SINGAPORE is now a relative bargain for office tenants. Thanks to a sharp fall in rents, it has fallen right off one key ranking of the world’s 20 most expensive office locations.

sat in 26th spot as at June 30, having tumbled 20 places from No. 6 just six months earlier, according to a global office report yesterday by Colliers International.

Indeed, average office rents here are now below the 20-year historical average of $8.40 per sq ft (psf) a month, after diving nearly 55 per cent from their peak a year ago, said another report from Jones Lang LaSalle yesterday.

Its preliminary data showed that average gross effective rent of prime Grade A properties in the main central business district area fell by 12.6 per cent quarter-on-quarter to $8.30 psf a month in the current third quarter.

The Colliers ranking showed that Hong Kong remained in the No. 1 spot ahead of cities such as London, Moscow and Tokyo.

It said Singapore’s office property market was one of the most severely hit by the global financial crisis in the first half of the year. It registered the second biggest drop of 42.3 per cent in Grade A office rents to US$55.53 (S$78) psf a year.

Latvian capital Riga posted a drop of 49.6 per cent, the largest in the first half of the year, while New Delhi came in third with a 38.6 per cent fall. Hong Kong saw a 22.4 per cent fall during this period.

Unlike Hong Kong, Singapore has a supply problem. The Colliers report showed that Singapore ranked No. 8 among the cities with the most office supply in the pipeline.

Singapore has 10 million sq ft of office space under construction – likely to keep rents in the doldrums for a while more, despite the improving economic outlook, said Colliers International’s director of research and advisory, Ms Tay Huey Ying.

‘Singapore will stay out of the Top 20 ranking for at least the next 12 months, which means it will remain a very competitive location.’

Jones Lang LaSalle said market activity has risen significantly in the third quarter but much of the demand is a ‘flight to quality’ rather than evidence of expansion.

This was the case at 78 Shenton Way Tower 2. Commerz Real said yesterday that it has secured an anchor tenant – its first – for the building, which was completed in June.

The Singapore branch of American Home Assurance Co, an operating unit of Chartis, will take up about 85 per cent of 64,000 sq ft of space for 10 years, with an option to extend for a further three years.

The firm will move there next January from its present offices in Martin Road.

So far, increased activity is not enough to absorb new supply, as core CBD office stock grew 600,000 sq ft in the third quarter with the completion of 71 Robinson Road, Mapletree Anson and 78 Shenton Way Tower 2, said Jones Lang LaSalle.

‘Under pressure to secure occupancy, some landlords continue to be aggressive on rentals,’ it said. ‘There have also been instances of landlords offering cash subsidies to attract prospective tenants in order to keep effective rentals high.’

Rent-free periods while negotiated on a case-by-case basis, are also becoming more widespread as landlords seek to maintain headline rents, it added.

With firms still cautious, new leases are likely to be signed at competitive rates and that will continue to weigh on the market, said Ms Tay.

Source, Straits Times 23 Sep 2009

Other big Australian investors likely to follow suit, say analysts

(SYDNEY) Australia’s sovereign wealth fund is beefing up its property portfolio through acquisitions at home and overseas, sources and local media said yesterday, leading analysts to suggest that more big investors may follow suit.

The Future Fund, which holds A$58 billion (S$69.7 billion) in assets, is looking to buy a stake in the Bullring shopping centre in Birmingham, UK, and is also looking at the Lakeside Joondalup shopping centre in Perth, deals that could be worth more than A$800 million, according to The Australian newspaper and sources.

Signs of stabilisation are emerging in the global property market.

Westfield Group, the world’s largest shopping mall landlord, said last month that it was cautiously optimistic about the outlook, echoing other Australian firms, while there are signs of improvement in the US and UK markets, according to analysts.

‘This is a sign of things to come. There will be more purchases. There are prospective investors sitting there with cash ready to invest,’ said Ken Atchison, managing director at Atchison Consultants.

‘Like Future Fund, superannuation funds in Australia will start to have cash available in the near future,’ he added.

Ian Fryer, head of research for Chant West which covers the pension fund market in Australia, agreed. ‘It’s fair to say that some have been quite cautious in their investments over the past a little while and have built up more cash than they usually would, and they are waiting for opportunities,’ he said.

The timing looks right for picking up real estate assets.

Capital values for UK retail assets fell 27 per cent last year, while those for Australian retail assets dropped 10.6 per cent in the year to June, according to UK research firm IPD.

