COMMERCIAL MARKET
Little action at property auctions
AUCTION activity in the property market was muted in the first six months of the year, with just 198 properties put up for sale and only 10 sold, a report has found.
Most were put under the hammer by owners rather than mortgagees such as banks.
The 10 that found buyers had a total value of $34.3 million. This marks the second-lowest sales value since the onset of the global financial crisis in 2008.
Only the 13 sales from July to December last year were worth less, at a paltry $26.4 million.
The report noted that the declining level of mortgagee listings - just seven in the first half of this year compared with 389 in the same period in 2007 - is due to the improved financial position of those taking mortgages. This comes on the back of low interest rates, a high liquidity environment and a healthy rental market.
Auction volumes have also steadily fallen from the high of 810 properties placed under the hammer in the first six months of 2007. Of these, however, only 131 properties were snapped up, worth a total of $263 million.
But it was the industrial sector that led the pack in the first half of the year. Factory space enjoyed strong demand, securing 27 per cent of the market's sales value.
In the absence of stringent regulatory curbs, commercial properties - such as strata-titled shop units and shophouses - also continued to attract investors, owing to higher yields of 4 to 6 per cent. This is well above the 2 to 3 per cent yields from residential properties, the report noted.
The property auction market in the second half of this year may see a pick-up in residential sales - the result of a spillover in the buoyant buying interest. Astute buyers are expected to look for value buys in the resale market, amid new residential projects in suburban areas achieving record-breaking prices.
Source: The Straits Times – 28 June 2012
Shadow office space increasing in Singapore
Shadow office space in Singapore is expected to rise amid global economic uncertainty that continues to plague occupier sentiment.
The stock of shadow office space islandwide was 285,000 square feet in Q2, up 32 per cent from Q1. It is expected to grow by 73,000 sq ft to nearly 360,000 sq ft by year-end.
Of the 285,000 sq ft of shadow space in the second quarter, 48 per cent was in Raffles Place.
Shadow space refers to excess space that occupiers have leased but are looking to assign or sublet to ease the rental burden.
The increase in shadow space comes at a time of declining average gross face rents for prime office space in the CBD for the second quarter. This, despite the pockets of demand from occupiers who view the current climate as opportune for upgrading to a better- quality space.
In Raffles Place, the average gross face rent for prime office space experienced a 3.1 per cent quarter-on-quarter decline to $9.50 per square foot (psf) per month. Similarly, rents on Shenton Way, Robinson Road and Cecil Street fell 2.6 per cent quarter-on- quarter to $7.55 psf per month.
Rents in the CBD are expected to continue being pressured, despite a lower- than-average net increase in supply of 1.1 million sq ft of office space in 2012, after taking into account existing buildings that have been or will be removed from the stock.
The average occupancy rate for office space at Raffles Place fell 0.7 percentage point in Q2 to about 92 per cent. However, on Shenton Way, Robinson Road and Cecil Street, the removal of Chow House from the stock in the quarter resulted in the occupancy rate rising 1.3 percentage points to about 95 per cent in Q2.
Source: Business Times – 28 June 2012
INDUSTRIAL MARKET
For sale: Two 30-year industrial sites
TWO 30-year industrial sites were launched for sale by public tender yesterday - the first batch following a recent government move to slash the leases for such sites.
Leases have been capped at 30 years for all Government Land Sales (GLS) plots that remain unsold and industrial sites to be put up for sale in the second half of the year.
Yesterday's two sites - at Bukit Batok and Yishun - had carried 60-year leases when put on the GLS confirmed list for the first half of this year.
Property consultants expect cautious response to the two relatively small sites, with three to six bidders for the Bukit Batok site and up to seven bids for Yishun.
Demand won't be so strong because there's already a lot of supply at the two established industrial areas.
Bids are tipped to range from $40 million to $53 million for the 15,011 sq m land parcel at Bukit Batok Street 23. That works out to about $100 to $130 per sq ft per plot ratio (psf ppr).
The site at Yishun Avenue 9 is 20,075 sq m, with bids expected to be between $54 million and $76 million, or $100 and $140 psf ppr.
Both sites are zoned for Business 1 uses, which include light and clean industry, and utilities or telecommunications.
Rules imposed last year, strata-titled units and those in multi-user industrial developments will have to be at least 150 sq m. This could cost more and detract investors.
The tenure reduction is intended to give the Government more flexibility for land redevelopment and to help make industrial property more affordable.
The industrial sector is looking at a possible downturn, given the 'huge oversupply'.
Source: The Straits Times – 28 June 2012
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