(SINGAPORE) The Singapore office market is buzzing with leasing interest as banks and other occupiers expand their operations and plan moves to new Grade A office buildings.

Citigroup is widely tipped to be considering taking more than 200,000 sq ft at Asia Square Tower 1. The 43-storey block will have 1.26 million sq ft net lettable area (NLA) of offices when it is completed in June 2011.

At 50 Collyer Quay, Bank of America (BOA) is said to be in talks to lease about 120,000 sq ft. If a deal materialises, the leasing level in the building will cross the 50 per cent mark. 50 Collyer Quay, which will have 412,0000 sq ft NLA, is expected to be ready in Q1 next year.

Russian oil, gas and resource group Gazprom, which currently uses serviced offices in Singapore, is believed to be negotiating to rent one of the top few floors of the 43-storey Ocean Financial Centre (OFC), which will be completing next year.

OFC’s top few levels will have roof gardens.

Swiss bank Julius Baer, currently at One George Street and Harbourfront Tower 1, may also be considering taking space at a new location, possibly OFC, suggest sources.

In the Tanjong Pagar area, Goldman Sachs and Yahoo have each leased about 40,000 sq ft at Mapletree Anson, which was completed last year.

CB Richard Ellis is understood to be advising both anchor tenants that are expected to lease space at 50 Collyer Quay and Asia Square but its executive director (office services) Moray Armstrong declined to comment on specific clients the firm is representing.

Mr Armstrong was, however, willing to discuss the strength of the office leasing market in general terms.

When office demand began to pick up about a year ago, it was a game of musical chairs as occupiers cashed in on low office rents to move to new office developments.

‘However, deals in the past three months or so have been underpinned by positive headcount growth among occupiers in various sectors – including finance, insurance and professsional services,’ Mr Armstrong said.

Agreeing, Knight Frank director, business space (office) Robert MacDonald said: ‘We’re also seeing hedge funds, principally from New York, coming back to town. Law firms from the UK and US are also looking at Singapore.

‘Serviced offices are seeing very high occupancy thanks largely to new players entering Singapore. These companies will lay the foundation for office demand and help to backfill some of the space being vacated in older Grade A buildings when tenants move out to newer properties.’

On a positive note, Savills Singapore’s director (commercial) Agnes Tay points out that departures from older buildings create opportunities for remaining tenants to expand their premises within the same buildings.

Demand for office space in Singapore has recovered from a negative net take-up of about 236,000 sq ft last year to positive net demand of about 635,000 sq ft in first-half 2010. Standard Chartered Bank’s head of Asean property research Regina Lim forecasts positive demand of 1.9 million sq ft for full-year 2010. She predicts that the average monthly Grade A office rental value will end the year at about $10.20 per square foot, up 26 per cent from end-2009.

An office leasing agent says preleasing rents for Grade A buildings under construction have risen about 25-35 per cent year to date. ‘Monthly rents in new buildings are about $8.50 to $10 psf; they were $7-ish at end-2009.’

The islandwide office vacancy rate has fallen marginally from 12.5 per cent at end-Q1 2010 to 12.3 per cent at end-Q2.

DTZ executive director, business space, Cheng Siow Ying says a key challenge for office leasing agents is managing a mismatch of expectations as landlords have raised rent expectations in select buildings with high occupancies while tenants are still hoping to secure leases at competitive terms.

Citigroup, which is believed to be studying options including renting space at Asia Square Tower 1, currently operates at Millenia and Centennial towers (over 400,000 sq ft), Capital Square and Changi Business Park.

Leases on some space in Centennial Tower and Capital Square are understood to expire sometime next year. When asked if the bank was looking at new locations, its spokesman would say only that ‘from time to time, we may look for real estate options based on the expiry of leases’.

Chris Archibold, head of markets at Jones Lang LaSalle – the exclusive marketing agent representing Asia Square’s developer MGPA – said leasing interest in Tower 1 has accelerated in the past six months, with about 40 per cent of NLA under serious negotiation or let.

‘Tenant profiles are predominantly from banking and finance, professional services and consultancy practices,’ he added.

