Sharper retail rent slide in the offing

Source : Business Times - 21 Mar 2009

PRIME Orchard Road rents could fall about 15-20 per cent this year, says a new report by CB Richard Ellis (CBRE).

Property analysts have cut their retail rental forecasts in the past two or three months. CBRE, for example, said in December last year that prime Orchard Road rents could contract 5-10 per cent in the first half of 2009. The new prediction comes after they shrank 3.3 per cent in the first quarter - to $34.90 per square foot per month (psf pm).

CBRE has also trimmed its rental forecast for suburban malls. It now expects these rents to fall 10-15 per cent in 2009. In December 2008, it expected them to fall just 2-3 per cent in the first half of this year.

Suburban malls are thought to be relatively resilient compared with their Orchard Road counterparts because of their ready catchment populations, steady demand for basic goods and less competition from new supply. But CBRE’s data shows prime suburban rents fell 2.4 per cent in Q1 2009 to an average of $28.30 psf pm.

“Poor consumer sentiment was evident in Q1 as a result of the weakening economy, as well as shrinking tourist arrivals,” CBRE says in its report. In 2008, prime Orchard Road rents fell 0.8 per cent, after a 7 per cent climb in 2007. Rents at suburban malls, on the other hand, rose one per cent in 2008 before starting to slip in Q1 this year.

Other firms have likewise cut their retail rental forecasts for this year. In a March 18 report, DBS Group Research re-worked its assumptions for the physical property market after its economists downgraded Singapore’s 2009 GDP forecast to an unprecedented -4.8 per cent.

Given this, analyst DBS Adrian Chua now reckons retail rents could fall 10-20 from peak to trough. His previous forecast was a 10 per cent contraction. Likewise, he now believes the vacancy rate for retail space could hit 15 per cent, while earlier he was looking at a maximum of 10 per cent.

But others are keeping their forecasts intact - for the moment. Knight Frank, for one, told BT yesterday it is keeping its retail rental forecasts steady. The firm believes retail rents are likely to shrink 8-12 per cent in the next 12 months to end-Q1 2010.

Leases signed this year are likely to involve lower rents and fewer pre-commitments, said Nicholas Mak, director of research and consultancy at Knight Frank. “Many of the leases signed in 2008 were before the financial meltdown in September that year,” he noted. “Retailers have since re-assessed their operations. And this will affect their considerations for leasing new retail space in 2009.”

In Q1 2009, some retailers put expansion plans on hold, Mr Mak said. “As market rents declined during the quarter, the asking prices of some major landlords were behind the curve,” he explained. “Retailers who were still seeking new premises were offering to pay lower rents than landlords expected. As a result of this mismatch, the number of leasing deals decreased.”

Analysts say that for now, landlords have made tenant retention a priority as retailers feel the impact of the weakening economy. “As tenant retention becomes increasingly critical to shopping malls, more landlords are likely to initiate rental incentives or re-package rental structures,” CBRE says.

On a positive note, the firm’s director for retail services, Letty Lee, says that despite the poor economy, Orchard Road will be transformed this year with the completion of the three new malls, revitalising Singapore’s main shopping belt.

“The new malls - Orchard Central, Ion Orchard and 313@Somerset - will introduce a slew of new retail brands and shopping concepts, providing a greater variety of products, F&B and lifestyle choices in the evolving retail landscape,” Ms Lee said.

Orchard prime rents may fall 20%

Source : Straits Times - 21 Mar 2009

Challenging retail sector is forcing landlords to look at making cuts

IN ORDINARY times, the move to transform Singapore’s premier shopping strip with three glitzy new malls would mean higher rents.

But the latest property industry report suggests that Orchard Road prime rents could fall further - by 15 to 20 per cent - by the end of the year.

The CBRE property report says Orchard Road prime rents could fall by a further 15 to 20 per cent by year-end. — PHOTO: SINGAPORE TOURISM BROAD

A weakening economy, a shift away from luxury goods, and shrinking tourist arrivals spell gloom for hard-pressed retailers with space in the area.

Consultancy CB Richard Ellis (CBRE) says rents will fall as landlords pass on property tax rebates, extend rent-free periods, set lower rent levels for new space, or cut existing rents.

So far this quarter, prime rents have eased 3.3per cent from late last year to an average of $34.90 per sq ft (psf) a month, according to its latest data. The fourth quarter last year saw the first rent fall in the shopping belt in five years.