EL & C Baillieu Stockbroking head analyst Ivor Ries said it was a good time in the economic cycle for the Future Fund to be buying shopping mall assets.

‘When you’ve just been through a period where consumers have been shutting their wallets and savings are high, that’s when you should be buying shopping centres.’

He said the Future Fund would get better yields by buying assets directly rather than buying exposure through listed property trusts.

‘There’s about a 1.5 percentage point gap between the cash yield on the listed vehicle and the actual yield you get from buying them directly,’ Mr Ries said.

The Future Fund said it did not comment on specific investments.

The fund had just A$529 million invested directly in property, or one per cent of its total portfolio, as at March 31, the most recent date for which figures are available. That is well short of its long-term plans to invest up to 30 per cent of its funds in assets such as property, infrastructure and utilities. The fund sees itself as a long-term holder of assets. — Reuters

Source: Business Times, 3 Sep 2009

(WASHINGTON) Michelle Jonasson-Jones, a Silver Spring, Maryland-based property agent, cautions potential tenants about a rental scheme making the rounds online that has caught the attention of the FBI.

Ms Jonasson-Jones said that she has had her listings for rental properties ‘stolen’ and relisted under a different name and a lower price, usually on Craigslist. The impostors send prospective tenants an ‘application’ and ask for their personal and financial information.

They tell prospective renters that the owner is working overseas and is unavailable to show the house.

‘It used to be they were scamming the owner; now they’re scamming the tenants,’ she said.

Wendy Dufford, an intelligence analyst for the FBI in Columbia, South Carolina, wrote an article for the bureau’s website after the South Carolina Association of Realtors called to report such a scam.
Tenants who had been scammed were showing up at people’s houses, she said, believing they had rented from a missionary overseas.

A formal investigation won’t be launched until a minimum threshold of losses is reported online, Ms Dufford said, but so far the FBI has discerned that the scam originated in Nigeria and is affecting cities nationwide.

‘They’re choosing victims because of the economy,’ Ms Dufford said.

Many of the scam victims have been forced to rent, because they’ve lost their homes and are searching on Craigslist, she said.

‘They try to rent these homes, and then they get their money stolen.’ – WP

Source: Business Times, 18 Aug 2009

THE average value of European commercial property transactions fell 35 per cent in the first half as banks granted fewer loans, according to CB Richard Ellis Group Inc.

The average price was 18.4 million euros (S$37.9 million), down from 28.3 million euros a year earlier and 44.4 million euros at the peak of the market in 2007, said CBRE, the world’s largest property broker. The biggest deal was the sale of properties owned by failed company Dawnay Day Group in the UK for more than £600 million (S$1.43 billion), CBRE said.

Commercial property investors are struggling to finance large purchases in Europe after banks curbed lending in the credit crunch and stopped securing bonds against buildings. There were nine transactions valued at more than 200 million euros in the first half, compared with 40 a year earlier, according to the broker.

‘Appetite for lending on large transactions has been very limited since the second half of 2007,’ said Jonathan Hull, CBRE’s executive director of European capital markets. ‘In recent months, we have seen greater willingness to lend.’

Source: Business Times, 15 Aug 2009

Student accommodation promises good investment returns even as UK property market remains dull

London – Property investors are turning to the student accommodation sector as a would-be phoenix rising from the ashes of the UK real estate market, promising growth in returns and size for at least the next few years.

Student housing is viewed as a rarity in the UK property market that still makes for an attractive investment, as more traditional commercial assets suffer falling capital values and rents, and rising tenant defaults.

‘Ten per cent increase (in student housing rents) per year is not sustainable in the long term when you have new supply coming on,’ said Mr Philip Hillman of property agency King Sturge.

‘But with the chronic shortage of student housing, rents will still rise for some time.’

Property broker Savills said it now gets about two enquiries a week from pension funds new to student housing, as rents for other assets like offices, malls and factories are forecast to fall up to 15 per cent this year amid the recession.

‘Pension funds had their fingers burnt in commercial assets where, if a big tenant drops out, the entire building is vacant; but if a student drops out, you still have a hundred more ready to take the room,’ Savills associate director Natasha Ham said.

The student housing sector, valued at 26.5 billion euros (S$54 billion), two-thirds of which is owned by universities and the rest by private operators, is about 10 per cent the size of the total commercial property market. Risk-averse banks are still willing to lend to build new student flats, thanks to an expected double-digit growth in Britain’s student numbers, student homes operators said.

