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Rents in S’pore rise 65%, highest of all 134 locations in DTZ’s global survey

The redevelopment and regeneration of the Central Business District (CBD) is well under way, but it may not be happening fast enough.

According to a report by DTZ Debenham Tie Leung, average annual take-up of office space has been 1.8 million square feet for the last 10 years. Yet, the property firm notes that potential supply for 2007 is estimated at 612,000 sq ft.

In 2008 and 2009, supply will dip below 500,000 sq ft and will only pick up in 2010 to 2.15 million sq ft.

And already, the repercussions are being felt.

In its Global Office Occupancy Costs Survey 2007, DTZ shows that rents in Singapore rose 65 per cent year on year, the highest increase across all 134 locations surveyed, to US$7,860 per workstation per year.

As a result, Singapore climbed 41 places on DTZ’s survey list to 55th spot globally, and was up six places to ninth position in the Asia-Pacific region.

There does appear to be an imbalance of supply and demand, and as DTZ executive director Ong Choon Fah says: ‘The government can programme development.’

For Mrs Ong, the pace of redevelopment in the CBD could have been faster but as she also points out: ‘Crystal ball-gazing is not easy.’

‘It’s a combination of planning and market forces,’ she added.

Perhaps one of the best examples of this paradox is One Raffles Quay (ORQ).

A consortium of Keppel Land, Cheung Kong Holdings and Hongkong Land bought the site in March 2001 for $462 million, or $290 per square foot per plot ratio (psf ppr), at a time when, as Mrs Ong remembers, the property market was ‘very bad’. Indeed, the site had previously been offered for sale in 1997 and there were no takers. The expected price of between $600 million and $800 million was also not achieved.

Mrs Ong says that the acquisition was seen as ‘contrarian’ at the time. But ORQ is now fully leased and achieving top rents, spurring redevelopment and a rash of acquisitions by foreign funds of buildings, most recently Temasek Tower.

Also contrarian was City Developments Ltd (CDL), which in 2002 bought the site for its hugely successful The Sail @ Marina Bay for $227.10 psf ppr - 22 per cent lower than the price paid for neighbouring ORQ.

Looking back, CDL group general manager Chia Ngiang Hong said: ‘CDL purchased the white site which is now being developed into The Sail at a time when no other developer was willing to venture into building a residential development at Marina Bay.’

CDL is now redeveloping One Shenton (the former Robina House) into a high-end condominium with a retail component, and has also expressed interest in the UIC Building next door, which is for sale at about $830 million or $1,150 psf ppr (inclusive of development charge and lease top-up).

Developers now appear to be making up for lost time, and demand for development sites is high.

‘Older buildings are often strategically located in prime areas that render them ideal for redevelopment. As such, although the older buildings purchased via en bloc acquisitions are not immediately available due to longer lead time required for planning process, their conversion may yield better returns,’ Mr Chia said.

The spate of current redevelopments, including the government land sales site at Collyer Quay and Overseas Union House, can be attributed to the ‘programming of development’ by the Urban Redevelopment Authority (URA).

Some, like the redevelopment of Natwest Centre into a condominium called The Clift by Far East Organization, was prompted by a URA initiative to bring more critical mass into an otherwise quiet downtown at night.

Plot ratio incentives are also important.

A spokesman for the URA said: ‘A number of existing office buildings in the CBD, in particular in the Shenton Way and Cecil Street areas, have not yet maximised their full development potential under the current Master Plan 2003.’

The pace of redevelopment has certainly picked up since 2003. Keppel Land is the latest to take advantage of the Master Plan and will soon announce plans for the redevelopment of Ocean Building.

‘There are merits in redeveloping Ocean Building and these include the opportunity to add about 100,000 sq ft of gross floor area which has not been utilised,’ a spokesman for Keppel Land said.

‘Furthermore, it will become increasingly challenging for the building, which is about 33 years old, to attract and retain top-quality tenants. By redeveloping Ocean Building we will be able to effectively maximise the potential of the site.’

Mrs Ong for one welcomes the government’s initiatives to address the issue of supply in the CBD, including the release of more development sites. She says that it is important to maintain the current ‘momentum of development’, not least because it allows the older parts of the CBD to regenerate.

She notes: ‘In the 1970s, when the government started releasing sites in Shenton Way, it stimulated the regeneration of the old Raffles Place.’

Source : Business Times - 31 Mar 2007

Pace of govt land sales in the area is likely to be quickened, says Mah Bow Tan

The government will move to tackle the office space crunch in the Central Business District, National Development Minister Mah Bow Tan said yesterday.

Raffles Place CBD Plan

Acknowledging an ‘imbalance’ between supply and demand, he said the authorities will likely step up the pace of government land sales (GLS) in the CBD. ‘I think the quantum will have to be stepped up as we see a tightening up of supply,’ Mr Mah said.

