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Republic Plaza asks for above $13 psf after clinching deal with financial firm

RENTALS at top-quality office buildings have hit an all-time high, with Republic Plaza now asking for $13 per sq ft (psf) or more a month.

Republic Plaza raised its asking price after a deal was sewn up above $12 psf in the lead-up to Christmas about a fortnight ago.

A financial institution new to Singapore is believed to have committed to about 3,000 sq ft of space there at around $12.50 psf, sources said.

This compares with the previous record level of nearly $10 psf set in 1996 for average top-grade Grade A office rents in the Central Business District.

The highest recorded rent then for an office building was $11.80 psf, said Mr Donald Han, managing director of Cushman & Wakefield.

Average rents of Grade A office space are now $8.61 psf, up two-thirds from $5.17 psf last year, according to Colliers International.

The speed of rent revisions has picked up considerably in the past few months, with landlords revising up their rentals once a deal is done, consultants said.

With sought-after office buildings enjoying almost full occupancy, any remaining space - likely to be small - can fetch premium rents, they said.

A lot of the demand is coming from financial institutions.

‘We are seeing rental commitments of as high as $12 to $13 psf in Raffles Place. However, it is limited to Grade A office buildings,’ said Knight Frank’s director of business space, Ms Agnes Tay.

One George Street, which is some distance from Raffles Place, is now commanding rentals of $9.50 to $10 psf, up from over $4 about two years ago, sources said.

Premium buildings such as 6 Battery Road and One Raffles Quay have already breached the $11 psf mark, said Mr Han.

Rents at the newest premium building One Raffles Quay, which offers large column-free floor plates, already hit $10 psf a few months back.

Overall rents have increased by almost 50 per cent since a year ago and for certain premium Grade A buildings, effective rents have doubled, Mr Han said.

For this year, consultants are projecting further increases in office rents, led by Grade A buildings, as supply will remain tight until the Marina Bay Financial Centre is ready around 2010.

However, in general, tenants are beginning to resist stratospheric rents, said Mr Han.

‘Tenants who are seeking to renew or expand this year would probably have budgeted a rent increase of 10 to 20 per cent,’ he said. ‘It’s difficult to justify to their head office that they now have to fork out much more than what was originally budgeted for.’

As a result, some tenants have moved out of Raffles Place completely while others have moved their non-core activities to suburban areas.

Some local firms have even chosen to buy their own space as their monthly mortgage payment is substantially below the high monthly rents in Raffles Place, said Mr Han.

Indeed, occupancy costs in Singapore have shot up by 65 per cent year on year, to US$7,860 (S$12,136) per workstation per year, said a statement from DTZ Debenham Tie Leung (SEA).

The rise was the highest across all 134 locations surveyed for DTZ’s global office occupancy costs report, it said.

Source : Straits Times - 3 Jan 2007

That’s the highest increase among 134 locations worldwide: DTZ survey

THE cost of having an office in Singapore notched up the highest increase among all 134 locations covered in the latest DTZ Debenham Tie Leung annual Global Office Occupancy Costs survey.

The 65 per cent jump to US$7,860 per work station per annum took the republic up to 55th position globally from 96th position last year, and put it among the top ten in the Asia Pacific. However it is still comfortably behind other top Asian locations like Hong Kong, which is the second most expensive in the world at US$19,730, and Tokyo’s five central wards which take the eighth spot at US$13,470. Also more expensive than Singapore are Seoul (at 12th position), Mumbai (18th), Sydney (41st), and New Delhi (51st).

‘Despite the hike, occupancy costs in Singapore remain less expensive compared to locations such as Hong Kong and Tokyo,’ said Angela Tan, DTZ Southeast Asia’s executive director and regional head, global corporate services.

Within the Asia Pacific, Hong Kong retained its top ranking from last year for occupancy cost, while Tokyo, Seoul and Mumbai maintained second, third and fourth positions. Singapore’s sharp rise however bumped it up to ninth position, ahead of China’s Beijing and Shanghai.

DTZ attributed the increase to the recent wave of financial institutions and other businesses setting up new global offices or expanding operations here. These have created higher demand and with new supply remaining insignificant till 2010, further rises in occupancy rates and cost can be expected, DTZ added in its report.

‘With the very limited new supply until 2010, occupiers are finding it very difficult to secure office space, especially Grade A space in the CBD,’ said Ms Tan. As a result, those not in the finance, insurance, real estate or business service sectors are increasingly exploring alternative locations outside the CBD, she added.