University Partnerships Programme (UPP), the UK’s second-biggest student homes operator and part of Barclays Private Equity, last year raised £300 million (S$711 million) from banks, and plans to further invest £1 billion and double its portfolio of 18,000 student beds by 2015.

New entrants to the student housing market have been attracted by the prospects of steady returns, where property yields have held steady at about 6 per cent over the past three years.

Sydney’s Campus Living Villages, backed by four Australian pension funds, made its first UK deal last December, buying 755 student flats from the University of Salford in Manchester, and is in talks over deals with other British universities, its UK chief executive, Mr Gary Clarke, said.

Elsewhere in Europe, agents say Germany and France also offer investment opportunities because of their attraction to overseas students, and relatively undeveloped student housing where average rents are a third cheaper than in the UK.

Savills is working with a Germany-based institutional investor to set up a 210-million-euro fund later this year, with plans to build student homes offering 6,000 beds across 15 German cities, including Frankfurt and Munich, Ms Ham said.

‘The fund manager has identified a UK-listed developer to provide sector expertise, to create the branded student accommodation model in Germany,’ she said, declining to name the parties as an agreement has not yet been finalised.

Branded student housing can be pricey, with high-end versions offering en suites, flatscreen TVs and laundry services costing up to £300 a week in London.

Despite the recession, King Sturge’s Mr Hillman said there are few signs that the target market – mainly affluent first-year and post-graduate international students – is trading down.

‘First-year students usually can’t find housemates to rent with, and there is no guarantee the flat will be near to school,’ said UPP finance director Gabriel Behr.

Reuters

————————————————————————-
Promising market
Elsewhere in Europe, agents say Germany and France also offer investment opportunities because of their attraction to overseas students, and relatively undeveloped student housing where average rents are a third cheaper than in the UK.

Source: Sunday Times, 12 July 2009

Institutions and fund managers prefer China, Japan, Australia: Survey

SINGAPORE no longer appears on the radar screen of most non-listed institutional investors and fund managers, according to the latest survey by Asian Real Estate Association (Area).

This year’s hottest picks are China, Australia and Japan, said its Investment Intentions Asia Survey 2009.

The online survey of 73 organisations active in the Asian non-listed real estate funds market found that less than 20 per cent of fund managers and just 10 per cent of investors chose Singapore as their preferred investment location.

China is the most appealing location in terms of Asian performance prospects – it is the choice of 90 per cent of investors and 81 per cent of fund managers.

Japan was the top fund choice for fund of funds managers, firms that hold a portfolio of various investment funds, with 88 per cent of them opting for the country.

Australia, a new entrant, was also a firm favourite.

‘With the exception of China, investors generally appear to have a lower regard than fund of funds managers or fund managers on the prospect of other Asian markets delivering target
performances,’ said the survey.

This year, Singapore did not figure at all in respondents’ preferred locations and sectors in Asia.
In last year’s survey, the Singapore office market was ranked seventh on the list of respondents’ preferred locations and sectors in Asia – though fund of funds managers were already not keen.
The number of institutions interested in Singapore has certainly diminished due to the downturn, said Mr Craig Ward, director of regional capital markets at Savills Singapore.

‘There are still some institutions keen on the Singapore office market, but pricing has not reached an equilibrium.’

According to the survey, investors this year are most keen on the residential sector in China, followed by its retail market.

Fund of funds managers, however, prefer the Australian and the Japanese office sectors.
About 60 per cent of the respondents believe Singapore to be most hit by the global downturn, while just 20 per cent of them thought Hong Kong and Australia to be worst hit by the slump.

‘Singapore is one of the most open economies in the world, so it is more than averagely affected by the downturn,’ said Mr Robert Lie, co-director of Area’s executive committee.

But it is an attractive mature market over the medium term, he added.

‘A lot of investors are cautious. Basically, indicated prices have to correct,’ said Mr Lie, who is also managing director of Redevco Asia.

Asia is the second home market of Redevco, which owns one of the largest retail real estate portfolios in Europe.

Source: Straits Times, 24 June 2009

Institutions and fund managers prefer China, Japan, Australia: Survey

SINGAPORE no longer appears on the radar screen of most non-listed institutional investors and fund managers, according to the latest survey by Asian Real Estate Association (Area).

This year’s hottest picks are China, Australia and Japan, said its Investment Intentions Asia Survey 2009.