The government has also set an ambitious target for further development of Marina Bay and the new downtown, which Mr Mah said could begin from as early as 2009.

To deal with the immediate office space crunch, the government is considering releasing state land for short-term use, he said.

The Urban Redevelopment Authority confirmed later that it is exploring whether vacant sites can be used for ‘transient offices’.

‘They would be basic but proper office accommodation that can be constructed quickly - for example, one year - and would be on land on short tenures,’ a spokesman said. ‘This is still under study and we have not firmed up the details yet.’

Mr Mah, speaking yesterday at the ground-breaking ceremony for a new bridge that will span the mouth of Marina Bay, painted broad strokes of how the rest of Marina Bay will take shape.

The first site to be released - a white site with an office space requirement, on Central Boulevard - will be launched for sale in May, he said.

Another key site is the stretch between the upcoming Marina Bay Sands and Marina Bay Financial Centre. Mr Mah said this choice plot will complete the loop of developments around Marina Bay when completed, but it will only be available when other construction work ends around 2009.

Other sites that will then come on stream will extend from Marina Bay and wrap around the Garden at Marina South.

The existing CBD will also be extended southwards into what is being called the Central sub-zone.

The as-yet-unnamed bridge, which will cost $82.9 million, will provide direct road access between Marina Centre and the new Bayfront at Marina South.

Mr Mah said that the bridge is part of $2 billion to be spent on infrastructure developments there, including the critical common services tunnel. ‘In turn, we have attracted about $10 billion of investments to date,’ he said.

Land likely to be released for development this year includes a boutique hotel site next to the Marina Bay Sands, the international cruise terminal site and the central promontory site. All are likely to go through a Request for Concept stage.

Mr Mah said he wants to reassure the business community that office space will be made available. State buildings vacated by the government could be an immediate source, he said. ‘It may not be used for MNC head offices, but it can certainly be used for back-end office for financial institutions.’

The government has moved some of its offices out of the CBD but Mr Mah said there are ‘one or two’ left.

He also said the authorities will ‘encourage’ users to make better use of existing sites, but did not elaborate on whether the government will make it more attractive for owners of old office buildings to redevelop them.

With the pace of construction likely to be maintained or stepped-up, Mr Mah reiterated that sand supplies are not a concern because the authorities are finding new sources.

He said the supply and price of sand will not affect the building of the integrated resorts, and he does not expect any delay to the opening dates.

Mr Mah did, however, say the government is close to finalising details on how it will help contractors involved with government contracts who face cash flow problems because of higher construction costs. The government said earlier it would pay for 75 per cent of the additional costs for public-sector contractors.

Details are expected within the month, Mr Mah said. ‘In principle, we will make progress payments. If we can help contractors with cash flow payments, we will do so.’

Source : Business Times - 31 Mar 2007

The fourth level of Heartland Mall near Kovan MRT Station was sold for $8.5 million on Thursday at a DTZ Debenham Tie Leung auction. According to some auction regulars present, the buyers are believed to be members of the Cheong family who developed International Plaza on Anson Road and who still have some units there.

The family members are believed to be cousins of Simon Cheong of SC Global Developments fame. The other star attraction at the auction - Jurong Reptile Park - was withdrawn after receiving a top offer of $860,000. But immediately after the auction, an individual is said to have made an offer of over $1 million and negotiations are expected to take place. The investor is expected to continue leasing out the retail outlets at the park. However, he may remove the reptiles and introduce some new sports and recreational attraction.

The 206,304-square-foot site has a remaining lease of about nine years. The park - formerly known as Jurong Crocodile Paradise - drew four bidders. The opening price of $1.8 million sought by DTZ auctioneer Shaun Poh found no takers. Instead, there was a counter offer by a bidder at $600,000, and bidding continued until it reached a high of $860,000, at which point the property was withdrawn.

The property was put up for sale by liquidator Stone Forest Corporate Advisory Pte Ltd.

The fourth floor of Heartland Mall drew just one bid - of $8.5 million - from the Cheong family. But that was good enough for seller Wang Lei Investment, understood to be linked to the company that owns karaoke chain Kbox. The space comprises six units adding up to 21,131 square feet of lettable area. Five of the units are leased until August 2012 to private schools, at a combined monthly rental of about $67,200. This reflects a net yield of just over 8 per cent. The four-storey mall stands on a site with a remaining lease of 76 years.

Wang Lei bought the six units for $6.8 million from mortgagee Maybank last year.

Source : Business Times - 31 Mar 2007

Most residents of Clementi Park are not willing to trade their idyllic homes for less than the ideal price

Tension is brewing in the sprawling Clementi Park housing estate as en-bloc fever threatens to pit a group of would-be sellers against the majority of residents — many elderly — who want to remain living on the one-million-square-feet freehold property.

