A LIMITED supply of new shop spaces is helping reverse a three-year decline in prime rents in Orchard Road, a property consultancy has found.

CB Richard Ellis (CBRE) found that rents for the three months to Sept 30 rose 5 per cent from the previous quarter to $31.60 per sq ft (psf) a month.

This is the first quarterly increase since the third quarter of 2008.

Ms Letty Lee, CBRE director of retail services, said Orchard Road malls are almost at full occupancy.

‘New-to-market brands continue to actively explore taking up Orchard Road space, encouraged by fresh opportunities offered by newly available large prime space, including the recent exit of Borders at Wheelock Properties,’ she said.

‘Rentals should hold steady for the fourth quarter.’

Prime shop rents have softened over the past few years as a flood of new shopping malls such as Ion Orchard, Orchard Central and 313@Somerset opened along the prime shopping belt.

But this has also led to retailers expecting greater visibility and accessibility for their stores now, Ms Lee said.

Older malls have revamped to stay relevant with new layouts and concepts.

The retail scene was also dominated by fast fashion brands in the third quarter, Ms Lee noted.

The entry of Forever 21, Cotton On and Uniqlo spurred two other fast fashion brands to chance their arm.

Aeropostale opened outlets in VivoCity and CityLink Mall as well as a 22,000 sq ft store in Ion Orchard.

H&M opened its 30,000 sq ft flagship store in Orchard Building, while Abercrombie & Fitch announced that its 21,000 sq ft shop in Knightsbridge will open in December.

Prime suburban rents increased by 2.9 per cent to $29.75 psf a month quarter-on-quarter, CBRE’s data found.

The fourth quarter will also give shoppers more options with the 45,000 sq ft Greenwich V in Seletar Road and the 207,000 sq ft JCube in Jurong expected to be completed.

The firm estimates that a further 657,000 sq ft of retail space will be completed next year while 1.57 million sq ft will enter the market in 2013.

Source: Straits Times, 5th Oct 2011

GLOOM has settled over the office market with analysts turning negative and pulling back their rental estimates by as much as 25 per cent over the next year.

This slide is on the back of deteriorating global economic conditions and a large amount of new office space that is due to become available soon.

Citi property analysts Wendy Koh and Tan Chun Keong said in a research note on Monday that the firm is cautious on the office outlook, given that 1 million sq ft of new space due for completion this year is still without tenants.

This means just 65 per cent of the

2.8 million sq ft of office space due for completion this year has so far attracted tenants, and the analysts expect rents to come under pressure in the coming months.

The uncertain economic outlook has led to a significant dip in demand for office space as businesses suspend or abort expansionary plans. — ST FILE PHOTO

Prior to this, Grade A office rentals in the Raffles Place area had risen sharply – by 19.7 per cent – in the first nine months of the year, according to Colliers International estimates.

Inquiries on office space have also slowed and estimates for rentals and office values are now expected to be 20 per cent lower, the Citi analysts added.

Standard Chartered property analysts have slashed their office rental forecasts by 25 per cent.

‘Our… checks with office landlords and leasing agents suggest that tenants have scaled back expansion plans and recent pre-commitments have been secured (about) 10 per cent below our expectations,’ they said in a note last month.

UOB Kay Hian property analyst Vikrant Pandey said the demand slowdown is due to the weakening hiring pace and cost-cutting exercises at banks.

‘Banks in Singapore were aggressively hiring in the first nine months of the year, but we anticipate that the pace will slow with the more uncertain economic environment,’ he said.

An average of 2.1 million sq ft of office space a year will be completed over the next three years. These include the redevelopment of the Market Street carpark and suburban commercial space in Jurong and Paya Lebar, Mr Pandey noted.

Kim Eng Research agreed that the uncertain economic outlook has led to a significant dip in demand as businesses suspend or abort expansionary plans.

‘Coupled with the increased supply of both primary and secondary space going forward, rents are likely to be kept further in check,’ it said.

CB Richard Ellis said Grade A office rents rose 4.3 per cent in the three months ended Sept 30, while Colliers’ data found office rents inching up by just

2 per cent, its lowest quarterly growth since the second quarter of last year.

Experts noted that the tender for a recent commercial site in the Central Business District in Robinson Road drew a subdued three bids and a top bid of just $882 per sq ft per plot ratio.

This fell short of market expectations and points to developers possibly turning cautious on the office sector, they added.

Source: Straits Times, 5th Oct 2011

HONG Leong Garden Shopping Centre, a mixed-use development in the West Coast neighbourhood, has been sold to an Oxley Holdings-led consortium for $171 million.

