A SHOPPING mall and office complex with a total development cost of $1.5 billion is set to be built beside Jurong East MRT station as rejuvenation plans for the area continue gaining traction.

A consortium of CapitaMalls Asia (CMA), CapitaMall Trust (CMT) and CapitaLand said yesterday they plan to build a 25-storey retail and office development.

They said the project will benefit from synergies with their two nearby properties – IMM, which is currently operating, and JCube, which is still under construction.

The group had last week submitted a bullish top bid of $969 million for the second mixed-use site in Jurong Lake District in a move that surprised many industry analysts. This worked out to $1,012 per sq ft (psf) per plot ratio (ppr).

The consortium, however, justified its bid yesterday, saying the proximity of all its three properties will allow for synergies that can help bring down operational costs. All three malls are within a three-minute drive of one another.

The new mall will be a family and lifestyle mall, while IMM is a value-focused one. JCube, with an Olympic-size ice rink, will be an entertainment-focused option.

The project occupies a prime location in Jurong Lake District, which is 21/2 times the size of Tampines Regional Centre and will be the largest commercial centre outside the city, they added. There is also a lack of quality office space in Jurong.

CMA chief executive Lim Beng Chee said the acquisition will increase the firm’s net lettable area in Jurong to 1 million sq ft – twice the size of Plaza Singapura.

With IMM already housing anchor tenants like Giant and Daiso – which pay lower rents – and Shaw cineplex slated to open at JCube, the newest site can focus on securing complementary mini-anchor tenants that pay higher rents instead.

This means retailers taking up space of 15,000 sq ft to 18,000 sq ft, bringing up average rents at the five-storey mall to about $16 to $18 psf a month.

Mr Simon Ho, chief executive of CapitaMall Trust Management, manager of CMT, added that the mall will also act as a regional mall, serving more than one million residents.

The project’s office component is also expected to secure average rents of about $7 to $8 psf a month, likely more than rents at a neighbouring site secured by Australian developer Lend Lease in June last year, Mr Ho said.

The Ministry of National Development (MND) has signed a 30-year lease for 29,300 sq m of office space at Lend Lease’s mixed-use development. Lend Lease had paid $749 million – or $650 psf ppr – for the plot.

Mr Ho said market talk was that rents were secured at about $5.50 psf a month as it is a bulk deal.

‘When it comes to leasing our office block, we ask ourselves, ‘Do we need to go en bloc?’ Probably not, the office market is made and people know that MND is there.

‘Government agencies will want to move there but do we need to accede to a price of $5.50? Probably not… We have choices on who we want to bring in,’ Mr Ho added.

Source: Straits Times, 2nd June 2011

All on reserve list; one each for commercial, residential and hotel use

THREE government land parcels have just been made available for sale – one each for residential, hotel and commercial developments.

All three 99-year leasehold sites are on the reserve list of the Government Land Sales programme in the first half of this year. Land on the reserve list is put up for tender only if developers make an acceptable initial offer.

Experts say the commercial site in Paya Lebar Central – the second to be offered in the area this year – is most likely to be triggered for sale due to the promising suburban office market outlook.

The 2.07ha land parcel is located at the junction of Sims Avenue and Tanjong Katong Road and can yield about 87,000 sq m of gross floor area (GFA).

The site is earmarked to be utilised as a good-quality mixed-use development comprising office, hotel and retail uses.

At least 40 per cent and 15 per cent of the maximum permissible GFA must be set aside for office use and hotel use respectively, said the Urban Redevelopment Authority (URA).

The remaining space can be for additional office, hotel, retail, entertainment or food and beverage uses to help build up the critical mass of activities that will anchor Paya Lebar as a prominent commercial hub. Residential use is not allowed.

The first Paya Lebar site was launched in January and sold for $586 million – or $872 per sq ft per plot ratio. It received 10 bids from heavyweights such as CapitaLand and Far East Organization.

Yesterday, URA also released a hotel site at the junction of Race Course Road and Perumal Road on the reserve list. The 0.38ha land parcel located near the historic district of Little India can yield a maximum permissible GFA of 13,500 sq m.

An executive condominium (EC) site in Upper Serangoon View is also being made available for sale today by the HDB. An estimated 420 units can be built on the site.

