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The area is set to evolve into the next prime area at the edge of the city, say NICHOLAS MAK and TEO JUNRONG

THE Kallang planning area, positioned along the picturesque Kallang River and within close proximity to the Central Business District (CBD), has enormous development potential. Made up of nine sub-zones, it covers a land area of about 920 hectares that includes 101 hectares of water body.

Since the announcement of the 1998 Master Plan, planners have envisaged the Kallang area as an urban waterfront district. This vision includes it being a centre for sports, recreation and leisure with residential developments flanking the riverbanks. There were also plans to transform the Kallang planning area into a major commercial centre to capitalise on its proximity to the Central Area.

In particular, under the 1998 Master Plan, Kampong Bugis, a sub-zone of the Kallang planning area, was slated to be a transition between the Central Area and the sports and recreation areas at Kallang Basin.

High-density residential buildings along with recreational facilities will be orientated towards the river to take advantage of the waterfront view. Some of these plans have already materialised. Waterfront residential developments, such as Pebble Bay and Camelot, can now be found facing the Kallang Basin.

The latest Master Plan aims to build on the earlier vision for Kallang. The new planning sub-zone will be the Kallang Riverside, which refers to the areas on both sides of the Kallang River, bounded by Nicoll Highway, Kallang Road and Sims Way. With a total land area of 64 hectares available for development, Kallang Riverside is to be transformed into a new lifestyle district, offering waterfront homes with an exciting mix of retail and entertainment facilities.

In addition, the area will also be developed into a commercial hub outside the city centre, providing various business alternatives and employment opportunities. Kallang Riverside will embrace the nationwide vision to make Singapore a great city in which to live, work and play.

Work

As mentioned earlier, Kallang Riverside aims to become a major commercial hub outside the city centre. There will be over 200,000 square metres of new office space added to the area. Its proximity to the CBD will be an advantage, as it will provide an alternative location to the existing CBD. The resulting projected increase of 21,000 office workers in Kallang could provide the necessary pool of demand for the upcoming retail and entertainment outlets.

Live

Homes with waterfront views usually command a premium and the prices of some of these homes fall within the high-end price segment in Singapore. Distinctive waterfront homes within a lush park setting are planned to be developed on the western side of the Kallang River.

The proposed 4,000 new waterfront homes will have a range of heights to ensure that scenic views of the beachfront will not be obstructed. For instance, there will be varying residential plot ratios of 3.5 to 5.6 under the 2008 Master Plan for the area to the west of the Kallang River. Future developments can also adopt a resort-style design, to take advantage of the beaches and water edge location. These new homes could also be relatively more affordable and could be priced in the mass market and mid-tier segments.

In order to allow the water features and landscaping elements to seamlessly extend the lush park setting, developments here will be encouraged to go ‘fenceless’. This will be similar to one-north Residences, where such a fenceless environment was created to enable pedestrian connectivity and interaction among the community.

This will also pose challenges and opportunities for architects, as they need to create this seamless environment for the developments in Kallang Riverside without compromising on the security of the residents.

With the presence of the various live-work-play elements, together with its waterfront location and proximity to the CBD, these developments are likely to be attractive to homeowners and investors.

Kallang Riverside will also take advantage of its distinctive tropical character and surrounding water features by forming a substantial hotel cluster to cater to family and business travellers. Under the 1998 Master Plan, the area to the east of the Kallang River had been zoned for residential purposes. Under the 2008 Master Plan, the zoning has now been changed to hotel and white sites.

The hotel zoning will have plot ratios ranging from 2.1 to 3.5 while the white sites zoning will have plot ratios ranging from 1.5 to 4.9. There are plans for up to 3,000 hotel rooms available along the banks of the Kallang River.

Due to tourism initiatives such as the Formula One race, Youth Olympics and the integrated resorts, the number of visitors to Singapore is anticipated to rise over the medium term from the 10 million in 2007 to about 17 million by 2015. As a result, more hotels are needed to meet the rising demand. Tourists should find hotels along the Kallang Riverside an attractive choice, with their scenic views, proximity to the CBD as well as major tourist attractions.

