COMPETITIVE bidding for land to build wet markets and hawker centres might result in high prices for consumers, opposition MP Low Thia Khiang (Hougang) warned yesterday.

He suggested that the Government, instead of private developers, should continue to build such new centres and markets as this would ensure Singapore remain a liveable and affordable city.

‘If we apply the principle of maximising economic benefit from the land occupied by hawker centres and wet markets, these iconic features of Singapore would become supermarkets and food courts in no time,’ he said.

But Senior Minister of State (National Development) Grace Fu replied that it was not necessarily true that consumers would end up paying a higher price for goods and services.

This is because private operators of such markets and centres need to ensure that what is sold is affordable and relevant to the needs of residents.

She cited the example of Sengkang’s first hawker centre and wet market.

Opened in January and run by the Kopitiam chain, it is the first instance where the Housing Board allowed a stand-alone market and food centre to be developed by a private operator.

She visited the centre and found prices comparable to those at other hawker centres in the neighbourhood. A plate of chicken rice was $3 and coffee cost 90 cents. ‘I don’t think you can call that exorbitant,’ she said.

Having a master tenant meant the Government could hold one person responsible for cleanliness and service standards. Such a tenant could ensure a good mix of tenants and must also be able to convince enough stalls to operate round the clock, providing better services to residents.

Ms Fu noted that, by contrast, a hawker centre in Hougang, which had since been demolished, had a vacancy rate of 34 per cent.

Why was that the case? It was because the National Environment Agency, the authority in charge of hawker centres, does not have a role to micro-manage tenants’ businesses.

A commercial operator, however, ‘will be able to do that and has the incentive to do that’, she said.

Source: Straits Times, 6 Mar 2010

IDA said to have leased 160,000 sq ft; rents may inch up as banks expand in prime areas

The upswing in office leasing deals that started around July last year shows no signs of letting up. The healthy demand has persuaded some property consultants that rents for the best quality space in Singapore’s financial district could be close to their bottom and poised to perk up.

The Infocomm Development Authority (IDA) is understood to have inked a lease for about 160,000 square feet at Mapletree Business City on Pasir Panjang Road.

This is said to be spread over six floors in the 18-storey office tower of the development, which is expected to receive Temporary Occupation Permit (TOP) soon. With IDA secured as a tenant, the tower’s 436,300 sq ft net lettable space is now fully leased, BT understands. The project is near Labrador Park MRT Station, which opens next year.

IDA is expected to move out of Suntec City, where its lease is said to be expiring next year.

Barclays Capital, which has leased 100,000 sq ft at Marina Bay Financial Centre’s Tower 2, is said to be close to inking a deal for another 250,000 sq ft in the same tower, which is expected to receive TOP next quarter. The bank is expected to exit from Atrium @ Orchard.

Barclays also occupies about 100,000 sq ft at One Raffles Quay’s South Tower and its retail bank has a technology centre at Eightrium @ Changi Business Park. The bank’s headcount in Singapore has increased from just several hundred people in 2004 to over 3,500 currently. Of these, about 2,000 are employed at Barclays Capital Global Support Hub.

As new office projects are rolled out, big tenants such as banks are being offered more choices. For instance, ANZ, which is currently at OUB Centre at 1 Raffles Place, is said to be deciding whether to move to the new tower being built in the same development, or to Ocean Financial Centre along Collyer Quay.

The latter, a 43-storey development under construction that will have about 850,000 sq ft net lettable area, is also said to have attracted some tenants from Ocean Towers next door. These include Ifast, Verizon Communications and DMG & Partners Securities.

Other tenants at Ocean Financial Centre are said to include Stamford Law Corporation, which is currently in Republic Plaza, and serviced office operator The Executive Centre.

Colliers International executive director Calvin Yeo said: ‘We are starting to see our clients, who are MNCs including financial institutions, planning for expansion as their existing leases approach expiry.’

While some of the initial buzz in the office leasing market was a game of musical chairs involving relocating from older buildings to newer properties, the market is now starting to move beyond replacement demand to actual expansion or new demand, say market watchers.

‘We’re seeing quite a few law firms from Europe coming to Singapore as well as existing law firms in Singapore expanding,’ says Jones Lang LaSalle regional director and head of markets Chris Archibold.