BOA, which is expected to vacate about 60,000 sq ft at Republic Plaza when its lease expires around mid-2011, is said to be considering a move to 50 Collyer Quay.

Source: Business Times, 19 Aug 2010

Analysts have said Grade B and C offices need to offer more attractive features like new facilities, or risk falling occupancy levels.

Already, there is a growing trend of tenants from the banking sector relocating to Grade A office space or planning to do so.

Banks are leading a flight to Grade A office space as the sector rebounds strongly from the financial crisis and prepares for further expansion.

Analysts said this trend stems from capitalising on low rentals of about S$7 to S$8 per square foot for Grade A offices. These levels are 60 per cent lower than the peaks two years ago.

Donald Han, managing director, Cushman & Wakefield, said: “The Grade A office buildings are doing very well right now in terms of the flight to quality phenomenon that’s happening because rents are at an all-time low, so obviously they are moving into Grade A office stock.

“And on top of that, the bulk of supply that we have in the next three years, about 7 million square feet from here on, are all Grade A office stock – about 80 per cent of them.”

About 2.5 million square feet of Grade A office space will be coming up annually over the next 3 years. And analysts said landlords of lower grade offices will have to revamp their properties to stay relevant.

Some measures could include upgrading older properties by sprucing up the facade of the buildings.

Tay Huey Ying, director of Research and Advisory, Colliers International, said “They can also look at redevelopment by amalgamating with their neighbouring plots so they can enjoy bigger floor plates and cater to financial institutions, for example.”

Occupancy rates are currently at about 96 per cent for Grade A offices, and 90 to 92 per cent for Grade B offices.

Analysts believe the financial sector will continue to lead in the occupancy of Grade A office space. But Grade B should not do too badly, as tenants from other sectors, such as shipping and insurance, are renewing or expanding their operations.

Analysts said the overall office market is expected to perform well, with rentals increasing as much as 12 per cent by the end of this year due to the strong economic outlook.

Source: Channel News Asia, 6 Aug 2010

CAPITACOMMERCIAL Trust (CCT) reiterated last week that it will not distribute a special payout to unit-holders when it completes its $380 million sale of StarHub Centre in September. Likewise, it did not return proceeds to shareholders when it completed the sale of Robinson Point in April.

The trust has said it is setting aside the net cash proceeds from these two divestments – totalling about $577.5 million – for future acquisitions and to reduce debt.

On the debt front, CCT can choose to refinance debt when it falls due, given its current gearing ratio is relatively low at about 33 per cent.

As for acquisitions, the trust has thus far found it difficult to buy office blocks. In fact, it has been selling office blocks which it believes have reached the optimal stage of their life cycle as office assets – such as Robinson Point and StarHub Centre.

CCT’s manager says it is keen to increase its exposure to the Singapore Grade A office sector. But buying such assets in today’s market is not easy for a Reit, as owners of Grade A office buildings are pricing the recovery in rents into their asking prices. As a result, the yields on these properties are not high enough to generate accretion for a Reit if it were to buy such expensive assets.

Given this challenge, some analysts think that instead of keeping its cash for future acquisitions, CCT could be saving it for something else – perhaps to re-visit plans to redevelop Market Street Car Park into a Grade A office project.

It was in January 2008 that CCT first disclosed it had obtained outline planning permission (OPP) from the Urban Redevelopment Authority to redevelop Singapore’s first multi-storey car park into a new office tower with gross floor area of about 850,000 sq ft and a maximum plot ratio of 14.49. It estimated the total cost then at $1-1.5 billion.

But the global financial crisis struck – and Singapore office rents started to slide. In January 2009, CCT’s manager announced its decision to abort the redevelopment plan, citing the uncertain market outlook and tight credit conditions, as well as high development cost and significant project size.

Quizzed about the possibility of re-visiting the Market Street plan at CCT’s second-quarter results briefing last week, CapitaCommercial Trust Management chief executive Lynette Leong said the OPP had lapsed, but added that the group continually reviews its assets. She also said that the Market Street property is generating an attractive net yield of more than 8 per cent based on its $47 million valuation as at June 30, 2010, thanks to a shortage of CBD parking lots. The yield surpasses that for office space.

