Office property market slowing in Q2

Singapore’s office property sector market appears to be cooling a little.

According to property consultant DTZ, the average office occupancy rate for the second quarter of this year saw a dip of 0.2 percentage point.

Office rental prices have also been flat – suggesting that the market is resistant to rising prices.

According to DTZ, the average office occupancy rate in the second quarter dipped to 96.9 per cent.

It said the slide was spurred by tenants seeking cheaper locations when their leases expired.

Chua Chor Hoon, Senior Director, Research, DTZ, said, “Our second quarter figures show that it has eased very slightly, by 0.2 percentage point, which reflects the office occupier’s resistance to the high rentals in the CBD, and also partly (because) of the slower economy. Companies are now more cautious and they are taking a longer time to think about expansion and renewal.”

Despite the overall dip, areas just outside the CDB saw higher occupancy rates – with the Novena and HarbourFront areas hitting 99 per cent.

At the same time, office rentals climbed by 1.1 per cent – with locations like Raffles Place now going for an average of S$19 per square foot a month.

The report showed that businesses have been looking to alternative locations like business parks, and temporary office locations to tide them over until new office locations open up in 2010.

At the moment, business park rentals cost about half, or a third of what can be found in the CBD.

Some companies may find it more cost-effective to stay in these alternative locations, but DTZ believes there will still be demand when the new supply comes on-stream.

Ms Chua said, “There will be new demand to take on the new office space, and even if the economy slows down this year and next year, we are likely to see it coming back in 2010. That’s when it also coincides with a few major events and developments that are going to take place, like the integrated resorts, and the Youth Olympics, and that is going to give the economy a boost.”

The DTZ report also showed that industrial sector demand remained stable – despite a weakening manufacturing sector – due to foreign investment. – CNA/ms

Source : Channel NewsAsia – 30 Jun 2008

Katong Mall sold to Tuan Sing Group for S$219m

Katong Mall has been sold in a collective transaction to property developer Tuan Sing Group for S$219 million.

Including a premium of S$24.5 million to top up the site’s lease, the price works out to about S$865 per square foot of gross floor area.

The tender for the 99-year leasehold commercial development in the Marine Parade area was launched in May.

Katong Mall, located at the junction of East Coast Road and Joo Chiat Road, is currently a four-storey building with three basements.

Under the Master Plan, the 78,158 square foot site is zoned for commercial use. It has a gross plot ratio of up to 3.6, with the allowable building height subject to evaluation.

Outline planning permission has been obtained for either a full commercial development or a mixed development with residential and commercial space.

The new development could yield some 100 residential units of 1,200 square feet each, and 185 commercial or retail units with an average size of 400 square feet. – CNA/ms

Source : Channel NewsAsia – 30 Jun 2008

MP REIT secures nearly 20% rent rise for 226,000sf of Ngee Ann City space

Macquarie Prime Real Estate Investment Trust (MP REIT) has secured 19.75 percent higher rent from its tenant Toshin Development.

But when contacted, MP REIT declined to reveal details of the rent, saying it is confidential.

Toshin is the master lessee for about 226,000 square feet of retail space in Ngee Ann City.

The new rent will be locked in for three years from June 8 this year.

MP REIT says this is expected to account for a 7.2% increase in its annualised distribution per unit.

As at 31 March 2008, the Toshin master lease made up a quarter of the gross rent of MP REIT’s portfolio.

MP REIT owns about 27 percent of the strata title interest in Ngee Ann City, comprising 256,000 square feet of retail net lettable area and 141,000 square feet in office net lettable area.

The Toshin area is occupied by luxury retailers such as Louis Vuitton, Chanel, Piaget and Burberry. – CNA/ir

Source : Channel NewsAsia – 16 Jun 2008

New Changi Business Park site may see bids of up to S$600m

JTC Corporation on Wednesday launched a tender for a mega development site at Changi Business Park, and the 4.7-hectare site is likely to see bids as high as S$600 million.

The winning bidder will have to build an integrated development comprising a business park, retail activities and a hotel.

Changi Business Park has been a hub for businesses that need to stay close to the airport or away from the city centre.

The new site being launched by JTC is at the junction of Changi South Avenues 1 and 2.

The site will yield a total gross floor area of 117,515 square metres, and 60 per cent of the floor space must be used for business park activities. The rest has been set aside for so-called “white” or commercial activities, including retail and hotel space.

Developers can dedicate 45 to 60 per cent within the “white” component to retail activities, with the remaining being set aside for the development of a hotel.

Observers say the winning bidder will need to build a hotel on the site to ease the crunch on hotel rooms in the vicinity.