Play

Kallang Riverside will go through a metamorphosis to become a new lifestyle hub, with a vibrant mix of retail, food and beverage outlets, and entertainment facilities. It is close to key attractions such as the Sports Hub and the Illuma entertainment centre.

Costing some $1.2 billion, the Singapore Sports Hub would be completed by 2011. The integrated complex includes a 55,000-seat capacity stadium with a retractable roof, a 6,000 capacity aquatic centre, a multi-purpose arena and over 41,000 square metres of commercial space. It will be Singapore’s premier land and sea sports, entertainment and lifestyle hub, hosting major international events and playing a critical role in taking sports in Singapore to a new level. Due to its close proximity, the Sports Hub is likely to add vibrancy to Kallang Riverside.

Illuma, located in the Bras Basah-Bugis district, is slated to be Singapore’s first urban entertainment centre. Spanning a site area of 8,921 sq m, the complex aims to provide an exciting mix of arts and entertainment facilities all in one location, drawing both locals and tourists alike.

Within the development, public spaces will be provided to serve as venues for street performances, bazaars and open-air concerts. Likewise, this upcoming project would be something that the residents in Kallang can look forward to.

With its sandy beaches, waterfront views, and close proximity to the city, Kallang Riverside is indeed situated in a unique spot in Singapore. As the Master Plan gradually materialises, Kallang Riverside will evolve into the next prime area at the edge of the city. The growing population in the area would provide the critical mass to support these upcoming residential and commercial developments. In time to come, Kallang Riverside might become one of the places in which residents can truly live, work and play.

The writers are with Knight Frank’s Research & Consultancy Department

Source : Business Times - 29 May 2008

Highest increase in occupancy costs over 12 months is Ho Chi Minh City

After the sharp increase in prime office occupancy costs, Singapore has emerged as the ninth most expensive office market in CB Richard Ellis’s (CBRE) latest semi-annual Global Market Rents survey.

Singapore was ranked 11th in the last survey in November last year and 24th in the May 2007 survey.

The last time it was one of the 10 expensive office markets in the survey was 1991, when it ranked sixth.

However, on a brighter note - for those concerned about Singapore’s competitiveness - the latest survey shows that the island no longer holds the title of posting the highest increase in occupancy costs over a 12-month period.

That ‘honour’ went to Ho Chi Minh City, which posted a 94.4 per cent jump in office occupancy costs - in local currency - over the 12 months ended March 31, 2008. It was followed by Moscow (up 92.7 per cent) and Singapore (86 per cent).

In the previous survey, published in November last year, Singapore posted the highest 12-month increase in occupancy costs, while in the May 2007 study it took fifth spot.

‘The pace of rental growth in Singapore is moderating and we sense that the peak of the market is close at hand,’ said CBRE’s executive director (office services) Moray Armstrong.

‘With significant new office supply coming on stream through the next few years, we are confident that Singapore’s medium- to long-term term competitiveness in premises costs is assured.

‘It’s also noteworthy that the range of alternative lower-cost premises options (for example, business park space) has been bolstered. This is a sign of the commercial property market’s growing maturity in response to Singapore’s status as a global business city.’

CBRE figures show the average monthly Singapore prime office rental rose 92.3 per cent last year to $15 psf in Q4 2007, after appreciating 50 per cent in 2006.

For Q1 this year, the average monthly prime office rental was $16 psf, up 6.7 per cent from the preceding quarter.

CBRE projects that the figure will edge up to $17 psf by end-2008 and $17.50 psf by end-2009.

CBRE’s latest Global Market Rents survey shows London’s West End retained its position as the world’s most expensive office market, while Moscow climbed to second spot, followed by Tokyo’s Inner Central Five Wards, Mumbai’s Nariman Point and Tokyo’s Outer Central Five Wards.