However, some analysts think that the time could be right for CCT to make a fresh planning application to redevelop Market Street Car Park into offices. And approval from authorities should again be forthcoming. For one, there is concern among property consultants about a potential shortage of new prime Grade A office space post-2012. The redevelopment of Market Street Car Park into offices could help alleviate this to some extent.

Redeveloping the property will mean the loss of 704 CBD parking lots that provide season and hourly parking. But of course, the authorities could always require CCT to reinstate this supply in its new project. And some relief will come soon from 250 public parking lots – for hourly parking – that will be ready by October this year underneath the Lawn @ Marina Bay, which is part of the Marina Bay Financial Centre project.

Standard Chartered Equity Research estimates the cost of redeveloping Market Street Car Park has fallen from 2008, probably to $1 billion to $1.1 billion today, given lower construction costs and development charges now. ‘If the Grade A office building (about 850,000 sq ft) conversion is completed by 2015 and rented for $10-14 per sq ft a month, the yield on cost would be about 6-8 per cent and development profit would be 6-25 cents per unit,’ it said.

Given CCT’s $6 billion asset size and the rule that development properties must make up no more than 10 per cent of a Reit’s asset size, CCT will no doubt have to seek the appropriate structure to undertake the development, perhaps jointly with parent CapitaLand.

A cash hoard will come in handy for such a venture.

Source: Business Times, 28 Jul 2010

But most are conservative about the strength of space absorption for the rest of 2009

Cushman & Wakefield’s mid-Q3 analyses show the decline in prime office rents has slowed. For instance, Raffles Place Grade A office rents fell 18 per cent from $10.61 in Q1 to $8.70 in Q2. But since then, they have dipped just 2.9 per cent to $8.45.

The same trend is showing up for prime office rents in the Shenton area. They have dropped 5.8 per cent from Q2 to $6.32 – a smaller decline compared with the 17.9 per cent drop from $8.17 in Q1 to $6.71 in Q2.

The prime office vacancy rate at mid-Q3 is 6.1 per cent, up 0.4 of a percentage point from Q2.

‘As economic conditions continue to stabilise, we will see the flow-through to improved space absorption happening over the next few months,’ said Cushman & Wakefield research director Ang Choon Beng.

‘On a more optimistic note, if Singapore’s GDP performance comes in at the better end of current estimates, we could potentially see positive space absorption by Q4 2009.’

Singapore’s Q2 GDP jumped 20.7 per cent quarter-on-quarter but the government remains fairly guarded, keeping its GDP forecast for the year at a contraction of 4 to 6 per cent.

Net take-up of office space here has been negative for three consecutive quarters since Q4 2008 – a result of weakening demand for office space and rising supply.

Other consultants that BT spoke to agree that office rents have fallen at a slower pace, but are more conservative about the strength of space absorption for the rest of the year.

‘It’s probably a little bit early to forecast positive take-up over the second half,’ said CB Richard Ellis’s executive director for office services Moray Armstrong. For one thing, some companies may have introduced downsizing plans that will only take effect in the months ahead, he said.

There could still be downward pressure on rents in the next few quarters and positive take-up of space might not emerge until next year, he added.

Jones Lang LaSalle’s head of markets in Singapore Chris Archibold is also cautious about where net take-up could head in Q4. ‘There are little bits of expansion here and there but they are very few and far between at the moment . . . and we’re still seeing some organisations downsizing,’ he said.

All three consultancies reckon a game of musical chairs is going on in the office market – leasing activity has been dominated by companies relocating for better propositions, such as more competitive rents or more efficient floor plates. As BT reported last week, several firms are moving to new buildings such as Mapletree Anson and Straits Trading Building.

Source: Business Times, 13 Aug 2009

Some tenants factor in higher headcount as they move to new locations

(SINGAPORE) There’s a buzz in the office leasing market. Many new leasings are at the expense of space being given up in existing locations as occupiers are drawn to better-value propositions in newer buildings. But a few are taking up more space in their new locations than what they are giving up in their existing premises to cater to future increases in headcount.