HDB said in a statement yesterday that apart from this site, both the HDB and URA will be releasing three new residential sites and one commercial site under the confirmed list this month.

The three residential sites are located at the junction of Punggol Field/Punggol Field Walk, Serangoon Garden Way, and between Upper Serangoon Road and Pheng Geck Avenue. The commercial site will be at Robinson Road/Cecil Street.

The four residential sites in total can yield 1,380 homes, HDB said.

Experts expect all three sites on the reserve list to be met with varying interest.

Cushman & Wakefield’s senior manager of Asia-Pacific research, Mr Ong Kah Seng, said the Paya Lebar commercial site will likely draw the strongest developer interest because of its strategic location and the optimistic bid for the previous site.

On interest in the EC land plot, he said that with the success of recent EC launches indicating strong demand from home buyers with affordability concerns, the site can expect moderate buying interest.

Mr Ong Teck Hui, Credo Real Estate’s head of research and consultancy, however, called the site ‘mediocre’. It is next to a private residential site that drew only four bidders last November, he said.

SLP International research head Nicholas Mak said if the hotel site was up for sale, it could attract bids of $72 million to $87 million. Credo’s Mr Ong added: ‘It’s a good location for a city fringe hotel, which would cater towards the more budget-conscious tourists.’

Source: Straits Times, 1st Jun 2011

$200m above forecast – reflecting confidence in land outside city centre

A PRIME mixed-use site in the Jurong Lake District has shattered price records with a top bid of just under $1 billion – almost $200 million more than the market expected.

The huge offer stunned analysts and dramatically underscored demand for well-located land in the up-and-coming area.

The knockout bid of $969 million – or $1,012 per sq ft (psf) per plot ratio (ppr) – came from heavyweights CapitaMalls Asia, CapitaMall Trust and CapitaLand.

It is easily the highest offer for any mixed-use site outside the city centre and reflects confidence in the suburban office market, the remaking of Jurong and the value that developers see in choice locations near MRT stations, say experts.

The second highest bid – $917 million lodged jointly by United Engineers and Singapore Press Holdings – was also far ahead of market expectations.

A Keppel Land-led joint venture with Perennial Real Estate offered $785 million. Frasers Centrepoint and private fund Phoenix trailed the field of five with a joint bid of $640 million, 34 per cent lower than the top offer.

At least 40 per cent of the maximum permissible gross floor area (GFA) on the site in Boon Lay Way and next to Jurong East MRT station must be for offices.

Savills Singapore’s director of commercial leasing, Ms Agnes Tay, said she was ‘pleasantly surprised’ with the aggressive bids.

They suggest a shift of developers’ interest to explore opportunities in suburban commercial land, especially when a substantial amount of office space has been released in the city over the past few years. ‘Given limited suburban office supply, the Jurong site might provide good opportunities that developers see value in,’ she added.

Experts also weighed in on what the site might be used for apart from offices.

Savills’ Ms Tay said the remaining 60 per cent GFA could be used for apartments as there will be a good market for well-located homes.

However, CB Richard Ellis Research executive director Li Hiaw Ho said the project is likely to be a pure commercial development with a high proportion of retail space. Average monthly rents could be around $15 psf a month for retail and $6 psf for offices, he added.

‘The successful award of this parcel would hasten the development of Jurong East as a vibrant commercial hub,’ said Mr Li. ‘Given the sizeable amount of retail pipeline supply from the neighbouring Lend Lease’s and JCube projects as well as existing retail amenities in this area, it would offer residents and workers a retail experience rivalling that of Tam-pines in the east.’

SLP International research head Nicholas Mak also noted that CapitaMalls Asia and its partners looked keen to retain their market share of commercial space in the Jurong East MRT Station area. The IMM and JCube malls are both in the area and managed by CapitaMall Trust.

CapitaMalls Asia will hold a 50 per cent stake in the Jurong Lake project, HSBC Trust Services – as trustee of CapitaMall Trust – 30 per cent, and CapitaLand will hold the remaining 20 per cent.

The five bids the tender attracted suggest developers still want relatively big parcels of land, added Mr Mak.

