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A new development site at Marina Bay has been activated - and more sites could be on their way.

In a move that is widely seen as a reaction to the space crunch in the Grade A office sector, the Ministry of National Development yesterday said it would put a site at Shenton Way/Central Boulevard on the confirmed list of the Government Land Sales (GLS) programme for the first half of 2007, potentially activating a whole corridor of new sites at Marina Bay.

And in the light of the tight supply of new Grade A office space, most analysts welcome the move.

DTZ Debenham Tie Leung executive director Ong Choon Fah says she was not surprised that the site - a white site with primarily office space - had been put on the confirmed list and expects more sites in the future. ‘You need that momentum to keep (the market) going,’ she said.

She did, however, caution that the release of sites there had to be ‘measured’. ‘The plot ratio there is high, so the quantum of space is also high,’ she added.

With the prime office sector buoyant, due primarily to a lack of new supply, there is concern that there may not be sufficient new demand for more prime office space.

Savills Singapore marketing and business development director Ku Swee Yong, however, sees the Marina Bay site sparking a lot of interest from investors and developers, especially because little has been said by the owners about the prospect of Phase Two of the Business Financial Centre.

Savills projects the Shenton Way/Central Boulevard site could go for as much as $1,200 per square foot (psf) per plot ratio (ppr) or over 200 per cent more than the $381 psf ppr for the Business and Financial Centre at Marina Bay in 2005.

Indeed, the burgeoning demand in the office sector appears to have been particularly targeted in the H1 2007 GLS programme with new sites at Shenton Way, Outram Road and Anson Road added.

Whether the geographical spread of these sites was planned to shift focus away from the CBD is hard to say but interest is also expected to be high.

For the Outram Road/Eu Tong Seng site, Savills expects prices to hit $700 psf ppr, while for Tampines Grande at Tampines Regional Centre, prices could be between $500 and $600 psf ppr.

CBRE Research executive director Li Hiaw Ho recalls that there was only one commercial site for office development six months ago. For H1 2007, Mr Li estimates that the three sites on the confirmed list - Beach Road/Middle Road, Shenton Way/Central Boulevard, Tampines Grande - could yield a possible combined gross floor area (GFA) of up to 2.4 million square feet.

The Beach Road/Middle Road site, which includes the former NCO Club, was slated for launch on the confirmed list this month but will now be released in March 2007 as Urban Redevelopment Authority needs more time to work out the details for a two-envelope tender. The impact of all this space coming on stream in the future could, of course, dampen rental rates in areas like Raffles Place.

Chesterton International head of research and consultancy Colin Tan believes that the release of office sites could indicate that planners are concerned about Grade A office rents rising too high. ‘The priority appears to be to keep Singapore competitive.’

Mr Tan also notes that demand could be exacerbated by tenants ‘hoarding’ existing space even though they have leased newer premises because of the fear that office space will simply not be available in the future.

Overall, analysts have reacted positively to the new sites on the GLS programme.

DBS Vickers analyst Wallace Chu lauds the ‘variety’ in the choice of sites. For instance, Mr Chu highlighted that Tampines Grande recognises that businesses will increasingly want to relocate backroom operations to sub-regional centres to keep operating costs down.

‘The government will want to push certain areas but I don’t see problems in absorbing these sites,’ he added.

Other prime sites that will be targeted by developers include a residential site in the city on Handy Road and a suburban site near Ang Mo Kio MRT Station on Ang Mo Kio Avenue 8. Savills estimates prices to reach $800 psf ppr and $350 psf ppr respectively.

CBRE’s Mr Li said: ‘Going by the depleting stock of 99-year leasehold sites that are held by developers, and a gradual shift in buyers’ focus to non-prime residential projects, we expect to see more activity in GLS programme in 2007.’
 

Source : Business Times - 22 Dec 06

Manufacturing Sector Uplift To Boost Demand 

Rental and capital values for industrial space look set to increase by as much as 10 per cent next year on the back of the improving manufacturing sector, increased demand for high-tech space, and the easing of oversupply in this property segment.

CB Richard Ellis (CBRE) believes demand will come from industries like life sciences and shipbuilding. CBRE director of Industrial and Logistics Services Bernard Goh said more companies will look to business and science parks as alternative office space, pushing up occupancy rates. ‘In 2007, only two business and science park buildings with a total gross floor area of 434,972 sq ft will be completed,’ he noted.

This year saw the sale of seven industrial sites for a total of $86.9 million under the government’s land sales programme compared with three sites in 2005 for $16.1 million in 2005.

Of the sites sold this year, five were from the confirmed list, up from three sites in 2005. And whether more are launched in 2007 could impact this property sector. Savills Singapore director of Industrial Services, Dominic Peters says: ‘Although we are starting to see the light at the end of the tunnel for the industrial sector, government measures in terms of the sale of new industrial land could affect the market supply condition which, in turn, impacts the rental and capital values of these properties.’

