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

MORE investors are turning to industrial properties as a result of government cooling measures in the residential market, according to a new report by CB Richard Ellis (CBRE).

Prices, rents and sales for industrial properties have all increased significantly, according to the CBRE figures released yesterday.

Most of the figures related to the first quarter. The latest round of the property market cooling measures came into effect in mid-January.

Prices of 60-year leasehold strata-titled factory space are a case in point.

Capital values of these properties shot up 5 per cent, quarter-on-quarter, in the January to March period this year – to $289 per sq ft (psf) for ground floor units and $213 psf for upper floor units.

Another strong performer was freehold stratatitled warehouse space.

This also leapt in price by about 5 per cent quarter-on-quarter to $449 psf and $392 psf, for ground and upper floor units, respectively.

Monthly rents for industrial properties were also markedly higher, indicating a healthy level of interest from investors who might normally be more active in the residential market, said CBRE.

In the first quarter, the average monthly rent for factory units rose by five cents psf to $1.75 psf and $1.40 psf for ground and upper floor units respectively from the previous quarter.

The average monthly rent for warehouses rose by 3.1 per cent to $1.65 psf for ground floor units and increased by 8 per cent to $1.35 psf for upper floor units, again, on a quarter-on-quarter basis.

Monthly rents for high-tech space rose a more modest 1.9 per cent quarter-on-quarter to $2.65 psf.

The CBRE report also included figures comparing sales volumes for last year with 2009 data.

Sales of factory and warehouse units last year surged 76.3 per cent, with 1,849 caveats lodged last year, compared with 2009.

More warehouses were sold too – with 128 caveats lodged for this type of property, more than double the 45 caveats lodged a year earlier.

‘It was observed that capital values for industrial properties were growing at a faster pace than rental values,’ said CBRE’s director for industrial and logistics services, Mr Bernard Goh.

‘This could be because some investors who were priced out of the residential sector invested in industrial properties instead.’

Mr Goh noted that the three rounds of cooling measures imposed on the residential market since October 2009 might also have prompted some residential investors to switch to the industrial market which does not have such stringent restrictions.

Property experts say the strong interest in non-residential sectors, in the wake of the cooling measures, is mainly from more sophisticated types of investors, including real estate investment trusts.

‘Investors of non-residential properties are mostly seasoned property players, who are familiar with the property market dynamics, including the profile and some likely risks associated with non-residential properties,’ said Mr Ong Kah Seng, property consultancy Cushman and Wakefield’s senior manager for Asia-Pacific research.

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PRICED OUT?

‘It was observed that capital values for industrial properties were growing at a faster pace than rental values… This could be because some investors who were priced out of the residential sector invested in industrial properties instead.’

CBRE’s director for industrial and logistics services, Mr Bernard Goh

Source: Straits Times, 5th April 2011

Move allows it to focus on major projects, promote market competition

INDUSTRIAL landlord JTC Corporation has embarked on the second phase of its exercise to sell off many of its industrial properties so it can focus on developing new ideas to give Singapore an edge.

The move also aims to promote greater competition in the market.

JTC is now selling 21 blocks of flatted factories and amenity centres mainly in areas such as Tai Seng, Kolam Ayer, Kallang Basin, Bedok and Kampong Ubi.

It has not put forward a guide figure but reports suggest the total could be in the range of $600 million to $700 million.

The first phase of divestments was finalised in 2008 when JTC sold 39 high-rise ready-built factories worth a combined $1.7 billion to Temasek Holdings unit Mapletree Investments.

The latest portfolio will be divided into two tranches according to location, tenure and size, with the two-stage tender process closing on March 1.

The firm is inviting potential buyers to submit business proposals to bid for the portfolio of more than 300,000 sq m.

Shortlised parties will then be invited to participate in a further stage, JTC said.

JTC chief executive Manohar Khiatani said the latest divestment phase is progressing well with the two-stage tender providing a rigorous process to find a suitable buyer for each of the two tranches.

‘One of the objectives of the divestment exercise is to promote active competition in the industrial property market in Singapore so tenants will benefit from more options and choices.’