The retail sector is becoming increasingly challenging as leasing demand is subdued by new mall completions about to offer more retail space in the area.

Already, many retailers are crying out for rent cuts from landlords as they see the economic crisis further undermining already-weak sales.

Aside from the weakening economy, upcoming new malls, such as Ion Orchard (above), are putting additional downward pressure on rentals in the retail sector. — ST PHOTO: NG SOR LUAN

Suburban malls, which experts have said should be more resilient than prime Orchard Road malls, are also feeling the impact of the gloomy climate.

Prime suburban rents slid by a smaller 2.4per cent from the fourth quarter to $28.30 psf per month, said CBRE.

For the whole of this year, they could decline by 10 to 15per cent, it said.

The somewhat smaller expected drop in suburban mall rents reflects their greater resilience to the recession.

They benefit from shoppers living nearby and from steady demand for basic goods. They also face less competition from new malls, said CBRE’s director of retail services, Ms Letty Lee.

‘As tenant retention becomes increasingly critical to shopping malls, more landlords are likely to initiate rental incentives or repackage rental structures.’

Just this week, the Singapore Retailers Association (SRA) intensified its call for rent cuts by getting three other associations on board. They say they are banding together as calls for rental rebates have gone unheeded, and they warn that many retailers will go under if nothing is done soon to bring rent levels in line with the much weaker sales environment.

‘The issue which is most pressing now and which retailers are still very concerned about is existing tenancies with high rental rates which were locked in during the good times, and which are eroding their businesses now, when sales revenues have dropped significantly,’ said the association’s executive director, Ms Lau Chuen Wei yesterday.

‘These are the ones in danger of closure if nothing is done to stem the losses. And closure means job losses.’

SRA had originally hoped landlords would reduce rents to 2005 levels ‘which in many cases would be about 50per cent of current rates’, said Ms Lau.

But she said that tenants are realistic and recognise that ‘this is probably not possible’. With this in mind, SRA has moderated its position to seek an average 20 to 30per cent cut in rents, particularly for existing leases.

Ms Lau added that the industry is not expecting rental rates to be reduced on a long term basis, but rather for, say, six months, as the market is very volatile.

New signings are less of a concern to SRA as these retailers will be more ready to refuse a store location if the rental is not financially viable, said Ms Lau.

Indeed, new malls opening this year have witnessed some tenant pull-outs due to the weak market. This happened at City Square Residences in Kitchener Link, though developer City Developments said the vacant prime space was quickly filled up.

KepLand to defer luxury project

Source : Straits Times - 21 Mar 2009

Madison joins others in weakening market that have been put on hold

“PROPERTY developer Keppel Land (KepLand) yesterday announced that it will defer the construction of its 56-unit development, Madison Residences, because of weak market conditions.

Construction of the 56-unit luxury development in Bukit Timah was originally scheduled to start last June and a preview had already been held. — PHOTO: MADISON RESIDENCES

The project has not been launched.

Luxury condos such as the Madison have fallen out of favour in recent times as buyers turn to smaller, more affordable apartments.

Some earlier reports said ’some units’ had been sold at the preview of the Bukit Timah condo for a median price of $1,801 per sq ft (psf).

However, KepLand said yesterday only one sale had been made, and that had been cancelled ‘by mutual agreement’. It declined to give details.

Analysts that The Straits Times spoke to said it was not uncommon for developers to offer to buy back units sold at the preview of a project if there were changes to its development.

A search on the Urban Redevelopment Authority’s website showed a single caveat lodged for a 1,776 sq ft unit at $3.1 million - or $1,745 psf - in September last year.

‘Given current market conditions, there is no urgency to proceed with the construction of Madison Residences. The launch or when the construction will resume for the project will depend on market conditions,’ KepLand told The Straits Times.

Construction was meant to start last June and take 21/2 years. Construction and property group KSH Holdings had won a $53 million contract from Keppel Land Realty to build Madison, it was reported.

The project consists of luxury three- and four-bedroom apartments that range in size from 1,460 sq ft to 4,000 sq ft.

Madison is the latest in a string of projects in the local property market that have been deferred in the wake of the global economic crisis.

Luxury units seem to have been hit harder, noted analysts, as buyers now prefer mass-market, lower-priced condos.

KepLand said in January that it would consider delaying the construction of some of its projects to save costs.