‘Insurance companies are starting to look at headcount growth of about 5 per cent this year followed by a further 5-10 per cent per annum for the next few years. Banks are boosting their headcount, not just for private banking but across the board. We’re seeing a number of them bringing high-end back-office support functions again to Singapore,’ he added.

Mr Archibold reckons that for international standard prime Grade A offices in the Raffles Place and Marina Bay area, rents will probably bottom out at their current levels of about $8 psf a month for smaller occupiers and $7 psf for bigger occupiers. These levels are about 58 per cent below the Q3 2008 peak figures. ‘However, rents for A- and B+ grade offices may still decline a few per cent from current levels though the drop should end by Q4 2010.’

Another office property consultant also said that office landlords are more confident and not prepared to discount rents any further. ‘But older buildings may relatively underperform and that means rentals in even good-quality buildings may not rebound quickly until space availability in new developments tightens,’ he added.

Others are more optimistic. UBS has predicted a 30 per cent jump in the average monthly Grade A office rental value from $8.10 psf at the end of last year to $10.60 psf at end-2010, citing growth in demand. The impact of new office completions is not likely to be as grave as feared earlier since some one million sq ft of existing office stock is expected to be removed in 2010-2011 for conversion to residential use.

Source: Business Times, 3 Mar 2010

Upgrading quality of stock crucial for S’pore’s status as financial hub: JLL

As of December last year, only 9 per cent of Singapore’s CBD office buildings had floor plates of over 20,000 sq ft, which are favoured by big occupiers, particularly financial institutions.

In Raffles Place and the New Downtown (Singapore’s financial district) alone, only 13 per cent of buildings have floor plates in excess of 20,000 sq ft, according to a Jones Lang LaSalle white paper titled Future Proofing Singapore’s Office Market.

However, the new supply of offices being built presents a great opportunity to enhance the quality of Singapore’s office stock to meet the requirements of financial occupiers, not just in terms of bigger floor plates but also technological specifications, security requirements, catering to lifestyle needs of office workers as well as to address sustainability issues.

The white paper, authored by the property consulting group’s regional director and head of markets Chris Archibold, says: ‘Singapore’s CBD currently only has 3.5 million sq ft of Grade A space with floor plates of at least 18,000 sq ft.

‘The upcoming supply will increase this to about 10 million sq ft by 2012 and enhance the quality of office stock offered in the market. This amount of space is needed to house Singapore’s financial occupiers,’ says the white paper.

Currently financial institutions occupy 83 per cent of international grade A office space in Singapore; hence addressing their requirements is critical if Singapore is to position itself as a major global financial hub.

More than 60 per cent of occupiers in JLL’s recent survey viewed floor plates of over 15,000 sq ft at the top of the scale in terms of importance when considering future space. Other key considerations included 24-hour chilled water supply (for air conditioning), dual power source and generator capacity for general use, and security issues.

Unfortunately, much of the island’s existing office stock now is not in sync with the needs of modern MNCs, especially those in the financial industry.

JLL said that besides large floor plates, most occupiers are also looking for modern square or rectangular floor plates with raised floors (to facilitate cabling) and the latest technological infrastructure.

But much of the current CBD office stock does not match this need because the bulk of the current office stock was built prior to today’s technology.

As of December 2009, 68 per cent of the CBD office buildings were more than 11 years old. In Raffles Place and New Downtown, the proportion of office blocks over 11 years old was 62 per cent.

‘This demonstrates that much of the existing CBD office stock suffers from functional obsolescence and needs upgrade works and refurbishments,’ JLL said.

The white paper noted that the massive increase in reliance on IT within MNCs, specifically in the financial services industry, over the past 10 years, has left much of the Singapore CBD office stock unable to cope fully with the needs of these occupiers.

‘Major banks and trading houses are looking for functional buildings with infrastructure that supports business growth and reduces occupational costs.’

These include telecoms infrastructure, multiple telecom providers and fibre-optic network options, open and flexible space, back-up power supplies, a high floor-load capacity, a high floor-to-ceiling height, raised floors as well as large, regular-shaped floor plates.