DTZ chief executive Ho Tian Lam added that it is rare that an industrial portfolio of this size is made available for potential buyers. ‘We anticipate that this tender exercise will attract not only local interest but also foreign investors.’

Last month, DTZ was appointed the real estate consultant to manage and coordinate the second phase.

Mr Ong Kah Seng, Cushman & Wakefield’s senior manager for research, said the tender response is likely to be ‘encouraging’, with active participation and optimistic offer prices from bidders.

‘The optimism is supported by increasing investor interest due to the strong tenant demand base and an increasing recognition of industrial properties as investable assets.’

Rents are likely to enjoy gradual increases in the coming years, supported by the economic recovery, he added.

Mr Khiatani has said previously that JTC sold such facilities as it felt the private sector market was mature enough.

JTC said yesterday it will continue to focus on developing large-scale and innovative infrastructure projects that can create a differentiating advantage for Singapore. These include two underground rock caverns for oil storage on Jurong Island and a $60 million offshore marine centre in Tuas to be completed this year.

Source: STraits Times, 11 Jan 2011

MORE industrial sites are up for grabs under the government land sales programme for the first half of the year.

Four plots, two of them new, have been put on the confirmed list while seven are on the reserve list. They amount to a total of 17.67 ha of industrial space.

The Ministry of Trade and Industry (MTI) said last Friday that the supply has been replenished to meet demand for industrial land in the light of sustained economic growth. It has also reduced the project completion period for all industrial sites triggered or launched for sale from Jan 1 in order to speed up project completion times.

The sites on the confirmed list are in Ang Mo Kio Street 62, Fusionopolis Link, Irving Place and Woodlands Avenue 12.

Reserve list sites – four are newly introduced – are at the corner of Pioneer Road North and Soon Lee Road, in Gambas Avenue, Serangoon North Avenue 4 and at the corner of Kaki Bukit Road 4 and Bartley Road East.

In the second half of last year, two reserve list sites – in Ubi Road1 and at the corner of Pioneer Road North and Soon Lee Street – were sold.

Developers will note the other key announcement: the reduction of the eight-year project completion period.

Sites with a maximum permissible gross floor area of less than 50,000 sq m must be completed within five years, while those of 50,000 sq m and over must be finished within seven years.

The MTI said the change is to ensure a ‘more timely supply of industrial space to meet demand’.

The industrial sector’s outlook has been looking rosy. According to property consultant DTZ, the average monthly gross rent for ground-floor private industrial space grew 2.5 per cent to $2.05 per sq ft (psf) in the final quarter of last year.

Average monthly gross rents for upper-storey space are at $1.65 psf – up 3.1 per cent from the third to the fourth quarter, and 6.5 per cent ahead over the same period in 2009.

Industrial rents are also expected to continue to rise this year but at a more moderate pace.

Source: Straits Times, 3 Jan 2011

(SINGAPORE) Industrial properties are attracting their fair share of buyers even as glitzy condominiums and gilded bungalows hog the limelight.

According to Cushman & Wakefield, $3.42 billion worth of factory units changed hands in the first three quarters of the year. This already exceeds the $1.83 billion for the whole of 2009 by 87 per cent.

The transaction value so far this year is just $290 million shy of the record high in 2008, when $3.71 billion worth of factory units were sold.

Warehouses have also been sought after. Transactions in the first three quarters came up to $83.3 million – almost triple last year’s $28 million.

‘The keen buying interest for industrial properties was fundamentally underpinned by a recovery of the manufacturing sector. The healthy performance of manufacturing encouraged industrialists to expand,’ said Cushman & Wakefield senior manager of Asia-Pacific research Ong Kah Seng.

Growing demand for industrial space has led to rising rents. In a report yesterday, Colliers International said the average prime warehouse rent in Singapore was $1.56 per square foot per month in the first half of the year, up 3.3 per cent from $1.51 psf in the second half of 2009.

As a result, Singapore became the seventh most expensive market in the world to rent a prime warehouse – climbing two notches from ninth place six months ago.

Tokyo, London’s Heathrow and Hong Kong took the top three spots in the latest ranking.

Apart from end-users, investors have also taken a fancy to industrial assets – a factory unit requires a smaller capital outlay and generates a higher yield compared with a private home, Mr Ong said.