‘An estimated 1,000 homes will also be added around Jurong East MRT station to provide more opportunities to live and work in the area,’ he noted.

‘Office and retail development on the subject site stand to gain ready access to a large pool of labour and customers – of more than one million residents – from the surrounding established towns of Clementi, Bukit Batok, Jurong East and Jurong West.’

In June last year, Australian developer Lend Lease beat five other offers with a bid of $749 million, or $650 psf ppr, for a 1.9ha site in the same area. It has since clinched the National Development Ministry as an anchor tenant, which experts say would have encouraged developers to bid for the second Jurong Lake District site.

The previous record for a mixed-use site outside the Central Business District was for the site of nex shopping mall in Serangoon which sold for $850 psf ppr in 2008.

Source: Straits Times, 26th May 2011

Growth the third fastest out of 26 markets in Asia-Pacific in first quarter, says new report

The Jones Lang LaSalle report found that a temporary shortage of office space had given a boost to office rents in Singapore in the first quarter of this year. — ST FILE PHOTO

SINGAPORE office rents and capital values notched up the third fastest growth out of 26 markets in the Asia-Pacific region in the first quarter.

A new industry report found that rents grew by 7.9 per cent compared with the previous quarter, supported by a temporary shortage of office space.

Office capital values climbed 4.5 per cent from the preceding quarter.

Singapore’s performance in the office sector was markedly better than the average for the region.

Across the Asia-Pacific, average rental growth was 2.5 per cent, while quarterly rises in capital values were 3.1 per cent.

Jarkata recorded the largest quarterly rental growth of 9.5 per cent, with landlords more aggressive in raising rentals due to strong take-up rates.

The Japanese earthquake was shown to have had little impact on the occupier market conditions elsewhere in the region, said the report compiled by property consultancy Jones Lang LaSalle (JLL).

The report also detailed a slide in vacancies as office rentals continue to rise across most markets in the first quarter.

The strongest performer in terms of capital values was Hong Kong, recording a 42 per cent jump in prices on the back of strong buying activity, largely fuelled by local investors.

Looking ahead, JLL expects leasing demand to remain solid throughout the Asia-Pacific region for the rest of this year. But the expected addition of fresh office supply is expected to result in a rise of vacancies over the next few quarters.

In view of recent events, JLL’s outlook on Tokyo is muted, with the report forecasting an annual decline of up to 5 per cent due to further delays in the recovery of its office market.

Landlords across the region can look forward to rental growth of up to 30 per cent this year, the report said. The strongest growth is set to be seen in markets where supply is limited.

JLL said the markets most likely to record the largest growth include Singapore, Hong Kong and major cities in mainland China.

The report also predicts that almost all markets outside North Asia are set to record strong gains in capital values of up to 35 per cent this year.

These gains will be achieved as rentals steadily head north and as investor confidence improves.

The data was compiled by JLL as part of its quarterly office index.

Source: Straits Times, 7th May 2011

It accounts for over 20% of sales in first quarter of this year

COMMERCIAL property is fast becoming a hot favourite among investors, going by both the sales figures and loans taken out in the first quarter of this year.

Mixed-use and commercial property accounted for more than 20per cent of total property investment sales in the first three months of the year, and was worth about $2.26 billion, according to data from Colliers International.

Some banks The Straits Times spoke to have reported a rise in customer interest in buying such properties in the first three months of the year.

HSBC estimated a 10 per cent rise in these loan applications, while OCBC said it had recorded double- digit growth in commercial property loan applications since March 2010.

The number of loan applications by Special Purpose Vehicles (SPVs), companies created for a financial transaction, has also risen in the last few months.

Mr Willie Tham, HSBC Singapore’s head of commercial banking, said: ‘While the interest stems primarily from business owners looking to purchase for their own business use, we have also seen an increase in applications by SPVs, which are acquiring such properties for investment purposes.’

Property watchers say this could indicate that even entities other than businesses and other non-traditional buyers are entering this sector.

Purchasing property through SPVs has its advantages, including a reduction in stamp duty and the means for investors to protect specific assets from creditors if they fall into debt.

