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Positive consumer sentiment and the Great Singapore Sale have provided some support for the retail property market in Singapore, according to property consultants DTZ.

It said given the general uncertain global outlook, tenants have resisted committing to higher rents, and this has kept the retail sector stable during the second quarter.

Going forward, analysts said they see at most a marginal increase of 2 to 3 per cent in rents for the rest of this year.

313@Somerset is part of the new wave of malls making a splash in Orchard Road. All together, some 5.4 million square feet of new retail space will be available by 2012.

Analysts said these new malls will lead the retail property rental market, while older ones will see rents stabilise at current levels, with little upside.

Donald Han, Managing Director, Cushman & Wakefield, said: “The new malls are looking at rentals higher than existing malls at Orchard Road. They’re looking at anything from 20-30 per cent higher. Prime retail space is always in demand.”

Cushman & Wakefield noted that there is little risk of oversupply as international retailers clamour for a piece of the Singapore market.

And although inflation may dampen domestic consumer spending, analysts said external demand from strong tourist arrivals is likely to offset that.

Mr Han said: “Into the next six months with the F1 arriving in September, we’ll only see a higher number of tourists on shore, which will effectively see higher tourism receipts, (a) positive spillover in spite of high inflation numbers over the next six months or so.”

With more malls fighting over the same tourism dollar, analysts said malls are starting to work harder to attract customers.

Turner Canning, Associate Director, Retail Consulting, Cushman & Wakefield, said: “(There is) a lot of criticism (that)… a lot of malls are cookie cutter, (with) similar shops, just in different configurations. You’re going to see that changing. It’s a global trend that malls are becoming more themed.”

Bringing in new retail choices is also another trend.

Chua Chor Hoon, Senior Director, Research, DTZ, said: “We notice that there are more new second-line brands coming, like Just Cavalli, which is a second line to Robert Cavalli. Emporio Armani is also coming. There are also more luxury brands from Europe coming here.”

This is in line with efforts by the Singapore Tourism Board to rejuvenate Orchard Road, turning it into one of the world’s premier shopping belts.

Analysts also said there is no fear that the Orchard belt will cannibalise suburban malls, as they serve different markets.

Ms Chua said: “The suburban malls… are in the heartlands, near residents. (They are) easily accessible. They serve residents’ daily needs, like groceries, daily wear necessities, personal services. These are complementary. In fact, the rentals in suburban malls can be as high as those in Orchard.” - CNA/ms

Source : Channel NewsAsia - 4 Jul 2008

They could hold firm despite gloom elsewhere and offer decent yields

Close to 300 homes at Sentosa Cove, including 200 condominium units, have received Temporary Occupation Permit (TOP) and the exclusive enclave is starting to bustle.

DTZ Debenham Tie Leung, which is the property manager of the 200-unit The Berth by the Cove says that the development is now about 70 per cent tenanted.

It added that the remaining units of the fully-sold development are owner-occupied, some of which are weekend homes or holiday homes for foreigners.

Other developments that have received TOP include The Berthside, Ocean 8, The Villas @ Sentosa Cove, Coral Island and North Cove.

Expected to come onto the leasing market next is the 116-unit The Azure, which is also fully sold.

And the popularity of The Berth by the Cove with the leasing market bodes well for the remaining 2,200 homes that are still being constructed.

DTZ senior director (research) Chua Chor Hoon said that the supply of new homes in Sentosa Cove is still ‘limited’ compared to the rest of Singapore and the units have ‘the unique feature of close proximity to the sea’.

Saying that the limited supply of units in Sentosa Cove will limit any downward pressure on rentals, Ms Chua added: ‘Rental prospects are likely to be better.’

This upbeat outlook for Sentosa Cove is particularly pertinent at a time when new housing supply is expected to flood the rental market by next year.

In a recent report, DTZ noted that in general, rentals would come under pressure between 2009 and 2011, not just from new supply but from the sub-sale market as well as it is unlikely that speculators will want to hold units for low rental income.

DTZ said that based on its basket of non-landed properties in the prime district (excluding luxury properties) average monthly rents are currently still holding steady at $4.90 psf per month.

While DTZ did not reveal rentals at The Berth by the Cove, a check with SISV-Realink shows that the rental for a unit there contracted for $19,500 per month in May.

Colliers International also said it believes median rentals could be around $6 psf per month.

Colliers director (research and advisory) Tay Huey Ying added that based on the average launch price of The Berth by the Cove of about $860 psf in 2004/2005, investors who bought units at this price could now be enjoying a net rental yield of about 5.5 per cent.

Those that bought units from the secondary market later when the price rose to about $1,500 psf will be looking at a net rental yield of 3.5 per cent.

‘Nevertheless, these investors would still be enjoying a higher net rental return compared to those who invested in a freehold luxury apartment on the main island of Singapore in recent times since the latter are generating average net rental returns estimated to be in the region of 2.3 per cent,’ added Ms Tay.

In time over 1,700 condominiums will be completed. Savills Singapore director (marketing and business development) Ku Swee Yong believes that buyers for most of these units will be investors, suggesting that a majority will be put up for lease.

Still, he said that there is a niche market for this type of waterfront home. ‘We had an expat client who was looking to rent and after showing him a few options, he chose The Berth because he already has a yacht,’ reveals Mr Ku.

Interestingly, Mr Ku says the advent of the integrated resort on Sentosa may not necessarily guarantee a pool of tenants. ‘Not everyone will want to live so close to work,’ he added.

What he does believe is crucial to the success of Sentosa Cove as an exclusive enclave is the provision of high end amenities. He added: ‘Once these are completed, we believe Sentosa Cove rents could demand a premium over Orchard Road.’