The shortage of office space is reflected in much of the Asia-Pacific market as well. Strong demand continued to be seen from the banking, financial services, insurance and IT/IT-enabled services sectors, the report said. It added that some companies faced with the prospect of higher costs are considering relocating to secondary buildings in good locations or on the fringe of central areas with good access to major transport routes.

The report also suggested that rising occupancy cost is a global phenomenon with 102 locations - or about three quarters of the markets surveyed - posting rises. Prime office locations in the US in particular accounted for the greatest number of cost increases, including those which in the previous year had stayed flat like Denver.

At the opposite end of the spectrum, the least expensive locations were also found mostly in Asia, with Surabaya and Manila at the bottom of the global list.

Source : Business Times - 3 Jan 2007

Developer has no plans for Amber Road site but it’s not on heritage list

A GROUP of heritage property lovers are trying to save a bungalow designed by the architect of Raffles Hotel that could be facing demolition after it was bought recently by a developer.

The neo-Renaissance style bungalow on Amber Road was designed by Regent Alfred John Bidwell in 1912.

The two-storey property, which stood on the seafront before land reclamation began, has an unusual crescent shape to let in as much fresh air as possible. It is currently surrounded by many private housing projects.

A new developer, AG Capital, bought the bungalow last year. The company told The Straits Times ‘no corporate decision has been adopted’ on future plans for the site.

The company is free to tear it down though, as the Urban Redevelopment Authority (URA) has no plans to add it to its list of more than 6,000 buildings that have to be retained because of their historical heritage value.

The URA told The Straits Times it adopted a ‘pragmatic’ approach to conservation. It said: ‘It is done on a highly selective basis to retain the unique character and identity of an area.

‘We have adopted a ‘win-win’ approach to strike a balance in allowing owners to realise the economic potential of their properties and ensuring the identity and character of our historic past are retained.’

However, a group of about 20 people, who call themselves the Historic Architecture Rescue Plan, feel this bungalow deserves preservation. On Christmas Eve, the group distributed fliers about the bungalow to residents in the Mountbatten area.

One member, Mr Terrence Hong, 26, unemployed, suggested the building be dismantled and relocated rather than demolished.

Destroying buildings like this would ‘contribute to the sense of impermanence and unrootedness in Singapore’, he said.

Another member, 72-year-old retired administrator Helen Khoo, said: ‘Modern buildings are okay in themselves. But when we have too many, we start everything on a clean slate and rub off all the happy memories.’

The group is trying to get the authorities to conserve at least 12 other buildings.

They include private buildings like the National Aerated Water Company building in Serangoon Road, the Shaw Brothers film studio in Jalan Ampas, off Balestier Road, as well as state properties like a two-storey manor in Gilstead Road that used to be home to Leslie Charteris, author of the mystery books that inspired the television series, The Saint.

The conservation group tries to raise awareness of heritage properties by giving their owners or tenants information on their historical value. They recently approached Gracefields Kindergarten, which rents the house in Gilstead Road.

The imposing 1920s building, which used to house the Spastic Children’s Association, was painted a cheery mint green when the kindergarten took up the tenancy in August.

Its principal, Ms Joyce Teo, 50, said that since then, at least eight people have walked in to express admiration for the building.

‘I stand in awe. Every day that I stand here, I am grateful for this place,’ she said. ‘It’s so majestic.’

BEING PRAGMATIC

‘We have adopted a ‘win-win’ approach to strike a balance in allowing owners to realise the economic potential of their properties and ensuring the identity and character of our historic past are retained.’ URBAN REDEVELOPMENT AUTHORITY

SAVE OUR HERITAGE

‘Destroying buildings like this would contribute to the sense of impermanence and unrootedness in Singapore.’

MR TERRENCE HONG, suggesting the building be dismantled and relocated rather than demolished

Source : Straits Times - 7 Jan 2007

THE hot property market looks set to go from strength to strength this year. But how exactly will the recovery unfold - and what particular trends will get buyers excited?

On two points, experts are clear. First, they say it is up and up for the already booming sectors such as high-end luxury units.

Second, weaker areas such as mid-tier condominiums will get pulled up finally, as developers, investors and consumers gain confidence in the market rebound.

While market players have a vested interest in being upbeat, the signs are strong that almost every sector of the property market will thrive in 2007.

But which will stand out most in a rising market? Here are four major themes likely to hog the headlines this year.

