RESIDENTIAL MARKET
Big fall in property prices unlikely: report
It would take an interest rate shock, poor GDP growth, or both, to bring down private property prices here noticeably over the next five years, a study said.
Analysts are anticipating that prices will fall as a record supply of land comes on stream and as the US Federal Reserve tightens monetary policy.
It is forecasted that prices will rise by about 8 per cent by the end of 2017, based on the central scenario from a modelling. The report also said that not all of the government's cooling measures have been effective in bringing down prices, even if they have dampened transactions temporarily.
If government land releases stay at the same "rapid pace" of around 16,000 units each year, prices will come down around one per cent by 2017, the report said, which indicates that an oversupply is unlikely.
However, if this scenario coincides with a meaningful GDP or interest rate shock, prices would obviously fall much more.
A GDP shock is defined as a scenario where output expands by a total of 5 per cent over the next five years, and assuming that loans and the Straits Times Index grow at the same pace.
Property prices will drop 16 per cent under this scenario.
Describing such a development as "unlikely" but "not impossible", Credit Suisse said the bank had predicted that GDP will shrink by more than 9 per cent in the scenario of a full-blown eurozone break-up.
But if nominal output can grow by 7 per cent each year, with the same assumptions, prices will surge 23 per cent by 2017.
As for interest rates, Credit Suisse expects prices to fall a cumulative 14 per cent between 2013 and 2017 if the Singapore Interbank Offered Rate rises to 7 per cent in that time.
It said rates have not reached that level since the 1998 Asian financial crisis, and there has to be a very strong growth or a sharp pick-up in inflation in the US economy to see such a high rate returning, due to the close links between the US and Singapore economies.
Source: Business Times –7 December 2012
Record bid for Punggol EC site
A RESIDENTIAL site for an executive condominium (EC) in Punggol East, next to Flo Residence condo, has drawn a record bid for a Punggol EC site in a seven-way contest.
The top bid of $351 per sq ft per plot ratio (psf ppr) exceeded those for more centrally located EC sites in Punggol.
"This shows that EC land prices are trending up," said Mr Ong Teck Hui, Jones Lang LaSalle Real Estate's national director of research and consultancy. "Optimism in the EC sales market has led to increased interest in EC sites among developers and a willingness to bid more enthusiastically for them."
The top bid of $162.1 million came from Sing Holdings. Translating to $351 psf ppr, this price easily trumped the $270 to $329 psf ppr range that analysts had predicted when the tender opened in mid-October.
It was nearly 9 per cent higher than the second highest bid of $148.9 million submitted by boutique property developer JBE Holdings.
Most of the other tenders were between $141 million and $144 million. Other bidders included Frasers Centrepoint unit FCL Place, Qingjian Realty and Bellevue Properties, a unit under City Developments that was incorporated on Nov 19. The lowest bid was $138.8 million from Chip Eng Seng unit CEL Property.
The 14,306.9 sq m site in Punggol Field Walk has a maximum gross floor area of 42,920.7 sq m and could yield 435 units. Analysts said this record bid for an EC site in Punggol indicated a trend of rising EC land prices.
The site is more than 2km away from Punggol MRT station and town centre, but the bid price was still higher than those for two closer sites.
One is an EC site in Punggol Way/Punggol Walk which fetched $314 psf ppr in September and went to Qingjian Realty. The other is the Waterbay EC site which garnered a top bid of $320 psf ppr in March.
Source: The Straits Times –7 December 2012
COMMERCIAL MARKET
Prime office rentals at basement prices, for now
The best office space in town currently commands just a shade more rental than the rest. But this won't last.
The rental gap between Grade A offices and Grade B office space islandwide has narrowed this year. Rents in older buildings at prime locations have held up as their occupancy levels remain stubbornly high. This is expected to change next year when tenants move into new developments and more space emerges in older buildings.
CBRE executive director (office services) Moray Armstrong highlights the "potential for a flight to quality as tenants realise just how attractively pitched rents are for Grade A office space".
Data from CBRE shows that the average monthly rental value in its Grade A basket - which covers the best-quality buildings in Raffles Place, Marina Bay and Marina Centre - is likely to end the year at about $9.51 per square foot (psf), from $11 psf in Q4 last year. This reflects a full-year drop of 13.5 per cent.
On the other hand, the rent decline for Grade B offices islandwide - which refer to older, smaller or lower-specification office blocks - will be much smaller, at about 2.3 per cent this year. The average monthly rent is expected to dip from $7.34 psf in Q4 2011 to $7.17 psf this quarter.
The resulting $2.34 psf rent difference between Grade A and Grade B offices currently is much smaller than a $3.66 psf gap a year ago.
"Rents for Grade B offices have fared better this year principally as they enjoyed high occupancy rates going into this office market pull-back phase, but also as they benefited from expansion by existing tenants in these buildings," said Mr Armstrong. In contrast, he said, Grade A rents came under pressure as vacancy rates went up after some major new developments were completed.