The shape, size and layout of a building’s floor plates will affect efficiencies. For instance, a regular (square or rectangle) shaped floor, especially if it is built with modern system furniture, will minimise space wastage.

A building with bigger column-free floor plates similarly allows for higher occupational density and minimises circulation areas like corridors.

Besides physical considerations, occupiers also weigh a building’s technical specs in evaluating their choice of premises.

Buildings designed with the occupier in mind substantially reduce upfront fitting-out capital expenditure costs and reinstatement costs at the end of the lease by providing infrastructure such as water supply to each floor (for internal pantries or extra washrooms) and knock-out panels for internal staircases.

JLL also highlighted that with the growing focus on corporate social responsibility, occupiers that are currently considering new premises are looking for environment-friendly buildings to minimise their carbon footprint.

‘Most of the older buildings are very expensive to retrofit with environmentally friendly or sustainable building systems and infrastructure.

‘Meanwhile many new developments are now focusing on attaining either the Singapore Building & Construction Authority (BCA) Green Mark or the US Leed – with some even getting both.’

Source: Business Times, 2 Mar 2010

Some one million square feet of office space in the Central Business District (CBD) is likely to be converted into at least 1,000 private homes over the next three years.

Property analysts say that with the Marina Bay financial district now taking distinct shape, developers are looking to recycle older office buildings in the current CBD in anticipation of business activity moving to the new hotspot.

Redevelopment plans are also motivated by climbing luxury home prices which contrast sharply with falling office rents.

City Developments said at its results briefing last Thursday that it was looking to see if it could convert any of its office buildings in the ‘old’ CBD to residential use.

‘It is a question of demand,’ said CityDev chairman Kwek Leng Beng at the briefing.

CityDev’s parent company Hong Leong Holdings is already redeveloping 76 Shenton Way, which has a net lettable area (NLA) of about 92,700 square feet of office space.

The 202-unit residential project due to come up on the site is likely to be launched within the next few weeks.

Other similar conversions in the pipeline include UIC Building on Shenton Way and Starhub Centre on Cuppage Road.

‘With the theme of working, living and playing in 21st century Singapore fast becoming a lifestyle reality, we see great potential in quality residential developments in the core central region,’ said a Hong Leong spokesman.

The trend is not new. Developers were looking to convert selected office space into residential use as far back as 2007. City- Dev, for example, launched its One Shenton residential project in January 2007, converting an office block into residential space. Since then, 316 apartments in the 341-unit project have been sold, with many going for more than $2,000 per sq ft (psf).

But other such plans were put on hold when in May 2007, fearing a shortage of office space, the Urban Redevelopment Authority (URA) called a halt to all conversion of offices in the central area to curb further depletion of existing stock.

The ban was lifted in late 2008 as fears of an office space oversupply emerged.

Knight Frank chairman Tan Tiong Cheng said that with the Marina Bay Sands integrated resort (IR) now ready to open its doors and the entire Marina Bay area taking shape, developers are now taking another look at their buildings located in the current CBD.

‘It is the government’s intention to have a new CBD in Marina South. So there is concern that some of the older office buildings may not be relevant to future needs,’ said Mr Tan. ‘Office rents have also dipped, so it is a good time to look at redeveloping some of these buildings now that the ban has been lifted.’

Elsewhere on Shenton Way, UIC has received permission to redevelop UIC Building into a mostly residential project. UIC’s board says it is still assessing all alternatives to ensure the best use for the building. But sources told BT that the conversion could start some time this year. The property has close to 400,000 sq ft of office space.

Office real estate investment trust (Reit) CapitaCommercial Trust also said in January that it is looking at redeveloping Starhub Centre on Cuppage Road into a residential and commercial project with up to 80 per cent of the gross floor area devoted to residential use. The property currently has an NLA of about 280,000 sq ft and analysts estimate that 200-300 upmarket homes could be built on the site.

Other office properties that could be converted (either fully or partly) into private homes include KOP Capital’s The Spazio on Cecil Street, and three buildings owned by Fission Group and Yi Kai Group – VTB Building on Robinson Road, and Aviva Building and Cecil House on Cecil Street.