Mr Chris Marriott, South-east Asia chief executive of Savills, said commercial property is a good hedge against inflation: ‘The 20-year inflation average is 1.7 per cent per annum compared to commercial property growth of 4.3 per cent per annum. At present, rental growth is supporting higher values so short- term gains can outweigh inflation.’

He noted that strong economic fundamentals across all key economic sub-sectors – financial services, manufacturing and tourism – are creating healthy demand.

Singapore’s office market is expected to benefit as the country gains importance as a regional business hub within South-east Asia and the Asia-Pacific, said Mr Ashish Manchharam, South-east Asia head of investments at Jones Lang LaSalle.

He is also expecting Grade A office rents to climb a further 10 per cent to 15 per cent this year.

Analysts say recent property market cooling measures may have driven some investors to park their money in commercial property, which is seen as a stable property asset that is less susceptible to policy changes.

Added to that, the financing of commercial property loans is attractive for investors, with some banks offering up to 80 per cent financing for such loans.

Industrial property rents have risen sharply in the first quarter of this year, climbing 8.3 per cent from the previous three months.

Rents for private residential property have also risen, but at a more subdued pace of 2.2 per cent.

Source: Straits Times, 3rd May 2011

DEMAND for office and industrial properties was buoyant in the first three months of the year, new figures show.

Property experts said the strongly performing economy and low interest rates continued to drive keen investor interest in these two sectors.

Latest figures from the Urban Redevelopment Authority show prices of industrial properties rose 8.3 per cent over the preceding quarter’s prices, while those of office properties rose 4.9 per cent.

Rents for both also gained strongly. Industrial rents were up 6.3 per cent, while office space rents rose 5.4 per cent.

Analysts said the strong interest in industrial space came as more companies set up new operations or expanded existing capacity in Singapore.

This was due to the healthy recovery in global trade and the strong rebound in Singapore’s manufacturing sector in the first quarter of this year.

The industrial property market is likely to enjoy spin-offs from other segments such as retail.

Shop owners might see industrial space as an alternative for production or storage activities, said Mr Ong Kah Seng, senior manager for Asia-Pacific research at Cushman & Wakefield.

Analysts also expect Singapore’s office property market to do well. Colliers International data showed that as of the end of last month, monthly gross rents of Grade A office space in the Raffles Place/New Downtown area posted further growth of 8 per cent compared with the previous quarter’s figure, hitting $9.72 per sq ft.

Source: Straits Times, 26th April 2011

THE first commercial site up for sale in Paya Lebar sparked a 10-way bidding battle that involved some of the biggest property players in the country.

The top offer – a bullish $586 million – was lodged by a consortium of property group Low Keng Huat, Guthrie GTS and Sun Venture Commercial.

Their bid of $872 per sq ft (psf) per plot ratio (ppr) for the 14,850 sq m site at the junction of Paya Lebar Road and Eunos Road 8 was ahead of market expectations.

It was 12 per cent more than the second-placed bid of $521 million – or $776 psf ppr – offered by Hong Leong Group.

The lowest bid came in at $332 million from Frasers Centrepoint and real estate fund ARA Asia Dragon.

Big guns CapitaLand, Mapletree, Keppel Land and Far East Organization also threw their hats into the ring as did Osim International founder Ron Sim – under the firm PLC 8 Holdings – and Soilbuild managing director Lim Chap Huat.

Any development on the site must set aside at least 80 per cent of the total gross floor area for offices. The rest can be used for other activities permitted under the commercial zoning.

Paya Lebar Central has been earmarked by the Government as a commercial hub to provide alternative locations for businesses. It envisages a pedestrian-friendly commercial hub with retail shops, hotels and attractive open spaces.

The precinct has about 12ha available for development and a potential commercial floor space of more than five million sq ft in total.

Guthrie GTS subsidiary Guthrie Properties managing director Michael Leong said its consortium was keen on obtaining first-mover advantage in the area.

Experts said the top bid was optimistic considering that the plot was the first site in Paya Lebar up for sale and the area was still in early phase of redevelopment. Analysts expected top bids of between $500 and $600 psf ppr.

Knight Frank group managing director Danny Yeo said the high bids reflected confidence in the office market and the eventual success of Paya Lebar as a commercial hub.