Demand for high-tech industrial buildings is likely to continue to increase in 2007, buoyed not by manufacturing industries but the demand from both the financial and IT sectors, says Mr Peters. ‘With projected increase in demand and the lack of new supply, we foresee that rental rates for high-tech industrial space will continue to be revised upwards. Therefore, companies which intend to house their back room operations in these high-tech industrial space may have to set a higher budget next year.’

Savills expects rents for high-tech space to increase by 5-8 per cent in 2007, while rents for conventional strata industrial space are likely to remain flatter at between 0-3 per cent.

Colliers International director for research and consultancy Tay Huey Ying expects steeper increases in rents for high-tech space between 8-10 per cent. Ms Tay is also forecasting prime rents for conventional industrial space to grow by 3-5 per cent. ‘Continued expansion of the economy will continue to spur expansion of manufacturing operations as well as encourage new ones to be set up,’ she added.

Ms Tay highlighted that ‘new hybrids’ of industrial properties were seen this year, including warehouse retail developments by Ikea and Courts, with Giant’s soon to follow.

Other hybrids included Singapore’s first high-security art repository near Changi Airport, making it ‘Singapore’s first entry into the multi-billion dollar business of art repositories/warehouses’.

She also noted that oversupply of industrial space ‘is easing as islandwide occupancy rate of industrial space has breached the 90 per cent mark - a level capable of spurring rental growth’.

Another significant factor in the industrial property sector is the real estate investment trusts (Reits), and 2006 saw the listing of a new industrial Reit - Cambridge Industrial Trust - and the confirmation that JTC Corp would launch an industrial Reit as well.

Ms Tay believes that 2007 could see the launch of another private sector industrial Reit by Australian-listed MacArthurCook Ltd which bought UE Tech Park for $115 million this month. This brings the value of Singaporean industrial assets slated for MacArthurCook’s upcoming Singapore-listed Reit to around $300 million.

The increasing presence of industrial Reits, though good for the property market, could have a negative effect on small businesses. On JTC’s upcoming Reit, DTZ Debenham Tie Leung executive director Ong Choon Fah says: ‘Occupiers could be affected. We have to see how it will pan out.’  The upside of the recovering industrial property is that it could stimulate renewal in older industrial estates, some of which are ‘obsolete’.

Apart from high-tech space, Knight Frank believes that demand for warehouse space will increase in future. Citing a study by Datamonitor, Knight Frank said global expenditure on third party logistics services is set to rise by 50 per cent in 2010 with the biggest growth coming from the Asia-Pacific region.

Source : Business Times - 21 Dec 2006

It’s said to be doing due diligence on an acquisition for close to $350m 

A PROPERTY fund managed by Credit Suisse is likely to be the buyer of Lippo Centre at 78 Shenton Way. Sources say that the fund is currently doing due diligence on an acquisition for close to $350 million or $1,163 per square foot (psf) of existing net lettable area (NLA).

Lippo Centre

The price is about 20 per cent higher than the $290 million at which a Macquarie-linked fund was negotiating to buy the property a few months ago. There was a preliminary arrangement for the deal but it lapsed before it could be finalised.

Sources told BT recently that a property fund managed by Credit Suisse had been narrowed down as the party that has entered the due diligence phase. This followed an expression of interest that closed in the second half of November and which is said to have drawn interest from five or six parties.

This is said to be Credit Suisse’s first major property acquisition in Singapore.

CB Richard Ellis and Jones Lang LaSalle are marketing the property - on a site with a remaining lease of about 76 years - which has about 301,000 square feet of NLA.

The property has upside as it has unutilised plot ratio which would allow roughly 40,000 sq ft of additional NLA of offices to be built, or a 10 per cent-plus addition to the building’s existing NLA.

Market watchers note that the $1,163 psf price for Lippo Centre is close to the $1,165 psf that SIA Building in Robinson Road fetched in June. SIA Building is on a better-located site with a longer remaining lease - 87 years.

Lippo Centre offers greater upside as it has unutilised plot ratio.

In addition, the office market has improved in the past six months, say market watchers.

Lippo Centre is owned by Ferrell Realty, which in turn is fully owned by a property fund in which Lippo is a major investor.

Ferrell Realty stands to book a handsome profit from selling the building, which it bought for $151 million or about $505 psf of NLA from MCL Land in August 2004.

The building has a three-storey podium with a basement level, housing a spa, retail facilities and 323-space carpark, and a 31-storey office tower.

Lippo has said that it is considering moving its Singapore headquarters to the new 18-storey office block that will be developed on the Overseas Union House site.