‘It’s not all musical chairs. There’s also a smattering of improved headcount numbers, even as most occupiers chase lower cost, better value locations,’ a seasoned office property consultant said.

Another office consultant, Knight Frank director of office leasing Agnes Tay, said: ‘I don’t expect net office demand to turn positive this quarter, but the negative demand will be smaller in the second half of this year. Companies in general are more optimistic now compared to the end of last year.
More of them are now taking a position on headcount and real estate requirements and a few are even making plans for future growth.’

Much of the leasing activity has centred on new buildings – including Mapletree Anson and Straits Trading Building.

More than 80 per cent of Straits Trading Building is said to be let out, ahead of its completion later this year.

Tenants are said to include Rajah & Tann (which is understood to be taking up at least 80,000-90,000 sq ft), overseas law firm Conyers Dill & Pearman and serviced office operator Asia-Pacific Business Centre. Colliers International is said to have brokered these leasing deals.

Rajah & Tann is expected to move from its existing premises at Bank of China Building nearby; Conyers, which is leasing a floor at Straits Trading Building, will move from Singapore Land Tower.
Over in the Anson Road/Tanjong Pagar corner of the CBD, Mapletree Anson, which received Temporary Occupation Permit recently, is said to be 35 per cent let out, with more than 100,000 sq ft leased. Tenants include AON, QBE (both involved in the insurance and reinsurance business) and a Japanese MNC, understood to be Sumitomo.

AON is moving from Singapore Land Tower, QBE from OCBC Centre and Sumitomo from Equity Plaza. CB Richard Ellis is said to have brokered the three leasing deals in the project.

Tenants are said to have been drawn to Mapletree Anson’s efficient floor plates, with column-free space of 20,000 sq ft per floor allowing more effective layout of workstations.

A stone’s throw away, a La Salle Investment Management fund will be completing its 20 Anson Road project in a few months.

Both office buildings have attained Singapore’s highest green building certification of Green Mark Platinum.

An office developer said: ‘Most of the leasing deals in the past six to nine months involve relocations or consolidation from several buildings into a single location. In contrast, 12 to 24 months ago, leasing deals involved occupiers upsizing their space requirements.’

Jones Lang LaSalle’s head of markets, Singapore, Chris Archibold said: ’2009 will be a negative take-up year but in terms of market activity, leasing deals will be higher in the second half of this year. A lot of relocation is being driven by consolidation or downsizing rather than expansion. Hopefully, expansion will come back next year. There are tenants with passing rents below current market rents and who are therefore looking for cheaper alternatives like new buildings in peripheral CBD locations.’

Office consultants expect office rents to continue easing for the rest of this year – but at a slower pace. The demand is still weak but there is substantial supply coming on the market in the next few years.

According to government figures, the pipeline supply for the office sector stood at about 13.3 million sq ft gross floor area as at end-Q2 2009, of which about 12 million sq ft is slated for completion by 2012.

JLL’s average monthly rental value for prime Grade A Raffles Place (small space) stood at $9.50 psf in Q2 2009, about half the peak figure of $18.40 psf in Q3 last year.

Source: Business Times, 5 Aug 2009

Some firms may expand as rents fall and the economy stabilises

(SINGAPORE) A plunge in Grade A office rents has raised Singapore’s competitive edge somewhat. According to Colliers International, office occupancy costs here were the fourth-highest among 26 Asia-Pacific cities in Q2 this year – down a notch from a quarter ago.

As rents stay weak while the economy stabilises, property consultants also expect some companies to take advantage of the situation to expand.

Colliers noted that monthly gross rents for Grade A offices in Singapore’s central business district (CBD) posted the sharpest fall in Q2, compared with other major cities in the region. Rents slid 26.2 per cent quarter-on-quarter, averaging at $6.73 psf per month in Q2.

As a result, Singapore fell from third to fourth place in a ranking of office occupancy costs. Tokyo remained the most expensive place in the Asia-Pacific to rent an office – average Grade A CBD office rents there were 2.2 times that of Singapore’s, up from 1.6 times in Q1.