Mr Ong Teck Hui, Credo Real Estate’s head of research and consultancy, said the bullish bids are supported by the demand for more affordable office space outside the central business district (CBD) that investors are keen to capitalise on.

‘In the last downturn, demand for office space within the CBD shrank in 2008 and 2009, while take-up outside the CBD remained positive. When under cost-cutting pressures, businesses would look for cheaper office space outside CBD,’ said Mr Ong.

Source: Straits Times, 22nd April 2011

SINGAPORE’S oldest multi-storey carpark, on Market Street, will be redeveloped into a $1.4 billion Grade A office tower, CapitaCommercial Trust (CCT) confirmed yesterday.

The project is set to be completed by 2014, in a significant alteration to the central business district skyline.

CapitaCommercial Trust Management – CCT’s manager – said that it intends to partner CapitaLand in the project, which is expected to have a development cost of $1,900 per sq ft of net lettable area.

The project is estimated to provide a gross floor area of 887,000 sq ft with floor plates of up to 25,000 sq ft.

The carpark was built in 1964. Redevelopment plans have been on the drawing board for more than 15 years but it was only in 2008 that the authorities granted permission, the manager said. The redevelopment was, however, deferred in 2009 owing to the financial crisis.

‘Having considered the unexpired land lease, estimated project cost, potential office market rent and there being no other new Grade A office building completing in 2014 in the core CBD area, we believe that a Grade A office tower is the best use for the site,’ Ms Lynette Leong, chief executive of the manager said.

CCT said the stabilised yield for the completed project is expected to exceed 6 per cent a year. It will be funded through the trust’s internal cash resources and debt.

A special purpose vehicle will be set up with CCT owning 40 per cent and CapitaLand, the balance.

Property fund guidelines for Singapore real estate investment trusts mandate that they may only develop projects the total cost of which must not exceed 10 per cent of its total asset size. This development limit is $601 million for CCT.

CCT also announced yesterday that its first quarter distributable income dipped 4.1 per cent to $52.1 million from $54.3 million in the same period last year. Distribution per unit fell by 4.7 per cent to 1.84 cents.

This decline was mainly due to the reduction in rental income after the sale of StarHub Centre and Robinson Point and from a lower revenue contribution from Six Battery Road due to asset enhancement works. Net property income fell 10 per cent to $70 million while gross revenue slid 11 per cent to $91 million. CCT units fell one cent to $1.41 yesterday.

Source: Straits Times, 20th April 2011

THE retail property market has stayed resilient with rents holding up despite plenty of new supply coming on stream over the past year.

Suburban rents have been particularly strong and resisted the intense competition in the form of more than two million sq ft of space having been completed last year alone.

Experts say suburban malls with their ease of access for shoppers have been able to withstand supply pressures and survive the financial crisis better than their counterparts in the prime Orchard Road shopping belt.

But the arrival of newer suburban malls and the fact that rents are already nearing Orchard Road highs might make it harder for rents to keep rising, they add.

Colliers International’s data showed that average gross rents for prime space in regional malls stayed unchanged at $33.50 per sq ft (psf) per month in the fourth quarter of last year compared with the third.

This translates into an overall modest gain of 1.5 per cent for the year.

CB Richard Ellis (CBRE) data also showed that suburban rents inched up 3.6 per cent last year and averaged $29.10 psf in the fourth quarter. This is just shy of the historical peak of $29.30 psf in the third quarter of 2008.

Suburban rents have held firm despite newly minted malls entering the market in the fourth quarter, such as nex in Serangoon Central and Bedok Point in New Upper Changi Road.

CBRE’s data shows that average suburban rents increased from $29 psf in the third quarter to $29.10 psf in the fourth.

Ms Tay Huey Ying, Colliers Inter-national director of research and advisory, said such malls, with big population catchment nearby and good transport links, have helped rents hold steady.

Indeed, the popularity of such malls has also seen rents moving up towards Orchard Road levels in recent quarters.

In fact, the difference in rents between these segments has eroded from its five-year peak of 35.5 per cent in the third quarter of 2007 to 14.9 per cent in the fourth quarter of last year, Colliers said.

While rents in the micro-market of Orchard Road – which is expected to see about 600,000 sq ft of new retail space completed between this year and 2014 – are forecast to rise by up to 5 per cent this year, rental gains in suburban malls are expected to face resistance since rents are already nearing Orchard Road highs, Ms Tay added.