In all, around one million square feet of office space could be removed from the market and transformed into upmarket homes.

City living has, in recent years, become more popular and luxury home prices are expected to climb this year. UBS Investment Research, for example, expects luxury home prices to rise 40 per cent in 2010 to reach $4,000 psf and maintains that prime home prices (in districts 9, 10, 11) could reach 2007 levels this year.

Falling office rents and an upcoming glut of office supply also means that office rents are widely expected to continue falling. Property firm Savills expects a 20-25 per cent fall in Grade A office rents in Singapore this year.

But Knight Frank’s Mr Tan says that not all office buildings in the present CBD can be converted into homes.

‘City living is only attractive if you have a view of the sea or you have some kind of a city vista,’ he said.

The conversion of some office space into residential units will lend support to rents, analysts said.

UBS Investment Research said in late January that it now expects over one million sq ft of office space to be removed in 2010 and 2011, instead of the 550,000 sq ft expected earlier.

‘As a result, we upgrade our prime office rents in 2010-2013 by 5 per cent,’ said UBS analyst Regina Lim. ‘We now expect prime office rent of $8.70 psf per month by end-2010 and $9.70 psf per month by end-2011.’

Source: Business Times, 1 Mar 2010

UNITED Industrial Corporation (UIC) has won in-principle approval from the Urban Redevelopment Authority to convert its UIC Building in Shenton Way into a mainly residential development.

But no firm decision has been made on the building’s fate.

The UIC board is assessing all alternatives to ensure the best use for the property, according to UOL group chief executive Gwee Lian Kheng.

He disclosed this yesterday as the property group announced a near tripling in full-year profits to $424.2 million in the 12 months ended Dec 31.

The sharp jump was predominantly attributable to UIC having become a 32 per cent associated company of UOL.

Net profits included a negative goodwill sum of $281.1 million from the acquisition of shares in UIC.

Earnings from associated company Nassim Park Residences also contributed to the surge in profits.

UOL posted a record-breaking year in revenues, which rose 12 per cent from $899 million to just over the $1 billion mark.

‘Our strategy of tapping the demand of mass- and mid-market housing segments was well timed,’ said Mr Gwee.

‘This has helped us reach a major milestone of becoming a billion-dollar company by turnover.’

Strong sales from the group’s Double Bay Residences and Meadows@Peirce contributed to the revenue rise.

The group’s property development arm represented 53 per cent of revenue.

Higher average rental rates brought about a 12 per cent rise in revenue from investment properties to $141.7 million.

Revenue from hotel operations declined 13 per cent to $294.5 million as revenue per available room fell amid a slowdown in tourism, the group’s statement said.

Pan Pacific Hotels Group, the group’s listed hotel subsidiary, saw revenue fall by 9 per cent due to weaker performance in the group’s hotels.

Mr Gwee said the ‘difficult period for the hotel industry may be over’ and that efforts would be made to ’secure more hotel management contracts, thus increasing fee-based income’.

The developer remains focused on Singapore’s resilient mass and mid-tier to high-end residential market.

A total of 1,138 residential units are in the pipeline this year. Developments at its Dakota Crescent and Toh Tuck Road sites are expected to be launched by the second quarter of this year. A total of 616 and 172 units respectively are estimated to be made available at these sites.

In the second half of the year, the group will launch a development in the Spottiswoode area, where it had purchased Spottiswoode Apartment and Oakswood Heights in 2007, releasing about 350 units.

Overseas, another 1,014 units are in the pipeline – 520 in a mixed development in Tianjin, China, and another 494 units in a development located in Kuala Lumpur.

Full-year earnings per share were 53.7 cents, up from 18.5 cents the year before.

Net asset value per share as of Dec 31 stood at $5.29, up from $4.26 previously. A final dividend of 10 cents per share has been proposed.

UOL shares closed 11 cents higher at $4 yesterday before the results were announced.

Source: Straits Times, 24 Feb 2010

PRIME office rents continued to soften going into 2010 and could slip another 2-3 per cent this quarter, says Cushman & Wakefield.

In a mid-first quarter report, the property consultancy noted that monthly rents at Raffles Place Grade A buildings had fallen to $7.62 per sq ft (psf), down 1.6 per cent from $7.74 psf in Q4 2009.