The online survey of 73 organisations active in the Asian non-listed real estate funds market found that less than 20 per cent of fund managers and just 10 per cent of investors chose Singapore as their preferred investment location.

China is the most appealing location in terms of Asian performance prospects – it is the choice of 90 per cent of investors and 81 per cent of fund managers.

Japan was the top fund choice for fund of funds managers, firms that hold a portfolio of various investment funds, with 88 per cent of them opting for the country.

Australia, a new entrant, was also a firm favourite.

‘With the exception of China, investors generally appear to have a lower regard than fund of funds managers or fund managers on the prospect of other Asian markets delivering target
performances,’ said the survey.

This year, Singapore did not figure at all in respondents’ preferred locations and sectors in Asia.
In last year’s survey, the Singapore office market was ranked seventh on the list of respondents’ preferred locations and sectors in Asia – though fund of funds managers were already not keen.
The number of institutions interested in Singapore has certainly diminished due to the downturn, said Mr Craig Ward, director of regional capital markets at Savills Singapore.

‘There are still some institutions keen on the Singapore office market, but pricing has not reached an equilibrium.’

According to the survey, investors this year are most keen on the residential sector in China, followed by its retail market.

Fund of funds managers, however, prefer the Australian and the Japanese office sectors.
About 60 per cent of the respondents believe Singapore to be most hit by the global downturn, while just 20 per cent of them thought Hong Kong and Australia to be worst hit by the slump.

‘Singapore is one of the most open economies in the world, so it is more than averagely affected by the downturn,’ said Mr Robert Lie, co-director of Area’s executive committee.

But it is an attractive mature market over the medium term, he added.

‘A lot of investors are cautious. Basically, indicated prices have to correct,’ said Mr Lie, who is also managing director of Redevco Asia.

Asia is the second home market of Redevco, which owns one of the largest retail real estate portfolios in Europe.

Source: Straits Times, 24 June 2009

Orchard Road still 28th costliest; most cities see double digit drop: Colliers

Published annually by Colliers International, the survey tracks annual retail rents – in terms of US dollars per square foot – along the prime retail corridors of 127 cities in North America, Europe, the Middle East and Africa, the Asia-Pacific and Latin America.

Orchard Road still 28th costliest; most cities see double digit drop: Colliers

Published annually by Colliers International, the survey tracks annual retail rents – in terms of US dollars per square foot – along the prime retail corridors of 127 cities in North America, Europe, the Middle East and Africa, the Asia-Pacific and Latin America.

DESPITE the recent uptick in property interest in some countries, the outlook for the sector remains uncertain, an Asian real estate conference heard yesterday.

Speaking at Cityscape Asia 2009, Mr Stuart Labrooy, chief executive of Malaysia-based Axis Reit Management, said the full effects of the credit crisis ‘have not yet reached Asia’.

Property valuations in Asia, he said, will probably bottom out in the second half of the year, but there was no telling when the recovery will come.

Also speaking during a panel discussion on the impact of the downturn on Asian real estate, Mr Blake Olafson, Arcapita’s head of Asia real estate group, said the industry was now focusing on the basics.

He added: ‘If you’re a pension fund manager, that’s what you’ll do – not suddenly try to become a real estate developer in some Tier 3 city in China. There’s a greater sense of realism in the market, and a return to looking at fundamental cash flows, not just internal rate of return deals.’

Invista Real Estate chief executive Duncan Owen said Singapore, Hong Kong and Tokyo are attractive over the medium to long term as they have ‘quite large commercial markets’, sustainable economies and increasing market transparency.

The fact that the Singapore market is now badly affected like other markets is an opportunity for them, he added.

Invista, Britain’s largest-listed property fund manager, recently bought the Asian real estate business of Babcock & Brown, which gave it offices in Singapore and Hong Kong.

In his keynote address, Singapore’s Urban Redevelopment Authority group director (strategic planning) Richard Hoo acknowledged that the economic climate was now more challenging than during last year’s Cityscape Asia.

Today’s focus, he said, was on ‘enhancing our readiness’ when the economy improves.

Yesterday’s Cityscape Asia exhibition was quieter than previous events. Just 40 exhibitors have set up booths this year, and the organiser is expecting more than 3,000 people to visit over its three-day period ending tomorrow.

Last year, it attracted 5,520 real estate professionals and 70 exhibitors.

The 2007 event – inaugurated by National Development Minister Mah Bow Tan – drew 4,689 participants and 125 exhibitors.

Source: Straits Times, 20 May 2009