For instance, the net yield of a factory unit would be at least 6 per cent while that of a private home would be about 3 per cent, he said.

Institutional funds are among some investors in the industrial property market, said Colliers International industrial director Tan Boon Leong.

He suggested that with the government introducing cooling-off measures for the residential sector, some investors may also divert their funds to the commercial or industrial sectors.

Interest in the industrial property sector has not been restricted to completed factory or warehouse units; there has also been intense bidding for land.

Just yesterday, the Urban Redevelopment Authority (URA) put a 30-year leasehold industrial site at Pioneer Road North/Soon Lee Street up for bidding. A developer triggered the sale of the reserve list site by committing to pay at least $13.8 million for it.

While prospects for the industrial property sector have certainly improved since the global financial crisis, they are not all bright and cheery.

Some consultants expect to see little or no rental growth in the next few quarters, given renewed fears of a slowdown in the manufacturing sector.

‘Industrial rents are expected to stay relatively flat till the end of 2010,’ said Colliers research and advisory director Tay Huey Ying. She cited the Economic Development Board’s survey of the manufacturing sector, showing that business sentiment for October to next March has moderated.

The amount of rent that industrial properties can fetch will be crucial to investors, since returns are more likely to come from rents than from capital appreciation, said SLP International Property Consultants research executive director Nicholas Mak.

‘They should not be buying industrial property with the same kind of investment strategy as buying residential property,’ he said.

Investors should also recognise that the industrial property market is less liquid than the residential one when it comes to leasing or selling units, he added.

Source: Business Times, 4 Nov 2010

Net take-up of its ready-built facilities turns negative while prepared industrial land demand rises

(SINGAPORE) JTC Corporation has turned in a mixed report card for the second quarter in terms of demand for its industrial properties.

Net take-up of its ready-built facilities fell into negative territory from the previous quarter, while take-up of its prepared land rose.

Net allocation of ready-built facilities was a negative 2,700 square metres in Q2, down from a positive 9,400 sq m in Q1.

Higher lease terminations were the culprit. Businesses returned 27,200 sq m of space – more than double the 12,700 sq m in the previous quarter.

The manufacturing sector accounted for 80 per cent or 21,800 sq m of the terminations in Q2.

Also, close to half of the terminations, involving 13,400 sq m of space, happened as companies consolidated their operations.

Standard factories bore the brunt of this, as 14,700 sq m of space in such properties was returned.

Larger gross take-up could not make up for the higher terminations. Gross allocation of ready-built facilities was 24,500 sq m in Q2, up 11 per cent from 22,100 sq m in Q1.

Despite the negative net take-up, the occupancy rate for ready-built facilities remained relatively steady at 97.4 per cent in Q2, dropping 0.1 of a percentage point from Q1.

At end-Q2, JTC had four ready-built facilities under development. Two at Seletar Aerospace Park and one at CleanTech Park are due to be completed next year, and Fusionopolis Phase 2A should be ready by Q2 2013.

Separately, JTC’s prepared industrial land enjoyed a 5 per cent increase in net take-up, to 24.4 ha in Q2 from 23.2 ha in Q1.

A drop in terminations contributed to the improvement. Businesses returned 21.4 ha of land, down 43 per cent from 37.8 ha a quarter earlier.

Manufacturing-related and supporting industries contributed the bulk of terminations. Lower terminations boosted net take-up even as gross take-up fell. Gross allocation was 45.8 ha in Q2, slipping 25 per cent from 61 ha in Q1.

Jurong Island saw a surge in demand. Gross take-up there was 37.1 ha in Q2, more than two times the 16.2 ha in the previous quarter.

Source: Business Times, 19 Aug 2010

(SINGAPORE) Oxley Rising has emerged as the top bidder for a 3.5 hectare industrial site at Ubi Road 1.

The company, which offered $158.1 million or $169 per square foot per plot ratio (psf ppr) for the 60-year leasehold site, trumped 10 other bidders including Qingdao Construction (Singapore) and Sim Lian Holdings.

This is twice what analysts estimated the site could fetch when it was launched in June. Then, consultants reckoned that it could fetch $61-$75 million, or $65-80 psf ppr.

