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The Urban Redevelopment Authority (URA) has closed the public tender for an industrial site at Ubi Avenue 4.

The URA had received a successful application for the site to be put up for sale in August and it was launched for public tender on Sept 3.

It has a site area of 11,491.5 square metres and a maximum permissible gross plot ratio of 2.5.

The site was offered for sale on a 60-year lease and received two bids.

Sim Lian Land submitted the highest bid of S$26.3 million or S$85 per square foot per plot ratio, while Orion-Four Development submitted a bid of S$23.1 million or S$75 psf per plot ratio.

In April, Sim Lian-linked 3 Link Development paid S$89 psf per plot ratio for a similar site located nearby at Ubi Road 2, where a seven- or eight-storey flatted factory will be built.

CB Richard Ellis’ research executive director, Li Hiaw Ho, said it is likely Sim Lian will develop a similar project if it is awarded the latest site.

He noted that industrial land prices in Ubi have remained stable despite the recent economic turmoil. - CNA/vm

Source : Channel NewsAsia - 30 Sept 2008

DEMAND for Singapore offices is likely to fall to recession-level lows next year and in 2010, resulting in the biggest excess supply of office space in 20 years, said Credit Suisse yesterday.

It expects office vacancy rates to hit a high of 16.5 per cent in 2010 - up from an islandwide vacancy of about 2 per cent currently - as firms’ expansion plans are hit by the global financial turbulence.

Office rentals are also predicted to peak earlier than expected this year, and fall 50 per cent by 2011, said research analyst Shirley Wong, who has downgraded the Singapore office trusts sector to underweight.

After her report was released, office trusts CapitaCommercial Trust (CCT) and Suntec Reit saw large drops in their unit prices that put them among the worst-performing property stocks yesterday. Property counters fell across the board as the wider stock market faltered.

CCT fell 17 cents to its lowest level in almost four years, while Wing Tai and Keppel Land each dropped more than 6 per cent to three-year lows.

‘Focus of the office sector has always been on supply, but actual demand is hurting, and repercussions from the US economic shocks could strain it further,’ Ms Wong said in the report. Tenants are resisting rent rises, while capital values have been flat for three quarters and vacancies have risen for two quarters.

But not all analysts are as bearish.

The supply of offices in the pipeline could be affected by construction delays, while property market sentiment and prices may start picking up at the end of next year when the integrated resorts take shape, said Kim Eng analyst Wilson Liew.

‘I do not foresee drastic cuts in the headcounts of financial institutions in the Asia-Pacific and, in fact, the private banking sector may provide some support.’

But Mr Liew conceded that the looming imbalance caused by more supply and less demand will ultimately lead to lower office rentals. He expects a moderate decline in rents of 10 to 15 per cent between now and the end of next year.

More broadly, property developers may soon be forced to write down their assets as real estate prices fall around the world, said another Credit Suisse research analyst in a separate report.

Developers were holding out for a recovery in sentiment, but ‘a confidence crisis from the recent near-collapse of global financial markets could hasten and steepen price falls’, said Ms Tricia Song.

Catalysts include the large upcoming supply of homes, a slower expatriate influx, potential job losses, and delays to the completion of the integrated resorts.

Ms Song noted that major write-downs in previous property downturns triggered developers’ stocks to plunge as much as 79 per cent in 1998 and up to 50 per cent in 2001.

‘CapitaLand and Keppel Land wrote down the most and could do so again due to aggressive acquisitions and revaluation gains in recent years,’ she added.

The only major property counters spared yesterday’s carnage were GuocoLand, up one cent at $1.85; CapitaMall Trust, up six cents at $2.31; and Bukit Sembawang, up 10 cents at $6.30.

Source : Straits Times - 30 Sept 2008

Average monthly rent at Raffles Place slips 1.4% to $17.64 psf in Q3

Grade A office rents in Singapore’s Central Business District (CBD) have declined for the first time since the office market troughed in 2004.

The average gross monthly Grade A rental value for the Raffles Place area slipped 1.4 per cent to $17.64 per square foot (psf) in the third quarter, from $17.89 psf in the preceding quarter, according to the latest data from Knight Frank.