Orchard Rd homes

MARINA Bay condominiums may have stolen the limelight last year, but the star of the residential market this year looks set to be Orchard Road.

A spate of anticipated launches in Singapore’s main shopping belt may result in 3,700 new homes on the market, and push average prices up about 25 per cent this year to hit new highs, experts said.

Chief among the new launches is Orchard Turn, which is expected to set a new benchmark price for 99-year leasehold homes in the area.

Property consultants are predicting average prices of about $2,400 per sq ft (psf) for the 100 or so luxury units.

Some bigger units on the higher floors may even hit up to $3,500 psf, rivalling Singapore’s highest-priced condominiums at Marina Bay Residences, said Ms Tay Huey Ying, director of research and consultancy at Colliers International.

This is far above the $1,500 to $1,700 psf average in the area last year, according to Mr Ku Swee Yong, director of marketing and business development at Savills Singapore.

In general, prices of Orchard Road homes are expected to rise 25 per cent or more to about $2,100 psf, as they head towards a record high of $3,500 psf next year, he added.

Mid-tier condos

SEVERAL mid-tier homes launched towards the end of last year saw strong take-ups, a signal that the exuberance in the luxury segment may finally be filtering down to the lower ends of the market.

With high-end prices continuing to soar, some prospective buyers may be priced out of this market and turn their attention to mid-tier projects this year, said Ms Tay.

A strengthening economy, more jobs and rising wages could also help boost mid-tier demand as more buyers enter the home market, said Mr Joseph Tan, residential director at CB Richard Ellis (CBRE).

Mr Ku agreed, saying that ‘2007 will be the year of the mid-tier and mass markets’.

But while some experts argue that the mass market may be held back by stagnant Housing Board (HDB) resale prices, most agree that the mid-tier segment will rise.

Mr Ku expects mid-tier prices to increase more than 20 per cent this year, with those in Bukit Timah and Katong increasing from their current average prices of below $900 psf to $1,200 psf by early next year.

Other areas that are anticipated to benefit from the rise in the mid-tier market include Marine Parade, Buona Vista, Clementi, Pasir Panjang, West Coast, Holland, Balestier and Thomson, he added.

Reits

REAL estate investment trusts (Reits) came back into focus last year with the listing of a bumper crop of seven new property funds on the Singapore Exchange.

This year, more - and more diverse - property trusts are expected to emerge.

Highlights include the first Reit of state-owned assets by JTC Corp.

Market buzz has also thrown up a new Reit comprising HDB shops and carparks.

In the private sector, cross-border Reits are poised to feature strongly. The first Singapore-listed Indian Reit may emerge, and CapitaLand has confirmed that it may launch an Islamic Reit, with assets in the Middle East and Asia.

Indonesia’s Lippo Group has also said that it will list two Reits in Singapore this year, one comprising Jakarta malls and the other, Asian offices.

Tycoon Kwek Leng Beng of City Developments has also raised the possibility of putting his considerable office assets into what would become one of Singapore’s biggest Reits.

Office rents

OFFICE rents across the island are likely to hit new highs this year, boosted by a worsening supply crunch and surging demand from expanding firms.

Rents of Grade A offices in Raffles Place, the most premium office space in Singapore, will breach their 1996 highs in the first half of this year, predicts Ms Tay of Colliers.

Knight Frank director Agnes Tay expects such rents to rise 15 to 25 per cent, with occupancy hitting 99 per cent.

Elsewhere, rents will rise 10 to 20 per cent, she said.

Mr Moray Armstrong, executive director of office services at CBRE, also said late last year that the ’steepest rental increase is expected in the next 12 to 18 months as demand drivers remain extremely strong’.

He added that the ‘tight availability situation is expected to persist for another three years due to the construction time lag’ and will be eased only by a sharp slowdown in demand or greater supply hitting the market in 2009.

Only one major office building, the 145,000 sq ft VisionCrest in Oxley Rise, is scheduled to come onstream this year, said property firm Jones Lang LaSalle.

This is nowhere near the 2.9 million sq ft of office space demanded by occupiers last year, so companies are likely to divert some operations to less prime areas as well as business and science parks, said market watchers.

Source : Straits Times - 2 Jan 2007

But local demand should pick up some slack as US growth eases; building sector expected to thrive 

In the new year, expect interest rates to fall, overseas spenders to scrimp and local consumers to come to the rescue.

But above all, expect the economy to waltz to a slower tempo than before.