Looking ahead, things may change as Grade A space finds support while competition and second-hand space increase downward pressure on Grade B areas.
CBRE forecasts that over the next 12 months, Grade A rents will be flat, averaging $9.50 psf in Q4 2013, while Grade B rents could drop by 5-10 per cent to as low as $6.45 psf. This will result in the rent gap widening again to $3.05 psf. "The importance of tenant retention may feature more highly among landlords of older buildings," says Mr Armstrong.
Calvin Yeo, executive director at Colliers International, says: "A major question is the potential take-up of secondary space that will be thrown back into the market from occupiers which have moved or will be moving to newer developments."
Analysts say a crucial test will be how long Overseas Union Enterprise (OUE), the owner of 6 Shenton Way, takes to fill up the 440,000 sq ft which DBS vacated when it moved to Marina Bay Financial Centre (MBFC) Tower 3 between June and October this year.
BT understands that OUE has begun securing tenants for some of this space; rents are thought to be around $6-$7 psf. New buildings in the financial district such as Asia Square Tower 1, OUE Bayfront and MBFC Tower 3 are said to be currently fetching rents of $9-$12 psf per month.
On a positive note, industry watchers highlight that it took Pontiac Land Group just nine months to fill back all the 129,000 sq ft vacated by Citi in Centennial Tower in November last year when it moved to Asia Square Tower 1. Pontiac leased the space to major existing tenants such as Sumitomo Mitsui Banking Corporation and McKinsey while clinching new ones such as Frieslandcampina.
Citi also occupies about 143,000 sq ft at Millenia Tower next door. Of this space, the bank will be vacating 17,000 sq ft by this month - which will be immediately handed over to existing and new tenants whom Pontiac has pre-committed to, said a Pontiac Land spokeswoman. Citi will give up the rest of its space on lease expiry in December next year, she added. Current transacted rents in the two buildings are $9-$11.50 psf.
According to Jones Lang LaSalle's head of markets Chris Archibold, activity among smaller occupiers of 15,000 sq ft or less is still fairly robust, and a lot of it is within the CBD. However, leasing agents say that big occupiers have become increasingly cost conscious. This has led to a drying up of big leasing deals in the CBD this year.
To save costs, some large companies are splitting front and back offices, while others are completely relocating to suburban offices and business parks.
Agents tip out-of-town locations as the most likely beneficiaries of any major pick-up in leasing deals in the near future, most notably at Ho Bee's The Metropolis office development in Buona Vista, which will be completed next year.
Meanwhile, rents for Singapore's CBD Grade A offices look attractive and are believed to be nearing their bottom. As Cushman & Wakefield country manager (Singapore) Toby Dodd highlights: "Singapore is currently a tenant favourable market, and we recommend leveraging this to lease Grade A CBD office space at very competitive terms locked in for the medium to long term."
Mr Archibold advises landlords that while maximising shareholder value is always a key driver, "the right strategy is probably to also ensure that overall occupancy levels remain strong to mitigate any downturn in Europe".
Source: Business Times –7 December 2012
Plaza Singapura gets new wing and Cold Storage
PLAZA Singapura has taken on a new look and new tenants, now that it has expanded into the space between it and The Atrium@Orchard.
The $150 million, 21-month-long makeover fills up what used to be a gap between the two buildings, bringing Plaza Singapura's net lettable area to 629,000 square feet, up some 25 per cent.
Its owner CapitaMall Trust said the extension is projected to bring an additional net property income of $15.6 million when fully occupied.
A 10.4 per cent return on investment is expected, as well as an increase in capital value of $110.2 million.
More than 90 per cent of the space in the new wing has been leased out, and 80 per cent of these businesses are already in operation.
Retail and office rents are now $10 to $12 per square feet (psf) a month. Before the works, rent in the retail podium was $6 to $7 psf.
Among the changes to come in Plaza Singapura is the entry of Cold Storage in the first quarter of next year.
The supermarket, whose parent Dairy Farm owns Giant hypermarket and Market Place, will occupy 30,000 sq ft in Basement 2.
This is just 37 per cent of the 81,000 sq ft across two levels vacated by the mall's previous anchor tenant Carrefour.
The new wing will have about 80 outlets, bringing the mall's total number of shops to 320.
They offer fashion and lifestyle products or are food and beverage establishments.
Some of these businesses are new to Singapore, such as Japanese eatery Tsukada Nojo and apparel label Suit Select. Swiss watchmaker Oris has opened its first flagship store in the mall; another newcomer is buffet restaurant 1 Market by Chef Wan, in a maiden restaurant tie-up between the Malaysian celebrity chef and Food Junction.
Shares of CapitaMall Trust closed unchanged at $2.05 yesterday.
Source: Business Times –7 December 2012
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