This hefty sum is the largest collective sale of the year in value and is also the largest collective sale in terms of land size for the past four years.

The other members of the consortium are Heeton Holdings, KSH Holdings, TEE International and Zap Piling.

Measuring about 150,800 sq ft, the development has a gross plot ratio of 1.6 and can be built up to an allowable height of 12 storeys, with a maximum gross floor area of 241,306 sq ft.

Credo Real Estate, the agency handling the sale, said the tender exercise was keenly contested, with four interested parties taking part.

‘The sale price translates to a land rate of approximately $804 to $819 psf per plot ratio, depending on the mix of commercial and residential quantum proposed by the developer,’ said Mr Tan Hong Boon, deputy managing director of Credo Real Estate.

The offer is slightly higher than the sellers’ initial expected offers of between $160 million and $170 million.

Built in the 1980s, the development consists of 72 apartments and 66 shop units.

The sale price of $171 million will mean that each apartment owner stands to receive between $1.17 million and $1.64 million, with shop owners getting between $792,000 and $1.51 million each.

The site is zoned for residential use, with commercial use on the first storey.

Mr Tan said the site could be transformed into a condominium development that could offer an array of amenities and dining options for West Coast residents.

The first nine months of this year saw a total of 37 collective sales, totalling close to $2.24 billion. This far exceeds last year’s total of 36 deals amounting to $1.77 billion.

Source: Straits Times, 22nd Sept 2011

ONLY three bidders joined the tussle for a commercial site fronting both Robinson Road and Cecil Street as bullish sentiment fizzles out amid economic uncertainties.

Far East Organization and Orchard Parade Holdings jointly lodged the top bid of $311.8 million, or $882 per sq ft per plot ratio (psf ppr), for the 99-year leasehold site.

This was below market expectations: Experts had expected bids of between $325 million and $530 million when the 0.29ha site was launched in June.

The other bidders were not far behind: IOI Properties unit Multi Wealth (Singapore) offered $303 million while Frasers Centrepoint bid $300.5 million.

Colliers International’s director of research and advisory, Ms Chia Siew Chuin, said the lukewarm interest was unexpected as the plot is a rare commercial site in the Central Business District.

‘The interest level and bid prices point to cautious bidding amid the current uncertainties surrounding the economic climate, as well as concerns about the upcoming ample supply of some 11.3 million sq ft of office space till 2016,’ she added.

Mr Ong Teck Hui, Credo Real Estate’s head of research and consultancy, noted that the site’s top bid was only 1 per cent higher than the $872 psf ppr sale of a suburban Paya Lebar site tendered in April.

‘The caution we have seen in recent residential tenders has filtered through to the commercial sector,’ he added.

‘The mood in April was much more upbeat compared to current sentiments, (and) may spell a slowdown for the economy as well as the commercial property market.’

The site can be developed into a good quality office block of up to 35 storeys.

At least 80 per cent of the maximum permissible gross floor area of about 32,800 sq m must be used for offices.

Mr Alan Cheong, Savills’ research and consultancy associate director, estimates that a top-grade office building erected on the site would have a break-even price of $1,975 psf of net lettable area.

‘Over the longer term, after the global economies and financial markets have stabilised, Far East would reap handsome rewards from this decision,’ he added.

Source: Straits Times, 21st Sept 2011

A FREEHOLD ‘build-to-suit’ industrial development near the Central Business District is up for sale.

The four-storey property at 243 Alexandra Road is zoned for Business 1, which means light and clean industry or warehouse uses.

The 14,753 sq ft site has a plot ratio of 2.5, so it could be redeveloped into a six-storey building, said Colliers International, the marketing agent.

The buyer ‘could tailor the building features and design to fit his or her business requirements’, said Ms Tang Wei Leng, executive director for investment services at Colliers International.

‘The buyer could also sub-divide the new development into strata units for sale,’ she added.

A build-to-suit development involves customising the property to meet the occupants’ needs.

Ms Tang said that while similar build-to-suit industrial spaces are usually in outlying areas like Jurong and Tuas, this site is on the fringe of the CBD.

A 99-year leasehold plot of about 33,000 sq ft at nearby 11 Kung Chong Road sold for more than $20 million earlier this month.

The Alexandra development is leased to a single tenant whose term expires in February. The tender ends on Oct 20.

The building is owned by the Le Mercier family behind the high-end furniture group. The sale announcement comes less than six months after it laid out plans to lease the Alexandra industrial development.