The Suntec/Marina Centre/City Hall area led the declines in Grade A office rentals in Q3, with a 6.2 per cent quarter-on-quarter fall to $15.13 psf. In the Shenton Way/ Robinson Rd/Tanjong Pagar area, the drop was 2.8 per cent, followed by a 2.7 per cent decline along Orchard Road.

Knight Frank director (research and consultancy) Nicholas Mak said that he expects office rentals to continue declining by 14-19 per cent islandwide in the next 12 months (from current levels) as the global financial turmoil and possible mergers and acquisitions contribute to consolidation and reduction in office demand.

Giving her take on weakening office demand, DTZ executive director Ong Choon Fah said: ‘Most companies are in cost containment mode and would be looking for ways to manage the increase in their accommodation costs. There has also been quite a lot of leakage of CBD office demand to business parks and vacant state properties converted to offices.’

Mrs Ong reckoned that headline office rents may not come down much but noted that leasing incentives like rent-free periods have started to reappear. Agreeing, an analyst said: ‘Major landlords will try to maintain headline rents, because once rents come down, it affects their whole portfolio.’

Besides weaker demand for office space amid the financial turmoil, Knight Frank’s Mr Mak attributed the softening rentals in Q3 to the government’s efforts to increase office supply (including transitional office sites). ‘In addition, landlords are more cognisant of the substantial supply of office space that will be completed from 2010 and have become more realistic and flexible in their rental expectation when it comes to lease negotiations; they want to hold on to their tenants and maintain their buildings’ occupancy rates,’ Mr Mak said.

The fall in the average Grade A Raffles Place rental value in Q3 marks the first quarterly decline since Q2 2004. This incipient weakening follows a rapid escalation in office rentals over the past two years on the back of tightening supply and strong demand from occupiers, including global financial institutions expanding their operations in Singapore. Average Grade A Raffles Place rents surged 82 per cent last year and that was on top of the 67 per cent gain posted in 2006, according to Knight Frank.

But it’s a different story now. ‘Since Q1 2008, there appears to be a crack in the growth momentum for office demand in the Downtown Core area due to external factors such as the US sub-prime crisis that began in the second half of last year,’ said Mr Mak.

The slowdown in demand in the Downtown Core area - which includes the key office districts like Raffles Place/Marina Bay, Shenton Way and Marina Centre - and tapering off in rentals in Q3 does not come as a surprise, he adds. ‘The tenants in this area are primarily financial institutions, many of which had already completed their expansion or consolidation plans over the last 24 months and some are adopting a more cautious approach by putting any further expansion plans on hold,’ Mr Mak observed.

Knight Frank’s data showed that Grade B offices in Singapore also experienced downward pressure on rentals in Q3. The biggest fall was in the Orchard Road location, where the average rent decreased 7.8 per cent quarter-on-quarter to $10.70 psf a month in Q3. Raffles Place and Shenton Way/ Robinson Rd/Tanjong Pagar Grade B offices were less impacted by easing office rentals and dipped by 1.8 per cent and 2 per cent quarter-on-quarter respectively.

As a whole, offices in non-CBD locations also mirrored the general slowdown in rental in Q3. Rentals continued to weaken for the Beach Road/Middle Road area, with a 3.4 per cent quarter-on-quarter drop. Suburban areas too met a similar fate with quarter-on-quarter rental decreases ranging from 1-8 per cent.

Looking ahead, Knight Frank said that in the short term, the beleaguered financial markets are expected to lead to many firms either postponing their expansion plans or consolidating their space usage. Restructuring at some organisations could lead to sub-letting of excess space to ease cashflow problems.

Source : Business Times - 29 Sept 2008

Development will add 350,000 sq ft of prime Grade A space in 2011

UNITED Overseas Bank and OUB Centre will invest $540 million to jointly develop a new commercial tower in the heart of Raffles Place.

The 38-storey development will take shape next to the existing OUB Centre tower and retail mall. The three components will together be known as One Raffles Place.

Due for completion in 2011, the tower will provide 350,000 square feet of prime Grade A office space.

The site has a remaining tenure of around 75 years but there are plans to top this up to 99 years.