‘The overwhelming interest in the land parcel could be due to (Singapore’s) strong GDP growth of 18.8 per cent year-on-year in Q2 2010, driven by a 44.5 per cent year-on-year surge in manufacturing. This coupled with a robust take-up of 2.67 million sq ft of factory space in Q2 2010 could have created more interest in the land,’ said Li Hiaw Ho, executive director of CBRE Research.

Oxley’s top bid of $169 psf ppr was almost twice the amount of recent winning bids for industrial sites in Ubi that were awarded.

In fact, the last time that the $100 psf-level was breached for industrial land was in August 2009. Then, KNG Development paid $105 psf ppr for a 30-year leasehold site at Kaki Bukit Road 2.

And the only industrial land awarded under the government land sales programme for more than $169 psf ppr was a 30-year leasehold site that One Commonwealth now sits on. In November 2007, Chiu Teng Construction paid $170 psf ppr for it.

Oxley’s top bid was 8 per cent higher than the second highest bid, which was from Qing Quan and Qingdao Construction (Singapore).

The two companies put in a joint bid of $146.6 million or $156 psf ppr. Oxley’s bid was also 159 per cent higher than the lowest bid of $61.1 million or $65 psf ppr from Soilbuild Group.

The site has a land area of 375,150 sq ft and a 2.5 plot ratio, giving it a maximum gross floor area of 937,875 sq ft. It is zoned for ‘Business 1′ use, which means it can be developed for various uses such as clean and light industry – which includes computer software development, printing and publishing, assembly and repair of computer hardware and electronic equipment.

Mr Li said that the the breakeven cost for this development is estimated to be about $380 psf to $400 psf.

CBRE’s data shows that in the first seven months of 2010, upper floor strata-titled units in the 60-year leasehold Vertex, located along Ubi Avenue 3, sold for between $309 psf and $409 psf while the ground floor units sold for $371 psf to $550 psf.

Source: Business Times, 12 Aug 2010

JTC Corp seeks consultant to study sector involving over 3,000 companies

(SINGAPORE) Having already ventured underground, Singapore is looking at how it can further intensify the use of industrial land here. It will take a close look at the growing offshore and marine (O&M) sector, given the general shortage of sites, especially those with waterfront access.

JTC Corporation, which is seeking a consultant for this, says the study will cover a sector involving over 3,000 companies, broadly involved in two clusters: marine engineering (including shipbuilding, rigbuilding and ship or FPSO conversions) and offshore oil and gas exploration and production support services.

The feasibility study by the appointed consultant ‘will not just be restricted to existing oil and gas activities here, but also those that are currently carried out overseas and have the potential to be done in Singapore,’ the tender document said.

‘The purpose of the study is to establish the viability of intensifying land usage for these oil and gas activities,’ it added.

JTC’s land-intensification study – starting with the O&M industry and also for the aerospace industry – clearly marks a new phase in the corporation’s attempt to carve out more industrial space here.

It has already embarked on building underground projects, like for oil storage on Jurong Island, and possibly for science parks, and logistics and data processing centres later. JTC is also currently studying building very large floating structures for various industrial purposes.

Its latest study to intensify land usage for the O&M industry follows the planned development of a 13-hectare offshore marine support base at the new hockey-stick shaped Tuas View Extension area.

The support base, replacing an earlier one at Shipyard Road in Jurong, will cater to a strong pipeline of customers for waterfront land. All the earlier offshore suppliers there have since relocated to Loyang Offshore Supply Base in the east.

Construction of the Tuas View base is slated to start this month, with the multi-million dollar project expected to be operational by end-2011.

In line with its land intensification effort, the multi-user facility will provide common waterfront and berthing facilities for O&M companies involved in the manufacturing and fabrication of heavy equipment, components and structures, a JTC spokeswoman earlier told BT.

‘It is aimed at attracting new and quality types of manufacturing activities which will generate high economic value in terms of value-add and fixed asset investment,’ she added.

JTC said that while companies within the O&M sector have vastly different facility requirements, the sector nevertheless ‘shares certain common characteristics in terms of the space/land utilisation of its facilities, which is generally low’.