The Le Mercier family has not used the building for its business, preferring instead to lease it out.

The Straits Times understands the family wants to sell the building as it does not want to develop the site.

The Le Mercier family also sold a seven-storey freehold office building at 22 Martin Road in April.

In a separate land offer, a site zoned for office use in Mountbatten Road has been triggered for sale through the Government’s reserve list system.

The 15-year leasehold site of 126,354 sq ft has a plot ratio of 1.0 and can be built up to three storeys.

A developer has committed to bid at least $8.2 million, pricing the land at around $65 per square foot per plot ratio.

The site will be launched for public tender in about two weeks.

An artist’s impression of the ‘build-to-suit’ site whose building features and design can be tailored to suit the buyer’s needs. — PHOTO: COLLIERS INTERNATIONAL

Source: Straits Times, 20th Sept 2011

AN INVESTOR who paid about $226 million for a whole tower block at Keppel Bay has been given a $442,680 discount on her stamp duty following a landmark High Court judgment.

Madam Lily Lai, in her 50s, had appealed against her $6,788,775 bill, arguing that her purchase should be treated not as a single contract but as 83 separate ones. This worked out cheaper because the rate of stamp duty is lower on the first $360,000 of every purchase, meaning she saved $5,400 each time.

Justice Choo Han Teck reversed the taxman’s ruling in what industry players see as a test case which could set a precedent for other buyers.

Madam Lily Lai paid about $226 million for all 83 units of Tower 1A at Reflections at Keppel Bay in 2007, but took the case to court after receiving the bill from the Commissioner of Stamp Duties. — ST PHOTO: RAJ NADARAJAN

Madam Lai was born in Taiwan but is now a Singapore citizen. She is said to be a low-profile real estate investor who is interested in long-term developments.

It is understood that she first caught sight of the development, called Reflections at Keppel Bay, while she was returning from a trip to Batam. She decided to invest in an entire tower block because a Buddhist shifu, or master, told her that the condo, which is ‘backed by a mountain and faces water’, has good fengshui, said a close friend of Madam Lai. The friend, who did not want to be named, told The Straits Times: ‘We had just driven past a banner advertising the property and decided to take a look. After bringing shifu there, we decided that it was a good investment.’

Madam Lai paid $226,472,460 for all 83 units of Tower 1A in 2007, but took the case to court after receiving the bill from the Commissioner of Stamp Duties.

The Inland Revenue Authority of Singapore’s (Iras) lawyers Foo Hui Min and Patrick Nai argued that correspondence between Madam Lai and the developers before the sale pointed to a single contract on which the stamp duty bill should be based. But Madam Lai, represented by lawyers Ong Sim Ho and Amolat Singh, said there was no understanding that there would be a single contract.

Justice Choo found that Madam Lai had ‘offered persuasive and bona fide commercial reasons for structuring the bargain in that manner’.

Madam Lai also confirmed in court documents that she would not have accepted a single sale and purchase agreement to buy all the units ‘as a collective interest’.

‘A single agreement would have constrained her ability to obtain financing from more than one financial institution,’ said Justice Choo.

‘She would also face difficulties in the event of the sub-sale of one or more of the units because the developer would have to cancel the sale and purchase agreement and re-issue her with fresh sale and purchase agreements.’

Justice Choo also rejected the Commissioner’s reliance on a circular issued by the Iras on March 13, 2008.

This said that when it came to stamp duty, block property purchases should be treated as having a single purchase price. This would prevent block buyers taking advantage of the tax scheme by treating the purchase as single units.

But Justice Choo said that the circular was irrelevant as it was published after the case had arisen. The judge held that there ‘cannot be uniform treatment of all block purchases’. He said the taxman must treat each case separately.

Mr Ong said the move could have important implications. He added: ‘The official Iras circular insisting on stamping ‘block purchases’ as a single block appears now not to be valid as the court rightly ruled that each case must be looked at based on its own facts.’

An Iras spokesman said yesterday: ‘We are reviewing the grounds of decision by Judge Choo Han Teck before deciding on the next course of action.’

Madam Lai’s friend said the units will be marketed and sold by Leadway Property, which also operates from and owns an 18th-floor office space at The Central Mall. According to the friend, Madam Lai spends most of her time overseas.

When The Straits Times visited a four-room flat in Clementi – Madam Lai’s last known registered address – a woman who answered the door said there is no such person living there.

