative’ when it approached BHG.

ALT was inspired by Japanese concept store LoFT and the idea had been on the drawing board for several years. When Heeren approached BHG, its management decided it was the opportune moment to turn the idea into reality.

BHG spent over a year researching consumer wants, behaviour and habits before finalising the design and concept.

The designer of the store is NODE, a retail specialist and subsidiary of Nomura Kougei of Japan.

With regard to rental, prices for the prime retail space at The Heeren Shops are now comparable to those in suburban locations. The rental price gap between Orchard Road and suburban locations has been narrowing due to the influx of supply in the Orchard area.

The concept store is targeted at people in their 20s and 30s as well as tourists. The shop is open every day till 10pm.

Source: Business Times, 8 Jul 2010

Some 20 shopowners in a Selective En bloc Redevelopment Scheme (SERS) are unhappy with the compensation offered by the Housing and Development Board to move to new premises.

HDB has now extended the deadline for the shopowners in Bukit Merah View to accept replacement units. The affected shops are at Block 113 and 114 Bukit Merah View.

HDB had offered them between S$486,000 and S$780,000 in compensation. But shopowners said it is not enough.

They said replacement shops offered are one third the size of existing ones, and only have a 30-year lease, compared to their current remaining 60-year lease.

However, HDB said the price is based on market value. It added that the 30-year lease was meant to ease the financial burden on lessees.

It added that the new shops beside the Tiong Bahru MRT station would attract more crowds.

HDB will also request for an independent licensed valuer to review its valuations.

Meanwhile, shopowners will have an extra month to indicate if they would like to take up the replacement shops. So far, only 7 out of 31 owners have agreed to take up the new premises.

Tanjong Pagar MP Indranee Rajah said she hopes for a win-win situation between HDB and the Bukit Merah View residents.

Source: Channel News Asia, 8 Jul 2010

THE global economic recovery will continue but at a slower rate than in the past two quarters and a slide back into recession should be avoided, according to Credit Suisse analysts yesterday.

The Swiss bank’s head of Asia-Pacific research, Ms Fan Cheuk Wan, said that while some economists fear another slump this year following job losses and a decline in world manufacturing, she believed such views are ‘overly pessimistic’.

Many economies hit a speed bump in the first half due to the problems coming out of Europe, said Ms Fan.

But according to the bank’s chief economist for Asia, Mr Joseph Tan, the effect on Asia is ‘next to zero’ because the nations most affected by the crisis – Spain, Portugal and Greece – account for only 4 per cent of Asian exports to Europe.

‘As long as core Europe (France, Germany and the Netherlands) can hold itself up, we should focus on the US and not be overly concerned about Europe,’ he said.

Asia is also protected by its low debt to gross domestic product ratio. Most Asian countries have ratios below 40 per cent while the United States and Europe struggle with ratios of more than 100 per cent.

This allows Asia to consume without worry as it normalises its monetary policy.

Mr Tan also said he anticipates more liquid Asian currencies like the Singapore dollar, Korean won and Australian dollar to appreciate in the near future, towed along in the wake of the rising Chinese yuan.

Credit Suisse believes the yuan’s appreciation reinforces China’s robust growth and advised investors to target commodities such as iron ore.

Ms Fan urged investors to ‘look for value’ and be cautious about investing in downstream goods such as steel and aluminium.

The bank also recommended investing in consumer stocks from firms such as milk company China Mengniu, sports apparel group China Dongxiang, Indofood, Samsung and Shiseido.

Source: Straits Times, 8 Jul 2010