‘Office occupancy costs are continuing to defy sluggish economic conditions and the credit crunch, as they rise faster than global inflation,’ noted CBRE’s global chief economist Raymond Torto.

‘These cost increases are dominated by emerging markets, caused by both supply and demand imbalance and the depreciation of the dollar relative to local currencies. In some of these emerging markets, Class A office space is seriously lacking.’

Overall, Europe, Middle East and Africa dominated the list of markets with the fastest-growing occupancy costs, accounting for five of the top 10 and 19 of the top 50 markets.

Worldwide, 88 per cent of the 173 office markets monitored posted higher occupancy costs.

CBRE said that its definition of occupancy costs covers rent, plus local taxes and service charges.

The occupancy cost figures are adjusted to reflect different measurement practices from market to market.

Source : Business Times - 29 May 2008

They anticipate fire sales by those who bought properties a year ago at the peak

(NEW YORK) A US$200 million resort hotel does not exactly resemble a suburban home. But scratch the surface of the sales market for each property category, and they look remarkably similar today.

The number of hotel deals in the United States during the first quarter plummeted by more than 40 per cent, to 127. There is a gaping spread between what sellers are asking for hotels and what buyers are willing to pay. And lenders are writing much smaller mortgages at higher interest rates than they were a year ago.

And yet several private equity firms have quietly managed to raise cash to buy hotels in recent months, said Warren Marr, a hotel consultant at PricewaterhouseCoopers. ‘It may take a bit longer than it did two years ago, but the money is there,’ he said.

Some hotel industry experts contend that this is an excellent time to raise cash, because they see fire sales on the horizon. Mr Marr said that some investors who bought hotels a year ago, at the peak of the market, and used financing to cover as much as 85 per cent or 90 per cent of the purchase price, might be forced to sell soon.

‘You could call these distressed assets - not physically distressed, but financially distressed,’ he said.

HEI Hotels and Resorts, based in Norwalk, Connecticut, is the latest company to raise cash for a new private equity fund.

This is the third fund raised by the company, which also manages the hotels in its portfolio. The new fund has more than US$500 million to invest in hotel properties.

Gary Mendell, chief executive of HEI Hotels and Resorts, said that across the industry, it is harder to raise capital now than it was a year or two ago. But he attributed his ability to raise US$500 million now to the number of repeat investors.

The company focuses exclusively on raising money from university endowments, and six of the 16 investors in the new fund also invested in both of HEI’s earlier funds, which closed in 2004 and 2006.

There is little doubt that hotel sales have plummeted since the credit squeeze took hold late last summer. For example, buyers spent US$4.1 billion on hotels in this year’s first quarter, less than half of the US$8.6 billion spent in the first quarter of 2007, according to Real Capital Analytics.

There are also far fewer big spenders. Only eight investors bought more than US$100 million worth of hotels in the US in the first quarter, down from 27 buyers who did so a year earlier, the firm reported.

Buyers are also starting to demand a little better return on their investment. Capitalisation rates - or the initial rate of return on a property, expressed as a ratio of the current income relative to the purchase price - are rising for all types of commercial real estate.

But Dan Fasulo, the director of market analysis at Real Capital Analytics, wrote in a report about hotel sales last week that the ‘large gap between asking prices and current bids indicates that buyers think cap rates should be even higher.’ Mr Fasulo said the average cap rate for all US hotel deals in the first quarter was around 8 per cent.

Mr Mendell said the HEI fund would probably buy fewer hotels than it might have two years ago, simply because lenders are demanding more equity.

Noble Investment Group, which is based in Atlanta and owns and operates hotels through similar private equity funds, raised its latest fund in early 2007. Mit Shah, the chief executive, said the company had invested about 40 per cent of this US$310 million fund so far and was focused on investing the rest, rather than on raising capital for a new fund.

Mr Shah said he thought the main reason so few hotels were on the market today was that most sellers were unwilling to part with their properties at current prices. ‘If you don’t have to sell, you won’t sell in this market,’ he said.