In the Shenton area, monthly rents of prime office space also dropped to $5.82 psf – 1.5 per cent lower than the $5.91 psf in Q4.

‘Extrapolating from the mid-quarter read, we therefore expect prime rents to decline by a modest 2-3 per cent for the first quarter of 2010,’ Cushman & Wakefield says.

While rents dipped, the vacancy rate across prime office space improved slightly to 6.9 per cent from 7.4 per cent in Q4.

Cushman & Wakefield research director Ang Choon Beng expects new commercial developments to have a better year ahead, compared with existing ones. ‘A bifurcation of the prime office market is taking place,’ he says.

New offices coming up this year include those at the first phase of Marina Bay Financial Centre and 50 Collyer Quay.

The new buildings have so far been able to attract tenants and achieve relatively high pre-commitment levels, Mr Ang says. This leads the consultancy to believe that rents of these developments could bottom out soon, probably by the second half of the year.

For instance, the recently-completed Straits Trading Building managed to attain a 90 per cent occupancy rate and an average rent of $9 psf.

On the other hand, rents of existing office developments may continue slipping until the end of the year, Mr Ang reckons.

‘The relocations of office tenants from existing to new buildings will exert pressure on rents in existing buildings,’ he says. ‘We believe prime rents would remain soft over the first half of 2010.’

According to reports from various consultancies, Grade A office rents in Singapore dropped most significantly in Asia-Pacific in 2009 by more than 40 per cent year-on-year. This has raised the country’s cost competitiveness compared with other cities such as Hong Kong and Tokyo.

Source: Business Times, 23 Feb 2010

THE Straits Trading Building, which was torn down for redevelopment in 2006, is now completed and 90 per cent occupied.

Owner Straits Trading Company spent about $60 million on the project, said the chief executive of its property division, Eric Teng. The Grade ‘A’ office building was completed in October 2009 and has achieved an average rent of $9 per square foot.

Despite concern about looming oversupply, leases have been signed for the building – at the expense of space given up in older locations. The property has a total net lettable space of about 160,000 square feet.

Occupiers are drawn to better-value propositions in newer buildings, market watchers say. In addition, the Straits Trading Building has a unique selling point – it is the only new office building to be launched in the Raffles Place area this year.

Law firm Rajah & Tann moved in from its previous premises in the Bank of China Building nearby, while foreign law firm Conyers Dill & Pearman, which is leasing a floor in the Straits Trading Building, moved from Singapore Land Tower.

Other tenants have taken up space in the Straits Trading Building as part of expansion plans. Serviced office space provider apbcOffices is taking up two entire floors totalling 15,000 square feet as it looks to grow its business in the region.

Chief executive Tony Chen said the location and layout of the building means his company can provide creatively designed office space, for which there is growing demand.

‘Our serviced offices are positioned in the top tier of office space,’ Mr Chen said. He takes up space only at Grade ‘A’ buildings in good locations. In particular, he said the Straits Trading Building’s two sky terraces are a plus.

apbcOffices now operates 12 offices in three countries in Asia.

Source: Business Times, 13 Feb 2010

SINGAPORE saw the steepest decline in office rents across 25 Asia-Pacific cities, but remains the third most costly office site after Tokyo and Hong Kong.

Grade A office occupancy costs in Singapore fell to US$53.78 (S$76) per sq ft per year in the fourth quarter of last year, down about 46 per cent from US$97.30 psf in the same period in 2008, said Colliers International’s latest Asia-Pacific office market overview.Costs are projected to stabilise at US$53.19 psf this year.

Hong Kong, which saw yearly Grade A occupancy costs fall 24.2 per cent from US$104.14 psf to US$78.92 psf, registered the next highest fall in office rents. The same costs in Tokyo slipped to US$101.39 psf, down from US$128.50 psf a year ago.

‘We are now much cheaper than Hong Kong,’ said Colliers International’s director of research and advisory Tay Huey Ying. ‘A year ago, though we were also ranked third, we were not that far off from Hong Kong and Tokyo.’