Source: Straits Times, 11th Aug 2011

THE high cost of office rents in Hong Kong could drive business and financial firms to jump ship to Singapore, according to a property expert yesterday.

Hong Kong office rents have risen drastically in the past two years, noted Mr Simon Smith, Savills’ senior director of research and consultancy.

Central office space hit a record HK$120 per sq ft (S$19 per sq ft) in the second quarter.

Hong Kong-based Mr Smith said the rise was ‘driven by mainland (initial public offerings), growth in the financial services sector and also the demand from mainland institutions’.

‘There are already concerns that firms (in Hong Kong) will soon not be able to afford rent and will therefore have to limit expansion plans and limit their growth,’ Mr Smith said.

While the outlook for the office rental market in Hong Kong looks gloomy for tenants, Mr Smith said Singapore could be one of the beneficiaries of pricey Hong Kong office space.

‘At the moment, Singapore is providing ample amounts of very good quality, highly specified office space in core locations at half the price of Hong Kong,’ he said.

Mr Smith said firms in Hong Kong could opt to send middle to back-end offices to Singapore, as they will want to keep their mainland Chinese market.

Mr Chris Marriott, Savills’ chief executive of South-east Asia, added: ‘The businesses in Hong Kong are focused on a greater China play. The businesses in Singapore tend to be focused on an Asia-Pacific play.’

Mr Marriott, who is based in Singapore, cited as an example Barclays Capital, which occupies more office space here than in Hong Kong.

‘If you look at someone like Barclays Capital, they occupy 450,000 sq ft in Singapore… in Hong Kong, (they have) about 130,000 sq ft,’ he said.

Mr Marriott described Singapore’s commercial property as ‘stable and in a very healthy place’.

‘There is stock available for expansion but there is not an oversupply,’ he said.

Source: Straits Times, 23rd June 2011

Investors deterred by Asian govts’ moves to cool housing markets

Cheung Kong’s newest project, Thomson Grand in Upper Thomson, will have 339 apartments and 22 strata-titled terraced units. — PHOTO: CHEUNG KONG HOLDINGS

THE heavy hand of the government in some Asian housing markets has made commercial property look more attractive, Cheung Kong Holdings executive director Justin Chiu said yesterday.

Governments in countries like Malaysia, Singapore and China have already introduced measures to cool the housing market, which they are ‘bound to do’ when it gets too heated, he said.

‘So of course if you’re talking about short-term investment, then the commercial sector should perform better because it is more or less policy-free to a certain extent,’ Mr Chiu added.

Even if the office market gets too hot, the Government intervenes by releasing more land, rather than putting a cap on land prices or rents, he said. While he expects housing markets to cool, however, he does not foresee a collapse.

The senior executive added that home prices here might also fall by up to 6 per cent should interest rates rise.

‘In Singapore, because the Government has always been paying attention to the housing market, I would say the fluctuations would be much smaller, in the single-digit range,’ he said, adding that sale volumes have already fallen.

If the ‘market gets very hot, or if prices run again’, then additional measures here will not be surprising, Mr Chiu said.

He was speaking at the unveiling of Cheung Kong’s newest project, Thomson Grand in Upper Thomson, which will have 339 apartments and 22 strata-titled terraced units. The apartments will be priced at an average of $1,400 per sq ft for the initial launch of about 50 units next month. The prices of the terraced homes have not been finalised.

Mr Chiu stressed, however, that Hong Kong-based Cheung Kong will continue looking across all property sectors here – apart from the industrial sector – for good opportunities.

Cheung Kong Real Estate director Francis Wong added that good-quality residential sites and larger commercial projects in prime locations are preferred, as the company’s relatively small size here compels it to be selective.

But as a foreign developer, smaller projects are unsuitable as they would mean higher overheads, making the project economically unsound.

Instead, commercial sites of about 1 million sq ft of gross floor area – such as the Tanjong Pagar mixed-use site recently won by Guocoland – and niche residential projects are more ideal.

Commercial sites near the Marina Bay Financial Centre – which Cheung Kong jointly developed with Keppel Land and Hong Kong Land – are also preferred, as they are in an area the company is already familiar with, Mr Chiu said.

But mass-market homes are not on the cards despite the Government’s recent bumper release of suburban sites. ‘We don’t want to compete in the mass market with the local developers who have been doing a very good job in supplying such homes on a steady basis. We don’t want to, and I think we cannot, compete with them,’ he added.

Thomson Grand will feature larger-size apartments of from 904 sq ft to 2,314 sq ft, while its landed terraces will be up to 6,566 sq ft in size.