The new tower is expected to be ready by the end of 2009.

Source : Business Times - 21 Dec 2006

But analysts say site cannot be easily compared with other recent transactions

SINO Land has set a new benchmark price of $1,540 psf per plot ratio (ppr) for a commercial/hotel site with its top bid of $165.8 million for a site at Collyer Quay. For hotel sites alone, Sino Land’s bid far exceeds the $520 psf ppr paid by Hong Leong Group for a site at Mohamed Sultan Road in November. It is also more than the $1,455 psf ppr that Lend Lease paid for the Somerset Central mixed development site in August.

Most analysts, however, believe that the Collyer Quay site cannot be easily compared with other recent property transactions.

Knight Frank director of research and consultancy Nicholas Mak said the Collyer Quay site is in ‘a class of its own’. A substantial portion - including Clifford Pier and the former Customs Harbour Branch building - has been gazetted for conservation. He also pointed out that the site includes part of the water body surrounding it, making future construction complex.

Mr Mak attributed Sino Land’s bullish bid to the Hong Kong-based sister company of Far East Organization wanting to ’safeguard’ its position in the area, where it also owns The Fullerton hotel. This benchmark price could now be used as a ‘reference’ by planning authorities for future land sales in the area, including the site between Marina Bay Sands and the Business Financial Centre, although Mr Mak believes that it will not ‘impact the prices of Marina Bay that much’.

Sino Land put in the top two bids of $165.8 million and $161.8 million out of the three bids that were shortlisted by the Urban Redevelopment Authority based on concept. Eight bids were received in the two-envelop system.

The third highest shortlisted bid was $108.3 million from Park Hotel Group - 35 per cent lower than the top bid.

In a statement released yesterday, Sino Land said: ‘The development will complement our historical and international award winning Fullerton Hotel, OneFullerton and the Fullerton Water Boathouse.’

Sino Land will build a luxury hotel with 120 ‘full sea-view rooms’ taking up 45 per cent of the total gross floor area (GFA) of 10,000 sq m (107,639 sq ft) with the rest going to F&B, retail and entertainment uses.

Park Hotel Group director Allen Law said that its bid had a substantially larger percentage of the GFA going towards hotel rooms. ‘We want to build our hotel brand,’ he said.

Indeed, Jones Lang LaSalle Hotels executive vice-president Chee Hok Yean said that someone whose bid includes a 200-room hotel would have not have been able to bid as high as Sino Land. ‘You get better returns from commercial and retail space,’ she added. Even so, Ms Chee expects that Sino Land will have to charge $400-$500 per night to make its hotel feasible.

David Ling, managing director of hospitality consultancy HVS International, who said that the price Sino Land paid is ‘unprecedented’, believes that the Hong Kong developer will probably focus on the F&B, retail and entertainment component too.

Mr Ling estimates that luxury hotel rooms should be around 60 sq m each. Sino Land however, said that about 4,500 sq m of the GFA will be for the hotel, which means that each room will only be 37.5 sq m big.

Source : Business Times - 19 Dec 2006

A 21,000 sq ft hotel site across the road from VivoCity is up for collective sale with a $52 million price tag.

Citiport Centre on Telok Blangah Road was put on the market yesterday after Dickson Property Consultants gathered a 81.5 per cent consent rate - after working on the sale since 2005.

The $52 million price tag includes an estimated development charge of $2 million. As the site has a plot ratio of 3.5, the asking price works out to $707 per sq ft per plot ratio.

The maximum building height is 37 metres, which means that any development could be about 12 storeys.

Citiport Centre is now a mixed commercial and residential development with 28 commercial units and 15 apartments with a total gross floor area of 4,165 sq m.

But because of the location, Dickson’s director Richard Tang thought that developers might be more interested in building a hotel. The consultancy has, therefore, obtained approval from the authorities for a hotel to be built on the site, he said.

‘Any shopping centre built will have to compete with VivoCity,’ Mr Tang said. ‘In the long term, with the plans for the area, a hotel development makes more sense.’

If the asking price is met, the sellers will receive an en-bloc premium of between 25-50 per cent in the collective sale, Mr Tang said. The sale proceeds will be split 60:40 between the commercial and residential owners.

The site has already seen interest from a Malaysian developer, Mr Tang said. But the developer wants to buy the property through a private treaty, while the sellers are in favour of a tender.

Separately, Colliers International yesterday said that four adjoining two-storey shophouses at Serangoon Road and another residential site at King’s Road will be put up for auction on Dec 20 at The Amara Hotel.

The four shophouses are expected to fetch about $10.5 million altogether, while the residential site with a bungalow on it can allow for up to six semi-detached houses.

The site is expected to fetch between $10-$11 million, Colliers said.

Source : Business Times - 7 Dec 2006