Chua Yang Liang, head of research and consultancy at Jones Lang LaSalle, said: “I would say the retail component is going to be more limited to just serving the day-to-day needs of the immediate occupants there. Hotel, on the other hand, is probably more welcomed. There is a dearth of hotels in and around that area.”

Some 2,000 hotel rooms could be built on the site, according to analysts that Channel NewsAsia spoke to.

The news comes as the government tries to cater to the rising demand for business park space and amenities in that area.

JTC expects Changi Business Park’s current population of 6,000 to surge to 20,000 by 2011.

Market watchers say demand will continue to remain strong over the next 12 to 24 months.

Donald Han, managing director of Cushman & Wakefield, said as long as there is a huge gap between the prime office rentals in the central business district and the rentals in Changi Business Park, “there will be what we call the preference for huge multi-national corporations to try and average down CBD office rents by moving part of their operations into the Changi Business Park.”

Interested bidders have up till 19 August to submit their proposals for the site. – CNA/ac

Source : Channel NewsAsia – 11 Jun 2008

Teck Whye Shopping Centre gets S$1.35m facelift

Chua Chu Kang residents will soon enjoy a new shopping experience. The 20-year-old Teck Whye Shopping Centre will soon undergo a major facelift.

The 79 shops located at Blocks 137 to 146 in Teck Whye Lane will be improved at a cost of S$1.35 million.

The upgrading comes under Hong Kah Town Council’s five-year Town Renewal Plan. So the project will be fully funded by the town council and shop owners don’t need to bear any part of the cost.

The groundbreaking ceremony was officiated on Saturday morning by Acting Manpower Minister Gan Kim Yong, who’s also the MP for Chua Chu Kang.

Construction work will be conducted in phases beginning next week and will take about a year to complete. The new shopping centre will be ready by next May.

Teck Whye Shopping Centre has also been selected for the HDB’s Revitalisation of Shops Scheme (ROS). Under the scheme, assistance will be provided to help shop owners to pay for items that benefit the shops directly, such as awnings and gateways.

The HDB and Town Council will bear 50 per cent of the cost, subject to a cap of S$10,000 per shop, while the shop owners will pay the remaining amount.

The Chua Chu Kang Merchants’ Association is currently working out the package of improvement items for the ROS for Teck Whye Shopping Centre. – CNA/vm

Source : Channel NewsAsia – 7 Jun 2008

Ho Chi Minh City overtakes S’pore as having world’s fastest growth in office rentals

Vietnam’s Ho Chi Minh City has overtaken Singapore as having the world’s fastest growth in office occupancy cost.

The cost of renting office space in Ho Chi Minh City grew 94 percent in the last six months, according to a global survey by consultants CB Richard Ellis.

Moscow was second at 93 percent, while Singapore took third spot with 86 percent growth.

Still, Singapore made its debut among the 10 most expensive markets, coming in 9th with office rentals averaging US$139 per square foot per month.

Dubai was another new entrant, taking tenth spot with rents hitting US$128 per square foot per month.

Despite this, CB Richard Ellis says Singapore’s growth in office occupancy cost is not expected to remain as strong in the coming years.

It says the market peak is close at hand and rents could come down with the supply of new office space in the next few years.

London remains the most expensive office market, with rents hitting as high as US$300 per square foot, followed by Moscow at US$232 and Tokyo at US$220. – CNA/ir

Source : Channel NewsAsia – 28 May 2008

Katong Mall up for collective sale by tender

Katong Mall is up for collective sale by tender.

Under the Master Plan, the 99-year leasehold 78,158 square foot commercial development site has a gross plot ratio of up to 3.6, with an allowable building height subject to evaluation.

It has the potential to be redeveloped into a commercial or retail development with a gross floor area (GFA) of up to 281,369 square feet, subject to relevant authorities’ approval.

To give developers more redevelopment options for the site, Outline Planning Permission has also been obtained for a mixed redevelopment of residential cum commercial development, with an approved plot ratio of up to 3.

This translates to a permissible GFA of up to 234,474 square feet, and could yield up to some 100 residential and 185 commercial/retail units with an average size of 1,200 square feet and 400 square feet respectively.

Sole marketing agent Jones Lang LaSalle said the tender will close at 3pm on June 25. – CNA/ms

Source : Channel NewsAsia – 26 May 2008

Kallang, Paya Lebar to be developed as new commercial hubs

Kallang and Paya Lebar will be developed into new commercial hubs, just like the Jurong Lake District. This is part of the government’s Draft Master Plan, which charts land use over the next 10 to 15 years.

Marina Bay and the city centre will continue to be the key commercial node in Singapore. New growth areas like Tanjong Pagar, Beach Road and the Ophir-Rochor corridor will also be developed.