Source : Business Times - 03 Jul 2008

Construction not putting tenants off

Sentosa Cove is slowly, but surely, attracting high-end tenants with the completion of an estimated 300 homes, including the 200-unit The Berth by the Cove condominium.

Despite ugly construction sites dotting many parts of Sentosa, the first luxury condo units and landed properties have drawn rents comparable to, if not higher than those in prime districts on the mainland, including Nassim Park and Grange Residences.

Colliers International has just completed its first rental survey of Sentosa Cove and says two-bedroom condos are fetching an average $5,350 a month, or $4.61 per square foot (psf).

Larger, four-bedroom units have rented for an average $10,625, which also equates to $4.61psf. However, one rented for $12,250.

As for landed homes, terrace houses ranging in size from 2,600 to 3,600 square feet have let for an average $15,333, or $5.19psf, while the first luxury bungalows ranging in size from 2,530 to 4,983 sq ft have been let for an average $24,000. The highest rental to date is $30,000.

“This is encouraging, given that so much construction is going on,” said Tay Huey Ying, Colliers director of research and advisory. “When fully-developed, it should be even more appealing to potential tenants.”

The idea of developing the 117-hectare cove into a waterfront enclave was first mooted in the ’80s. However, the first land parcel was only sold to the private sector in end-2003. Five years on, temporary occupation permits have been granted to just the first five small developments completed, with Ho Bee Group’ 200-unit The Berth being by far the largest.

More is to come, with land already sold capable of accommodating over 2,000 condo units and 400 bungalows or terrace homes.

Colliers said investors who bought units in The Berth at the end of 2004 or early 2005 and have held onto them are today enjoying attractive net rental yields of 5.5 per cent. Purchase prices have since surged. As such, Colliers said those who entered the market later in 2007 now have to contend with lower yields averaging at 3.5 per cent.

Prices of non-landed homes have shot up from an initial launch price of $785 per sq ft in November 2004 for The Berth to current $2,800psf for Lippo Group’s The Marina Collection.

Source : Today - 3 Jul 2008

The leasing market in Sentosa Cove is starting to pick up, as more units are ready for occupation, according to property consultants Colliers International.

With some 300 units at Sentosa Cove having temporary occupation permits, Colliers said the leasing market could be starting to take shape.

Numbers from the Urban Redevelopment Authority showed that some 51 leasing contracts were recorded for homes there between January last year and April 2008. Forty-six of those went to The Berth by the Cove.

Some 99.6 per cent of land parcels for sale in Sentosa Cove has been taken up by private developers and individuals - in all yielding more than 2,000 condominium units, and 400 bungalows and terrace houses.

Contracted monthly gross rents are believed to range from S$4,700 for a two-bedroom unit to as high as S$12,250 for a four-bedroom unit in a condominium development.

Landed homes are believed to command between S$12,000 and S$30,000 per unit. - CNA/ms

Source : Channel NewsAsia - 2 Jul 2008

But no hike next year as new supply from key projects starts coming in

OFFICE rents here are expected to rise a further 10 per cent or more this year - before growth all but disappears in 2009.

According to a report by Deutsche Bank’s property arm RREEF, rental growth is expected to ‘evaporate’ by 2009 as extensive new supply starts to come onstream from projects such as the Marina Bay Financial Centre (MBFC), Ocean Building and Marina View.

From 2010 to 2012 - when the market adds 570,000 square metres of new Grade A office space - Grade A stock is expected to increase 25 per cent, the report says.

‘The vacancy rate, currently near one per cent, will shoot up to 2005 levels by the time this new wave of supply is all brought on line,’ it adds.

RREEF expects rent momentum - the ‘general momentum behind the potential changes in rent, not an absolute variation in rates’ - to decrease in 2010 and 2011, then stabilise in 2012.

In its report, Asia Pacific Property Cycle Monitor, it says each property sector has a clearly identifiable cycle with four main phases:
recovery (high but declining vacancy rates - stable to rising rents);

growth (low and declining vacancy rates - rising rents supportive of construction);

post-growth (low but increasing vacancy rates - rising/flattening rents); and

contraction (high or increasing vacancy rates - falling rents).

‘The office market has the greatest volatility of the three main commercial sectors,’ says RREEF. ‘The retail and industrial sectors are less volatile due to the relatively high levels of owner-occupation, with less investment activity and limited modern supply, particularly in the industrial sector.’

While the office sector is currently still in the growth stage, a post-growth stage is expected in 2009, followed by two years of contraction, and finally recovery in 2012.

On the upside, the retail property sector is expected to remain in the growth stage until at least 2012.

RREEF attributes this to a ‘broad construction boom’ and ‘robust economy’. ‘Two new malls in the Orchard Road area will join the island’s existing stock of dated retail space in 2008, which could spur structural change in the market,’ it says. ‘Extensive pre-leasing of this space will keep Singapore’s retail vacancy rate steady in the one per cent range.’

RREEF expects retail rental growth to average 3 per cent per annum between now and 2012.

It also sees the industrial property market booming - especially business parks. It projects growth until 2010, when a post- growth stage will kick in until at least 2012. Rents, which grew at double-digit levels in 2006 and 2007, should continue to rise this year, before the rate of increase tapers off to single digits.

While the spillover effect from the office sector has led some companies to turn to business-park space for their back-office operations, RREEF reckons that this effect will ‘diminish’ when the large supply of new office space comes onstream from 2010.

It also adds a note of caution: ‘While it poses no immediate competitive threat to Singapore, Malaysia’s long-term plan to develop the Iskandar Development Region in Johor will be a project with structural implications for Singapore, and its progress should be monitored over the long-term.’

Source : Business Times  - 24 Jun 2008