Ms Letty Lee, CBRE director of retail services, expects suburban rents to rise a maximum of 3 per cent this year, with Orchard Road rents expected to stabilise.

The suburban retail market has diversified in recent years with newer malls that have taken shoppers from the more mature ones, she added.

‘With population levels expected to remain the same, the pie is getting smaller as newer malls compete for a slice of the local consumer market.’

In Bishan, for example, Junction 8 is up against shops near other MRT stations as well as Ang Mo Kio Hub and nex, which is on the Circle Line, Ms Lee said.

Even though new retail space being completed is expected to fall to about 1 million sq ft, landlords have continued with their asset enhancement plans to stay competitive in the light of the overall rise in retail stock.

Far East Organization, for example, has announced plans for addition and alteration works to the two-storey Junction 10 mall on the Ten Mile Junction site. Singapore Press Holdings’ Clementi Mall is also expected to open fully in April.

Colliers data also showed that prime retail rents in Orchard Road have held stable for the past four quarters to close at $38.50 psf.

This has been on the back of positive consumer sentiment and strong visitor arrivals throughout the year.

Source: Straits Times, 31 Jan 2011

It wraps up the total for 2010 to 1.65m sq ft, a sharp reversal of negative demand of about 236,806 sq ft in 2009

NET new office demand surged to 753,473 square feet in the fourth quarter of 2010, the highest quarterly take-up since Q1 2007, according to latest government numbers.

The fourth-quarter take-up was triple the 258,334 sq ft for the preceding quarter and took the total for 2010 to 1.65 million sq ft, a sharp reversal of negative demand of about 236,806 sq ft in 2009.

‘This once again demonstrates the fast recovery in the office market and the voracious appetite of office occupiers for expansion space whenever the economy picks up,’ said CB Richard Ellis (CBRE) executive director Li Hiaw Ho.

The Urban Redevelopment Authority’s islandwide office vacancy rate, which had spiked to 13 per cent at end-Q3 2010 (from 12.3 per cent at end-Q2) eased to 12.1 per cent at the end of last year – as tenants moved into recently completed office projects.

Most of the new project completions last year took place in the first three quarters, such as Marina Bay Financial Centre (MBFC) Tower 1 in Q1, Mapletree Business City in Q2 and MBFC Tower 2 in Q3.

The islandwide stock of office space rose 2.6 per cent to nearly 76 million sq ft at the end of last year, from about 74 million sq ft at end-2009.

URA’s office rental index rose 4.7 per cent quarter on quarter in Q4, slowing from the 6 per cent gain in Q3. For the whole of last year, the index appreciated 12.6 per cent, a marked turnaround from a drop of 23.6 per cent in 2009. The latest index, however, is nearly 20.2 per cent below its previous peak in Q2 2008.

According to CBRE’s numbers, the average gross monthly rental value for Grade A office space climbed 22.2 per cent last year to $9.90 per square foot (psf) but is still 47.3 per cent shy of the recent high of $18.80 psf in Q3 2008.

Property consultants are generally predicting an increase of around 15 per cent in Grade A office rents this year.

Agnes Tay, Savills Singapore director (commercial leasing), said that over the next two years, there would be considerable secondary office stock being returned to the market as occupiers vacate existing premises to move to newly completed office developments.

‘However, the impact of secondary stock is likely to be cushioned by a reduction in supply from demolition or refurbishment of a number of older office blocks. On the demand side too, a healthy 54 per cent of the new office space to be completed in the CBD in 2011-2012 has already been pre-committed.

‘Savills has identified an inflection point appearing in late 2011 when the return of secondary stock will impact the market. At this point, we expect to see a greater spread in rents between the international Grade office space and the rest of the market.’

URA’s shop rental index recovered 2.9 per cent last year, against a 7.4 per cent drop in 2009.

Amid Singapore’s economic recovery, the rental indices for flatted factory and warehouse space appreciated 11.7 per cent and 17.7 per cent – against respective declines of 12.1 per cent and 15.6 per cent in 2009.

Source: Business Times, 29 Jan 2011