Hong Kong also kept its No. 2 spot. Average Grade A CBD office rents there were 1.4 times that of Singapore’s, growing from 1.2 times in Q1. Ho Chi Minh City rose one notch to replace Singapore in third place on the list.

Colliers expects office rents in Singapore to continue falling up till H1 next year, albeit at a slower pace. This is because demand from most companies is likely to stay subdued, while supply of shadow space could increase.

This means that Singapore could continue slipping in the list of the most expensive Asia-Pacific cities to rent an office, said Colliers research and advisory director Tay Huey Ying.

While most companies may be cautious about expansion, some may take advantage of lower rents to grow in anticipation of better times ahead. ‘Flight to quality and opportunistic expansion can be expected to intensify on the back of continued rental weakness,’ Ms Tay said.

Cushman and Wakefield managing director Donald Han agreed, noting that companies have been more willing to relocate to larger premises since May or June this year.

‘The economy now looks like it’s on the mend’ and some companies ‘are budgeting for a possible increase in headcount’ by some 10-15 per cent, he said.

Mr Han added that a few quarters ago, most firms were still watching the rental market and would rather extend their leases than commit to more space. As rental declines moderate, ‘tenants are going to say – how low can it go?’

Colliers cited Dresdner Bank as an example of companies expanding or upgrading their space requirements as office rents fall. The bank will be moving from Tung Centre at Collyer Quay to 71 Robinson Road where it will take up 20,000 sq ft of space.

Office rents fell 26.2 per cent from the first quarter, according to Colliers International’s new Asia Pacific Office Market Overview.

It was the biggest decline in the region, with Hong Kong next, with a fall of 10.3 per cent.

Tokyo is the priciest, with Hong Kong and Ho Chi Minh City second and third, respectively.

The survey assesses monthly gross rents for Grade A offices in central business districts of 26 cities in the Asia-Pacific region.

‘Monthly office rents here have fallen 41.5 per cent for the first half of this year to average at $6.73 per sq ft,’ said Ms Tay Huey Ying, director of research and advisory at Colliers International.

This was due to both the large supply of office space looming and firms giving up office space because of the financial crisis, she said.

However, the average occupancy rates of such offices stabilised in the three months to June 30, ‘declining nominally from 94.3 per cent to 93.9 per cent’, said Ms Tay.

Ms Chua Chor Hoon, DTZ’s head of South-east Asia research, pointed out that falling rents do not reduce business costs for all parties.

It is only good for tenants with leases due for renewal or those looking to rent.

‘If your lease is not due for renewal, you still have to pay at the rate you signed on earlier,’ said Ms Chua.

Ms Tay said office rents here would remain depressed over the next 12 months.

‘Given that the economy is expected to contract at a reduced pace, growth in demand for office space will likely stay subdued,’ she said.

Ms Tay also cited a large supply of upcoming office space and shadow space. This is space already leased to a tenant who wants to sublet it.

She said that Singapore is likely to keep slipping in the ranks because all the other Asian cities in the survey have relatively brighter outlooks.

This will improve Singapore’s competitive edge, as office rent would be cheaper here than elsewhere.

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Source: Straits Times, 4th Aug 2009

Pace of decline slows down but new supply looms over the next few years

(SINGAPORE) The pace of decline in prime office rents slowed in the first six weeks of the second quarter and the improvement has been most visible in the key Raffles Place sub-market, going by latest data from Cushman & Wakefield.

The property consultancy’s monthly average rental value for prime Raffles Place slid 6.6 per cent in the six weeks since the end of Q1 2009 to $9.44 per square foot as at May 15, a much smaller decline than the 28.8 per cent quarter-on-quarter drop registered in Q1 this year. This brings the total year- to-date decline to 33.5 per cent from $14.20 psf a month at end-2008.

The average Grade A Raffles Place rental eased 8.7 per cent in mid-Q2 2009, again a more moderate drop than the first quarter’s 27.7 per cent Q-on-Q slump.