The $540 million investment excludes land cost and will be financed through syndicated loans from several financial institutions.

OUB Centre, which counts Overseas Union Enterprise, UOL Group and the Kuwait Investment Office among its shareholders, owns an 81.54 per cent stake in the partnership.

An anticipated economic slowdown and the US financial turmoil have affected outlook for the office property sector.

UBS Investment Research said in a report on Tuesday that demand for office space could weaken in the next 12 months as global financial institutions consolidate.

Prime office rents could be down as much as 47 per cent in 2012, it said.

But such forecasts have not dampened OUB Centre’s confidence in the new tower.

‘This is a long-term investment,’ said its general manager, Henry Kok. ‘This tower marks another milestone and reflects our confidence in Singapore’s growing business scene and this location.’

Marketing of the new building has started and target tenants include financial institutions and multinational companies.

Despite on-going consolidation within the financial sector, Mr Kok pointed out that ’some financial institutions are expanding quite aggressively . . . the gravity is slowly shifting to Asia’.

The new tower and the existing OUB Centre building will offer 760,000 sq ft of prime Grade A office space in total.

The OUB Centre building is near full occupancy and rents range from $17.50 to as close as $20 psf per month, Mr Kok said.

The principal architect for the new tower is Paul Tange, president of Tokyo-based architectural firm Tange Associates.

He is the son of Kenzo Tange, who designed the original OUB Centre tower more than 20 years ago.

Source : Business Times - 26 Sept 2008

New development will cost $540m and is due to be completed in 2011

A New office block will soon come up next to OUB Centre, with the two buildings to be packaged in a single prime development called One Raffles Place.

The tower, due to be completed in 2011, will offer 350,000 sq ft of top-quality Grade A office space and five floors of shops, said OUB Centre Limited, which is developing the 38-storey building along with United Overseas Bank (UOB).

Although none of the space has yet been leased, the company is not too concerned about securing tenants despite a large supply of new offices looming over the market next year and beyond.

‘This development is a long-term investment, we are confident of the location and the address, and we are confident of Singapore’s economy,’ said OUB Centre general manager Henry Kok yesterday.

Even amid the financial turmoil, Singapore office space is still in demand, added Mr Chris Archibold, regional director and head of markets at Jones Lang LaSalle (JLL), one of the building’s leasing agents along with CB Richard Ellis.

‘We are still seeing quite a number of expansions in the financial services industry, jobs being relocated to Asia out of Europe and the United States.’

The new block will cost $540 million to develop, which will be financed by a syndicated loan from financial institutions, said Mr Kok. OUB Centre’s shareholders are Overseas Union Enterprise, UOB, UOL Group, Khattar Holdings and the Kuwait Investment Office.

While none of the parties involved would reveal expected rents for the new building, JLL’s managing director for Singapore and South-east Asia, Mr Christopher Fossick, said rents would be pegged to the ‘market rate’ for Raffles Place.

Asking rents for Grade A offices in the area, including at the existing OUB Centre, are roughly between $17.50 and $18.50 per sq ft (psf), said Mr Donald Han, managing director of property consultancy Cushman & Wakefield.

But he said rents for the new tower will ‘have to reflect the expected market situation in 2011, given the supply coming onstream in 2010 and beyond’.

However, with the building’s high specifications, he still expects rents to be ‘near the top of the range’.

‘There will always be a demand for buildings like the new OUB tower, as the Raffles Place location will be the first stop for companies moving to Singapore.’

Other new upcoming offices in Raffles Place include the 28-storey Straits Trading Building in Battery Road, whose redevelopment will be completed by this year, and Ocean Building in Collyer Quay, due for completion in 2011.

The OUB tower, with smaller floor plates of 11,000 sq ft, will target tenants with smaller space requirements, said Mr Fossick. ‘There’s been an enormous explosion of hedge funds, investment management groups and private banks, who take 5,000 sq ft to 20,000 sq ft of space.’

In an interesting twist, the new tower is being designed by Japanese firm Tange Associates’ Paul Tange, the son of Mr Kenzo Tange, who designed the original OUB Centre more than 20 years ago.

Source : Straits Times - 26 Sept 2008