That growth will ease is the one thing economists widely agree on in their 2007 outlook for Singapore.

They forecast that the country’s gross domestic product will increase by 5 to 6 per cent this year, after a blistering rise of 7.7 per cent last year.

With three good years behind it, ‘few expect Asia will repeat its above-trend performance in 2007′, said Standard Chartered Bank (Stanchart) economists in a report.

The overwhelming reason? Export-oriented economies such as Singapore’s will inevitably be bogged down by the housing-led decline in the United States.

Economists are still uncertain how sharp or how long the ride downhill will be for the US.

However, they predict that as American consumers tighten their belts, consumers in most Asian economies will loosen theirs.

Much hinges on US outlook

THE greatest danger this year will be the risk of a hard landing or sharp slowdown in the US, said Ms Selena Ling, OCBC Bank’s head of treasury research.

Stanchart economists concurred: ‘Although China has become an important trade partner for many Asian economies, the US continues to be the top driver of Asian exports.’

Export-dependent Hong Kong, Malaysia, Singapore and Taiwan would be worst hit if things go awry in America, they predicted.

On the other hand, economists at Citigroup reckon that the darkest hour may already be over for the US.

‘Our base line is that the US economy already bottomed out during the third quarter of 2006 and is likely to continue its uptrend over the next two years,’ they said in a report.

Construction on a roll, at last

IN STARK contrast to the cooler external environment, industries that ride on domestic demand are set to thrive. The result - an economy that is cool on the outside but hot on the inside.

The hot sectors include property, finance and, at last, construction.

After shrinking for nearly five years, the construction industry will finally play a starring role this year, spurred by the property boom and several billion-dollar projects lined up.

Deutsche Bank economist Sanjeev Sanyal predicted: ‘The revival of the construction sector will be one of the remarkable trends in the next two years.’

The export-reliant electronics sector, on the other hand, is moderating to a slower pace.

‘With the Straits Times Index hitting new highs and the property market now in an upturn, the domestic sector is entering a virtuous cycle,’ said Stanchart economist Joseph Tan.

He added that the domestic wing will ‘decouple’ from the softening export sector.

Retailers should also rejoice: The so-called ‘wealth effect’ from higher asset prices may encourage more consumer spending.

Climbing real estate prices should also make home owners more willing to spend, said Mr Sanyal.

Interest rates poised to drop

MORTGAGE borrowers can heave a sigh of relief.

Interest rates, which have risen relentlessly since 2004, appear to have peaked and can only head down, in the US and most Asian countries.

A clouded US outlook and tame inflation mean that the Federal Reserve, which paused in its rate hike cycle last August, may start cutting rates in the second quarter of this year, said analysts.

Asian central banks, with the exception of China, India and Japan, are expected to follow suit.

The closely watched federal funds rate could end the year at 4 per cent, from 5.25 per cent now, said United Overseas Bank (UOB) economists.

They also reckon that the local benchmark interest rate - Singapore’s three-month interbank offered rate - will slide to 3.2 per cent from the current 3.44 per cent.

Asian currencies play catch-up

IF 2006 was the year of the falling US dollar, 2007 is set to be another year of decline.

The difference is, after weakening against the euro, sterling and Kiwi dollar, the greenback is poised to fall more against Asian currencies this year.

‘Asian currencies, including the Singapore dollar, will continue the second leg of the US dollar correction,’ said UOB economists.

But regional central banks will increasingly take their cue from China’s central bank, which they expect will let the yuan rise by another 3 to 5 per cent this year.

Asian economies are willing to let their currencies strengthen, but not so much that their exports lose competitiveness, said analysts.

The Singdollar could average 1.51 against the greenback this year, and 1.44 next year, predicted Citigroup economist Chua Hak Bin.

The Monetary Authority of Singapore is expected to maintain its policy of gradual and modest Singdollar appreciation, he said, adding: ‘Only a severe US downturn and a bird flu epidemic pose potential threats, but such scenarios remain a low probability.’

Oil prices may not ease much more

PETROL may get cheaper this year, but not by much.

After zooming above US$75 a barrel last year, crude oil prices will average US$56 a barrel this year, due to higher oil production, predicted the Australian Bureau of Agricultural and Resource Economics.

But given potential supply disruptions and geopolitical uncertainties, there is a chance that crude prices may rise again, said UOB economists, calling a range between US$55 and US$75 a barrel ‘conceivable’.

Source : Straits Times - 1 Jan 2007