The gap in rents between Singapore and the top two most expensive cities – Tokyo and Hong Kong – has since widened to 88.5 per cent and 46.7 per cent respectively, from 32.1 per cent and 7 per cent previously, said the report.

‘With Asia-Pacific leading the world out of recession, the competitive office rent in Singapore now offers businesses a compelling reason to invest in or locate their operations here,’ said Ms Tay.

Average monthly Grade A office rent in Singapore’s central business district was $6.29 psf in the fourth quarter of last year, according to Colliers.

Oncoming supply of close to three million sq ft continues to weigh on the office market in the near term, so there may be some mild price erosion of up to 5 per cent, she said. But barring any external shocks, the local office downcycle is expected to bottom out in the second half of this year, she added.

Source: Straits Times, 11 Feb 2010

It’s biggest fall in Asia-Pac, widening S’pore’s rental gap with HK, Tokyo

TOKYO, Hong Kong and Singapore remained the three most expensive office locations in the Asia-Pacific in the fourth quarter of 2009, according to a report from Colliers International.

But Grade A office rents in Singapore suffered the biggest fall in 2009 across all Asia-Pacific markets tracked. Rents here slid 46.2 per cent from Q4 2008, Colliers says in its latest Asia-Pacific office market overview.

Rents fell 24.2 per cent year on year in Hong Kong and 19.5 per cent in Tokyo.

‘Because of the steeper fall in Singapore, the gap in rents between Singapore and Tokyo and Hong Kong widened to 88.5 per cent and 46.7 per cent respectively in Q4 2009,’ said Colliers’ director of research and advisory Tay Huey Ying.

In Q4 2008, rents in Singapore were 32.1 per cent lower than those in Tokyo and just 7 per cent shy of Hong Kong.

On the other hand, the cost of occupying Grade A office space in Singapore versus cities such as Sydney, Ho Chi Minh City, Perth, Mumbai and Delhi has narrowed. Occupancy costs in Singapore were 30.3 to 115.1 per cent higher than those in these cities in Q4 2008, but the difference has fallen to 3.1 to 29.1 per cent in the past year.

‘This has greatly increased the competitiveness of Singapore vis-a-vis the rest of the region,’ said Ms Tay. ‘With the Asia-Pacific leading the world out of recession, the competitive office rents in Singapore are now a compelling reason to invest or locate operations here.’

In general, office leasing markets across Asia-Pacific are bottoming out. The pace of rental decline narrowed to less than one per cent quarter on quarter in Q4 2009.

Colliers attributed this to strong rents in cities such as Hong Kong and Chengdu, where the supply of new space remained tight and demand increased.

In Singapore, office leasing activity increased in Q4 2009 as businesses started to prepare for the upturn. Rents declined just 0.4 per cent from Q3.

Looking ahead, average office rents in the region are expected to grow again towards the end of 2010, Colliers said.

Source: Business Times, 11 Feb 2010

THE second phase of Orchard Medical Specialists Centre will be offered for sale and rent from tomorrow by Hong Property Investments.

The fifth floor of Lucky Plaza has been transformed into an exclusive medical hub with occupants engaged in fields such as psychological medicine, dentistry and women’s wellness. Since the first launch some two years ago, eight units have been sold and another 30 are tenanted.

The remaining 18 units are now being offered for sale at average prices of $3,100 to $3,200 per square foot (psf) and for rent at $11 to $12 psf per month.

Knight Frank, which is marketing the units, said that with the renewed buying interest in high-end apartments at Orchard Road as well as the continued growth in medical tourism in Singapore, medical practitioners and retail investors can generally envisage the capital appreciation and the rentability of the medical suites in the mid to long term.

According to Knight Frank, at the nearby 99-year Mount Elizabeth Medical Centre, a 1,206 sq ft unit changed hands at $3,701 psf last month while another 893 sq ft unit was sold for $4,798 psf in November last year.

Over at Novena Medical Centre, there were some transactions of the 99-year leasehold units in the range of $2,800 psf to $3,000 psf.

Rents of medical suites in the Orchard Road vicinity, such as at Paragon Medical Centre and Mount Elizabeth Medical Centre, are in the range of $14-$16 psf, Knight Frank said.

Source: Business Times, 28 Jan 2010