Source: Straits Times, 23rd June 2011

Its recent sales history reflects movements in the local office market

Marketing agent Colliers is inviting expressions of interest from developers for the 35-storey former SIA building at 77 Robinson Road. — PHOTO: COLLIERS INTERNATIONAL

THE former Singapore Airlines (SIA) building at Robinson Road has been put up for sale with a guide price of about $678 million.

The 35-storey block at 77 Robinson Road in the central business district (CBD) sits on 32,435 sq ft, and has a total net lettable area of about 295,000 sq ft. There are about 82 years left on the lease.

Its recent sales history reflects the movements in the local office building market.

SIA sold the block in June 2006 for $344 million, or about $1,165 psf of net lettable area, to a CLSA Capital Partners- linked fund, which in turn sold it 10 months later for $526 million, or $1,783 psf, to its current owner, German fund manager SEB.

Now, SEB is hoping to get $678 million, or about $2,300 psf of net lettable area, for the building, said Ms Tang Wei Leng, executive director of investment services at marketing agent Colliers.

This is in line with the most recent office sales transaction involving Capital Square at $889 million – which also had a unit price of $2,300 psf, she said.

Colliers said the building, which has a gross floor area of 380,999 sq ft, is 92 per cent leased to tenants including Adidas, Rabobank Group and Royal & Sun Alliance Insurance.

Ms Tang said the office market is expected to remain buoyant, with strong demand from both tenants and investors.

‘With Grade A office rents currently 45.7 per cent below the previous peak in the first quarter of 2008, it is predicted that rents for the whole of this year will continue to enjoy an expansionary mode, supporting a 15 per cent to 20 per cent growth,’ she added.

The highest price achieved for a CBD office building was $3,125 psf, paid by Commerz Real for 71 Robinson Road in April 2008.

Ms Tang said she is confident of keen interest from both local and foreign institutional investors. Colliers is inviting expressions of interest from developers.

Net yields for office investment sales in the CBD hovered between 2.5 per cent and 4 per cent from January to May and were ‘encouraging’ to such investors, she said.

The building’s 180 carpark spaces – which gives it one of the highest ratios of parking spaces per square foot leased in CBD office buildings – is also a key draw for developers and tenants, considering the area’s parking crunch, Colliers added.

Besides 77 Robinson Road, SEB also has a 55 per cent stake in 79 Anson Road, 12 floors of Springleaf Tower, a 60 per cent stake in the consortium that owns Chinatown Point mall, and Starhub Green, an Ubi Avenue industrial building.

Source: Straits Times, 22nd June 2011

AN INDUSTRIAL site in Jurong will be launched for sale by public tender in two weeks, after a developer lodged a minimum bid acceptable to the Government.

The 30-year leasehold site is one of a cluster of three sites along Pioneer Road North and Soon Lee Street.

The other two sites have been sold.

The latest site was first made available for sale on Feb 25 as part of the first half-year Government Land Sales reserve list.

It has been zoned for Business 2 developments, which include clean and light industries,warehouses, public utilities and telecommunication uses.

The 1.7ha plot has a maximum gross plot ratio of 2.0 so it could be built to a maximum gross floor area of 3.4ha.

Yesterday, the Urban Redevelopment Authority said a developer had committed to bid at least $23.8 million for the site, which works out to about $77 per square foot per plot ratio (psf ppr).

The commitment triggered the public tender process.

Interested parties will have four weeks from the launch of tender to submit a bid.

One of the two adjoining plots of land, a 30-year leasehold industrial site, drew eight bids in December last year.

The highest bid came from Kng Land, which offered $26.9 million or $87 psf ppr, almost double the application bid of $13.8 million that triggered the tender last October.

The adjoining piece of land was acquired by Kng Realty in December 2009.

A total of eight bids were submitted for that site and the highest bid of $19.4 million was also twice the trigger bid of $8.2 million. This worked out to $48 psf ppr.

Mr Dominic Peters, Savills’ director of industrial real estate, expects healthy interest in the third Pioneer Road site.

He said: ‘The plot of land is located in a pretty attractive part of Jurong, near the residential estate, MRT stations and other recreational facilities like Jurong Point Shopping Centre and Jurong West Sports and Recreation Centre.’

Mr Tan Boon Leong, Colliers International’s director of industrial services, predicted the site could attract between five and eight parties.

He expects the final bid to possibly surpass the $23.8 million trigger bid by up to 80 per cent.

Source: Straits Times, 4th June 2011