At the heart of the row, as always, is the question of the value of the estate — and what price will tempt the residents to sell.

Posters announcing the intention of the en bloc group, which went up around the estate recently, have been surreptitiously removed, probably by those who are against any move to sell the property.

“I want to spend the rest of my life in this place, which has been my home for the last 20 years. It’s spacious and the surroundings are idyllic,” said a retired civil servant in his 70s. He was not in dire need of cash, he said, and would only consider selling if the price was right.

But in reality, he would prefer to stay put in his 2,500-sq-ft apartment, which he bought at $320 psf about seven years ago, after moving from a smaller apartment in the same estate for which he paid $260 psf in the mid-1980s.

An en-bloc sale of 30-year-old Clementi Park — which is made up of 491 apartments — could fetch $750 million which would translate to about $600 to $700 psf, according to property agents. But “it’s a laughable amount”, one resident said, when asked if it was an attractive price.

Housing agent Susan Ye, who has also been living in Clementi Park for about 20 years, says that a 2,500-sq-ft apartment could be sold en bloc for $1.5 million, about $200,000 above what it would have fetched if sold individually. That is not considered a handsome premium in today’s market, say experts.

And with prices for property rising rapidly, Clementi Park residents would be hard pressed to find alternative accommodation, at the same size and in a similar locality, with comparable amenities such as a gym, swimming pool and tennis courts.

Besides, Clementi Park is perhaps the only locality in Singapore with half of the land comprising rolling hills, a wonderful place for jogging, residents told Today. “And when we get older and less mobile, we can just sit back and enjoy the scenery,” said a retiree in his 60s.

“There is not much joy to be had from an en-bloc sale these days. After finding an alternative place to stay, there’s hardly any cash left over from the sale proceeds,” said a resident, who has vouched to stay put, in the face of the recent move by the pro-en-bloc group.

“Some people even find themselves short on cash when they finally settle down in another home, after paying renovation costs, which could amount to $100,000,” said Mrs Ye.

Some even wanted to get the sale of their former homes cancelled, after finding they were not able to get accommodation of the same standard as they had become accustomed to.

“Just imagine, we gave up our apartment in town because of an en-bloc sale and had to downsize with a new home in the ulus (away from the city),” said a couple who moved from upmarket district 9 to an outlying area in the north-east.

In practical terms, it could take a year to bring an en-bloc sale to fruition — from the time the residents agree to the move to the time a developer signs on the dotted line — and within that period, property prices would have risen, as is the trend these days. More often than not, the residents will have to downsize and stay in new homes without the ambience of their former homes.

Property experts expect that the value of Clementi Park might well rise when quiet and sleepy Sunset Way, a fringe road, is developed into the next food-and-beverage hot spot with new and swanky restaurants, pubs and cafes, as well as a better mix of shops.

A redeveloped Clementi Park could attract a younger mix of residents who would value the long-term potential of the estate when their children grow up and attend tertiary institutions, several of which are in the area.

But the future of the property market, despite the current resurgent mood, is still uncharted waters. It is dependent on, among other things, the influx of foreign talent and tourism growth.

“I would advise residents not to rush into any en-bloc sale,” said Mr Colin Tan of Chesterton International.

A low sale price is not the only reason why many older residents are against an en-bloc sale.

“I am fearful about having to move to a new area. I have grown to love my home. In Clementi Park, I have made so many friends over the last 20 years, and I will be lost if I had to move to the heartlands,” said a woman in her late 60s.

Would she ever sell if she got $2 million for her apartment, which is currently valued at $1.5 million?

“I might — the amount is attractive — but in the end, I doubt I will bite. I don’t have that many years left to live, and I might as well live the rest of my life in the comfort and serenity of my home in Clementi Park,” she said.

She may well get her wish. Right now, less than 20 per cent of the residents have joined the group urging an en- bloc sale.

Source : Weekend Today - 31 Mar 2007

Niche residential property developer Hiap Hoe is soft-launching its latest freehold project, the Oxford Suites at Owen Road, this weekend.

This is its second residential property launch this year. The first was Cuscaden Royale in February.

The 18,308-sq-ft site will house an 18-storey condominium with modern studio, two- and three-bedroom apartments ranging from 678 sq ft to 1,141 sq ft in area.

There will also be three penthouses measuring between 1,679 sq ft and 2,293 sq ft.

Facilities include access to wireless LAN in outdoor areas, lap and wading pools, a jacuzzi and a gym, among others.

The average price of the units is about $780 psf and the developers are offering a deferred payment scheme.

The project is expected to receive its temporary occupation permit in March 2011.

Hiap Hoe’s other projects in the pipeline include developments in prime areas such as Cavenagh Road, Bukit Timah Road and St Thomas Walk.

Source : Weekend Today - 31 Mar 2007