For instance, the sector commonly uses computer numerical controlled machines, which because of their weight and high-specifications require low-vibration and are usually located on ground-floor areas. Because most of their materials and products are heavy and bulky, these are also usually stored in the open or on the ground rather than stacked within warehouses.

The consultant will be required to study existing value-chain activities in O&M operations and come up with conceptual designs for each of the two industry clusters that can increase the plot ratio or reduce the land required. This includes the possibility of their having multi-tenanted buildings with shared facilities, among other solutions.

Source: Business Times, 5 Jul 2010

RENTS at industrial properties formerly owned by JTC Corp are likely to go up from June next year once a rental rise cap is lifted and a real estate investment trust (Reit) manager takes over.

The properties are held under the Mapletree Industrial Trust, which is headed for an initial public offering, possibly by the end of the year. Reits collect rent from tenants of the properties they own and pay most of it as dividends to unit holders.

Mapletree Investments, which bought the properties in 2008, had to face unhappy tenants struggling with soaring rents last year. Many had petitioned Mapletree for hefty rent cuts to cope with the tough market conditions then. Most of all, they were upset at having missed out on a 15 per cent rental rebate granted by JTC as part of the Government’s Resilience Package.

Many are small and medium-sized enterprises occupying the cheapest of the ex-JTC factories. And JTC rents are generally below market rates.

Property consultants had said that they cannot expect Mapletree to offer them the same low rates.

In any case, Mapletree had said that 1,448 of the industrial trust’s flatted and stack-up factories, as well as warehouses, would benefit from a 5 per cent rental cap – of JTC’s rent in July 2007 – when they renewed their leases before this month.

There is no cap for the remaining 108 – 7 per cent of the total – tenants in its business park buildings.

Mapletree Investments’ chief executive (Industrial) Phua Kok Kim said yesterday it has stuck to the rental cap. He said new tenants are signing leases at higher rates, which shows that the properties are ‘under-rented and there is potential for organic growth’.

But any rise is likely to be gradual, said Mapletree group chief financial officer Wong Mun Hoong.

Mr Phua added: ‘All our rents are subject to competitive market forces of supply and demand, so even when the rental cap of 5 per cent is lifted for non-business park space, the renewal rents will still be subject to market forces.’

Source: Straits Times, 1 Jul 2010

The plots, with total area of 19.92 ha, will be sold on 30, 45 or 60-year leases

THE Ministry of Trade and Industry (MTI) is offering 10 industrial plots for sale under the second-half 2010 industrial government land sales programme.

The plots, with a total land area of 19.92 ha, comprise three sites on the confirmed list and seven on the reserve list.

Five of the 10 sites are new – a 4.65 ha plot at Yishun Street 23/Yishun Avenue 9 on the confirmed list and plots at Woodlands Avenue 12, Tuas View Square, Kaki Bukit Road 4 and Ang Mo Kio Street 62 on the reserve list. The rest are being rolled over from the H1 2010 reserve list.

The government will sell all the plots on leases of 30, 45 or 60 years.

Colliers International director (industrial) Tan Boon Leong noted that all three plots on the confirmed list are zoned Business 2 use. ‘This will cater to strong demand for such sites as seen in the high number of bids for B2 land parcels last year.’

Sites zoned Business 2 can be put to a wider range of industrial use whereas Business 1 land is for clean and light use only.

Mr Tan highlighted the new reserve list plot at Tuas View Square as being relatively small for an industrial plot at just 0.44 ha and the Ang Mo Kio Street 62 site as the first plot the government has offered in Ang Mo Kio through its industrial land sales programme.

He also reckons that industrial land bids are likely to moderate in the second half of this year given the spread of sites that the government is offering.

Sites on the confirmed list are launched for tender according to a schedule. Reserve list sites are released only upon application by bidders.

In the first half of this year, the government also offered 10 industrial sites – two on the confirmed list and eight on the reserve list. Three of the reserve list sites were sold; they are located at Woodlands Avenue 12 and Yishun Avenue 6 (parcels 1 and 8).

The remaining five reserve sites have been rolled over to the H2 slate – two in the confirmed list and three in the reserve list.

Source: Business Times, 30 Jun 2010