The moderation in rental decline was also seen in the other micromarkets in Cushman’s prime office basket – namely, Shenton, City Hall and Orchard. Cushman’s overall prime office vacancy rate crept up 0.4 percentage point to 5.5 per cent as at May 15, milder than the 2.1-percentage point Q-on-Q hike to 5.1 per cent in Q1 2009.

‘The deceleration of rent declines is not surprising in light of the recent global stock market rally and signs of the oft-mentioned green shoots starting to emerge in major economies around the world,’ Cushman said in its report. This has caused a mood shift among landlords – from one of nervousness to a ‘more considered and cautious stance’. ‘The continued caution is understandable in light of competition from the oncoming stream of new office supply,’ Cushman added.

CB Richard Ellis executive director (office services) Moray Armstrong acknowledged that the pace of rent declines has ‘shown signs of easing in the past couple of months’ and expects this trend to continue. ‘There’s some semblance of confidence seeping back into the system,’ he said.

‘Relocation and leasing activity has been very limited for the past six to nine months. We’re looking out for a restoration of normal level of leasing activity, combined with the restoration of positive occupier demand. Those will be the signs that we’re emerging out of the office downcycle. We’re not there yet,’ Mr Armstrong added.

The office market may be weighed down by looming new supply – with 9.9 million sq ft net lettable area of offices slated for completion from 2009 to 2013. This year alone, the new supply is projected at about 2.56 million sq ft, 83 per cent above last year’s 1.4 million sq ft.

Demand-wise, the Singapore office market has already seen two consecutive quarters of negative take-up: 366,000 sq ft in Q4 2008 and nearly 323,000 sq ft in Q1 2009, based on official figures.

Cushman’s director of research Ang Choon Beng predicts around 40 per cent full-year contraction in prime office rents, with a bigger slide expected for Raffles Place.

‘While our forecast model predicts that prime office rents would continue to be weak through 2009, we believe the market has, in some instances, already priced in 70 per cent of the anticipated full-year decline. With the significant portion of the rent declines behind us, we think tenants can start to be more confident of entering into leases.’

Cushman’s figures show that in the Shenton micromarket (which includes Shenton Way, Robinson Rd and Anson Rd), the average monthly rental value slipped 6.5 per cent in the first six weeks of Q2 2009, slower than the 18.7 per cent Q-on-Q contraction in Q1. The City Hall location – which includes the Marina Centre area – saw an average 9.4 per cent rent reduction in the first six weeks of Q2 from the end-Q1 level, against a 27.2 per cent Q-on-Q drop in Q1. Similarly, for the Orchard area, the 9 per cent mid-Q2 drop was smaller than the 15.5 per cent slump in Q1.

Cushman’s director of commercial and industrial agency Kelvin Chiang says that along with an uptick in tenant inquiries and demand in the first six weeks of this quarter, there wasn’t much sublease (shadow) space being added to the market. Neither does he foresee any significant supply of additional ‘shadow space’ – which refers to excess space that companies try to sublet – in the months ahead.

DTZ executive director (occupier services) Angela Tan says that while there has been no let-up in the amount of shadow space in the market, there is healthy interest in such space as it offers ‘good value proposition for short-term use since the space usually comes fully fitted out and reduces the initial set-up cost for the new occupier’.

Source: Business Times, 21 May 2009

Price works out to 36% below what seller paid in 2007

(SINGAPORE) Finally, a price benchmark has been set for a CBD office block in Singapore. Parakou Building, at the corner of Robinson Road and McCallum Street, has changed hands at $81.38 million or $1,280 per square foot of net lettable area, BT understands.

A subsidiary of Cathay Organisation, controlled by Choo Meileen, is believed to be the buyer. Knight Frank is said to have brokered the deal by private treaty. It declined to comment when contacted.

The $81.38 million transacted price for the 16-storey freehold office block is about 36 per cent lower than the $128 million the seller paid for the property two years ago.

Still, the loss for UK fund manager New Star Asset Management Group (which was acquired recently by Henderson Group) would be mitigated substantially by the Singapore dollar’s appreciation relative to the pound over the two years.

The last major office investment sales deal was in June last year when City Developments Ltd sold the 999-year leasehold Commerce Point near Raffles Place MRT Station for $2,200 psf.