However, more commercial hubs will be needed outside the city, to offer alternatives to businesses and bring jobs closer to homes.

One regional centre will be in Paya Lebar. About 12 hectares of land are available for development, and half a million square metres will be set aside for office, hotel and retail spaces.

The Urban Redevelopment Authority (URA) said at least 1,400 hotel rooms can be built in the area. And in the near future, residents will be able to shop and dine by the Geylang riverfront.

National Development Minister Mah Bow Tan said: “When the Marina Barrage is completed some time later this year, we will be able to stabilise the water levels in Geylang River.

“Around the Geylang River area, we will be able to integrate very attractive public spaces, malls and so on. The plan is to realign the Geylang River so that it runs through the new commercial developments.”

The proposals will build on the area’s distinctive Malay identity, so there will be a new Geylang Serai Market and Civic Centre. The Civic Centre will house a Community Club, community development offices and even a library.

More activities and bazaars can also be staged at a new plaza, next to the upcoming Paya Lebar MRT interchange.

As for Kallang Riverside, it has been earmarked as the next lifestyle precinct. Urban planners said new parks, waterfront residences and recreational spaces can be developed at the 64-hectare area.

About 600,000 square metres of land will also be devoted to commercial use, with 3,000 new hotel rooms in the pipeline.

About 4,000 waterfront homes have been planned for the area. And the new properties will have a variety of storey heights, stepping down towards the waterfront. This will allow those living further inland to also enjoy the views of the waterfront.

Parts of the historic Kallang Airport will also be conserved and redeveloped into a new entertainment and retail attraction. Also in the works are an integrated second-storey linkway to connect Kallang MRT station to the Old Airport Square and the future Sports Hub.

All in, URA said there are plans to add 327,200 new homes around the island over the next 15 years.

Members of the public can send their feedback on the Draft Master Plan through the URA website.

The Master Plan 2008 will be gazetted after incorporating views from the public at the Draft Master Plan exhibition at the URA Centre. – CNA/ms

Source : Channel NewsAsia – 23 May 2008

Industry players upbeat about plans for 2 new commercial hubs

Industry players are upbeat about the plans for two new commercial hubs, noting that both Kallang and Paya Lebar have great potential for growth, given their close proximity to the city.

However, they said the timing of the various projects will have to be calibrated carefully, so as not to place additional strain on the construction sector.

In the next 15 years, Singapore will have three new commercial hubs. Jurong Lake District, Paya Lebar Central and Kallang Riverside will cost billions of dollars to develop.

According to the National Development Minister, Mah Bow Tan, one or two sites in these new regional centres will be released for sale fairly soon. But market demand will mostly dictate the pace of the developments.

Industry players warn against over-developing and easing plot ratios, which they said could trigger another wave of en-bloc sales.

Simon Cheong, President, Real Estate Developers’ Association of Singapore, said: “We are one of the highest in the world – higher than Dubai, Tokyo, Sydney, New York and Hong Kong – in terms of construction costs. By not increasing the plot ratio, I think the government is giving some relief to the construction industry.”

The government has already announced that it will defer some S$3 billion worth of public sector projects. Other projects may also join the list.

Mr Mah said: “I’ve asked the public agencies to consider deferring more projects if necessary. It makes good sense, (with) construction cost being so high, you won’t get as much value for money.

“It also helps to even out the cycles – when construction demand in other areas goes down, this is one way for us to even out the cycle.”

Some infrastructural works have already started at the Jurong Lake District, which is being transformed into a regional centre for the western part of Singapore. – CNA/ms

Source : Channel NewsAsia – 23 May 2008

CapitaMall Trust buys The Atrium@Orchard development for S$840m

CapitaMall Trust (CMT) has bought The Atrium@Orchard office development for about S$840 million.

CMT said the purchase from the Singapore Land Authority (SLA) will be funded by a mix of debt and convertible bonds.

Describing the acquisition as yield-accretive, the Trust plans to issue at least S$650 million worth of bonds.

The Atrium@Orchard is a commercial development comprising two Grade A office towers and some ground floor retail space.

CMT plans to integrate the development with the Plaza Singapura shopping mall next door which it also owns.

Deputy Chairman of CapitaMall Trust Management Liew Mun Leong said the proposed merger of the two properties will create one of the largest integrated developments along Orchard Road.

The combined property will have about 170m of prime retail frontage and over 900,000 sq ft of net lettable space.

The acquisition will also grow CMT’s asset size by 15 percent to some S$6.9 billion.

With the latest purchase, CMT has revised its local target asset size from S$8 billion to S$9 billion by 2010.

Source : Channel NewsAsia – 22 May 2008