But he added that the pool of buyers was much shallower than it was a year ago, so he hoped to pick up some good deals soon. ‘There is a significant amount of capital on the sidelines,’ he said.

David Loeb, a hotel analyst at Robert W Baird & Co, an investment bank in Milwaukee, predicted that the fundamentals of the hotel business would worsen over the next two years.

He said this was only partly because of the lagging economy. He said a significant amount of new hotel construction was in the works, which had been financed before the credit markets soured.

He estimated that the number of hotel rooms in the United States would increase 2.5 per cent this year, and possibly another 2 per cent to 2.5 per cent next year.

Mr Loeb said he thought this was a smart time to be raising money to buy hotels. ‘There will be owners who can’t afford to keep their hotels anymore,’ he said, because they bought them in highly leveraged deals a year or so ago.

He added that some trophy properties might even change hands.

‘Luxury properties do not come on the market often,’ he said. ‘But in this market, you will absolutely see some of them sell.’ - NYT

Source : Business Times - 29 May 2008

STANSFIELD Group yesterday won a Singapore Land Authority (SLA) tenancy auction, allowing it to continue leasing its existing eight-storey premises at 11 Penang Lane from SLA for a further period of up to nine years.

Stansfield’s winning bid was for $270,000 monthly rental for a three-year lease term, with options to renew for another two terms of three years each.

However, lease renewals for the second and third terms will be at market rentals at the time.

The $270,000 monthly works out to $7.96 per square foot (psf) based on the building’s gross floor area of 33,905 square feet.

Stansfield leased the building from SLA in May 2003 after the group won a public tender for a 3+2 year tenancy.

Before that, the building had been used by National Council of Social Service.

Knight Frank conducted the auction for the tenancy on behalf of SLA.

The $270,000 monthly rental that Stansfield will pay SLA for the next three years is over six times the $40,000-plus it was paying SLA under the lease that has just expired.

The group was prepared to bid high to ’spare our students the inconvenience and disruption that would have resulted had we moved to new premises’, Stansfield CEO Ramel Ang said when contacted by BT yesterday.

‘We are committed to the students and want to ensure continuity for them,’ he added.

Stansfield is suing the Consumers Association of Singapore over an alleged breach of an agreement governing insurance payments that hampered its ability to bring in foreign students.

Since Stansfield’s existing 3+2 year lease for 11 Penang Lane expired on May 19 this year, the group has been occupying the building under a Temporary Occupation Licence issued by SLA.

Bidding for the building’s tenancy at yesterday’s auction began at a monthly rental of $76,000.

A total of 10 parties took part in the bidding, including other private schools and investors, some of whom were keen to convert the building into a hotel, BT understands.

Separately, Knight Frank also sold two properties at its auction yesterday at Amara Singapore.

One was a four-storey building at 466 Serangoon Road, which was sold on behalf of its liquidator, for $3.2 million.

The 999-year leasehold property, which is currently tenanted, has a shop on the ground level and apartments on the upper floors. The total net lettable area is 7,061 sq ft.

The other property sold was a 1,399-sq-ft ground-floor shop unit at the freehold Tembeling Centre in the East Coast area, that fetched $1.31 million.

Source : Business Times - 29 May 2008

The Urban Redevelopment Authority (URA) yesterday awarded the tender for a residential site at Choa Chu Kang Drive to Tian Hock Properties.

Tian Hock Properties, a unit of Far East Organization, was top bidder for the site at $116.01 million, or $203 per square foot per plot ratio (psf ppr).

The 99-year leasehold site has a maximum gross floor area of 572,600 sq ft.

On Monday URA closed the tender for the site, which attracted four other bids from companies such as Sim Lian Land.

Market watchers’ estimates of the breakeven cost of a new development on the site range from $550-$600 psf, translating to a selling price of $610-$650 psf.

Source : Business Times - 29 May 2008