There was at least one other smaller deal after that – the $21.5 million sale of Beach Junction at Beach Road in August last year.

The dearth of sales of office blocks since then, in the aftermath of the global financial crisis, has made it hard to price such assets, although rents have clearly fallen.

The average gross monthly Grade A office rental value has fallen about 35 per cent from a high of $18.80 psf in Q2 and Q3 last year to $12.30 psf in Q1 this year, according to CB Richard Ellis figures.

While Parakou Building has sold for 36 per cent below what the seller had paid two years ago, bigger price discounts are expected for larger office towers costing several hundred million dollars or more, because there is less equity around and because of tight bank financing, property agents say.

‘So potentially, based on a returns perspective, the price benchmark might be tested again,’ a senior property consultant said.

Source: Business Times, 18 May 2009

Vacancies hit 10% in Q1; broader property market sees prices fall across sectors; rentals also slide, URA data shows

This segment took a hit for the second consecutive quarter, government data showed. The broader property market also saw prices and rentals slipping.

‘Many of the corporates we talk to are well advanced in implementing their restructuring programmes. From this, we deduce we may be going through the period of sharpest contraction in office demand now. Contraction may ease in the second-half,’ he said.

The weak demand in the office sector also rubbed off on business park space, which saw negative take-up of about 215,000 sq ft in Q1, against positive take-up of some 10,700 sq ft in Q4 2008. Vacancy rate for the sector increased from 6.2 per cent in Q4 2008 to 9.7 per cent in Q1 2009.

In the private residential segment, URA’s overall islandwide price index slipped 14.1 per cent in Q1 over the preceding quarter, slightly steeper than the flash estimate decline of 13.8 per cent. The Q1 drop was also the biggest quarterly drop to date. The index has now eased 21.2 per cent since peaking in Q2 last year.

Colliers International director Tay Huey Ying says: ‘Mass market homes could see more gradual price corrections averaging about 8 to 12 per cent over the next three quarters (from Q1 2009 levels) as more sellers in the secondary market as well as developers with unsold units from earlier launches can be expected to adjust the pricing of their properties to near-current levels.’

She predicts bigger average price declines of 10-15 per cent for the mid-tier and high-end/luxury segments over the same period.

URA’s private residential rental indices show that the sharpest contraction in Q1 was for non-landed homes in the Core Central Region, which shrank 10.3 per cent quarter on quarter. The overall private residential rental index slipped 8.5 per cent in Q1, bigger than the 5.3 per cent drop in Q4. ‘The decline in rents could be attributed to supply outstripping demand as more expats left the country and to more new projects being completed,’ CBRE executive director Li Hiaw Ho said.

Developers sold a total 2,596 private homes in Q1, about six times the 419 units in Q4 2008.

The latest Q1 number was 64 units lower than the 2,660-unit figure collated from monthly developer sales stats (for January to March 2009). The decline reflects lapsing of options on units sold earlier in the quarter, URA’s spokeswoman said.

Market watchers also observed a slight easing in residential supply.

Some 27,423 private homes are expected to be completed between Q2 2009 and 2011, lower than the 31,004 units projected for completion between 2009 and 2011 in URA’s Q4 2008 data.
The smaller pipeline supply partly reflects the completion of 2,230 units in Q1 2009.

Developers may also have postponed redevelopment of some of the sites they had bought through en bloc sales and delayed construction, said URA’s spokeswoman.

URA’s shop rental index eased 3.3 per cent quarter on quarter in Q1, after dipping 0.6 per cent in Q4. The all industrial rental index slid 5.6 per cent in Q1, also worse than the 3.7 per cent fall in Q4.

Summing up prospects for Singapore’s property markets, Knight Frank managing director Tan Tiong Cheng said: ‘For the private residential sector, there’s evidence of a pick-up in activity – not just in the primary market but also subsales and resales. For office and industrial, there are going to be more rental declines because of the economic slowdown. Retail will be difficult. New malls opening this year may drum up business, but it will be at the expense of existing malls, given that tourism numbers are weak.’

Source: Business Times, 25 April 2009