Some measures unveiled in January by the Government in the Budget also gave developers greater flexibility in terms of selling their residential units.

The measures include a one-year extension of the completion period for private residential projects. Also extended was the period in which developers with qualifying certificates need to dispose of all residential units, from two years to four. They can rent out unsold units during this time.

CB Richard Ellis executive director Joseph Tan said there had been examples in the past of developers offering to buy back units if there were changes to the development plans. He noted that it was also not unusual for a project to be deferred even after the preview.

In its statement to the Singapore Exchange, KepLand said the deferment is not expected to have any significant impact on the company’s earnings per share for the current financial year.

KepLand defers construction of Marina Bay Suites

Source : Business Times - 21 Mar 2009

Building of Madison Residences also delayed by current market conditions

KEPPEL Land is deferring construction of the highly touted Marina Bay Suites (in which it has one-third stake) as well as Madison Residences in Bukit Timah, citing ‘current market conditions’. KepLand is developing the 221-unit Marina Bay Suites jointly with Cheung Kong Holdings/Hutchison Whampoa and Hongkong Land.

DELAYED
Worsening sentiment in the high-end residential sector

In a filing with the Singapore Exchange yesterday, KepLand announced construction deferral of the 56-unit Madison Residences on the former Naga Court site in Bukit Timah.

The group had earlier managed to sell just one unit in the project, at about $1,740 per square foot, in the second half of last year. However, a KepLand spokeswoman told BT yesterday that the sale of that unit has been cancelled by mutual agreement. ‘We are unable to provide details due to confidentiality,’ she added. When asked, she also revealed that ‘a decision has been made to defer the commencement of the main construction of Marina Bay Suites’. However, construction of another of the group’s residential projects in Singapore, The Promont, located in Cairnhill, will continue.

It has been one postponement after another for Marina Bay Suites because of deteriorating sentiment in the high-end residential sector. The tripartite partnership developing the condo had initially hoped to launch the project around end-January last year, but this was delayed to later the same quarter, and even then, that did not happen. The project has not been launched to date.

KepLand’s spokeswoman did not say how long the construction deferments for Marina Bay Suites and Madison Residences will be.

In its release to SGX, KepLand said the construction deferment for Madison Residences is not expected to have any significant impact on the consolidated earnings per share and net tangible asset per share of the company for the current financial year ending Dec 31, 2009.

Separately, construction group KSH Holdings also said in a statutory filing with SGX yesterday that it has agreed to the request of Keppel Land Realty to defer the construction of Madison Residences. The delay is not expected to have any material effect on KSH for the financial year ending March 31, 2009. KSH announced in April last year that it had won a $53 million contract from Keppel Land Realty relating to the construction of Madison Residences.

In January, Keppel Land’s group chief executive Kevin Wong said the group will conduct a review to see if it can delay building some of its projects. ‘We are reviewing our operation costs as well as the project costs of all our development projects to trim fat and conserve cash, so that we can invest in any attractive opportunities that come along. ‘This cost review exercise could include developing projects in phases to meet demand and even temporarily suspending the entire project if it does not add value to the company under current market conditions,’ Mr Wong said then. Projects that are yet to be launched for sale are those that are most likely to be delayed both in Singapore and abroad, he added.

KepLand’s earnings for the year ended Dec 31, 2008 fell 70.8 per cent to $227.7 million, from $779.7 million in FY 2007.

Recession trumps the hotel card

Source : Business Times - 21 Mar 2009

As membership numbers take a hit, hotels fight back by offering sweeter deals

THE popularity of hotel cards is now at a discount. After thriving on offers of better room rates, restaurant discounts and spa packages, many issuers are reporting falling membership numbers.

For example, the Advantage Plus card, used by the Accor group of hotels, has seen sales slow down in recent months.

Grant O’Bree, regional manager of Singapore and Malaysia Advantage Plus, said that the number of new members has declined. ‘Membership signups have been static since October last year,’ he said.

‘Towards the end of last year, we were still able to record 20 to 30 new sales a day. Now, there are some days where we only see 12 to 15.’

The St Regis Hotel finds itself in a similar situation. Its Astor Card, which was launched around September last year, has seen a dip in the number of members recently.

‘There is definitely a contraction,’ said a spokesman for the hotel. ‘The take up was really good last year - the market embraced the card when it was first offered. In fact, we were surprised by the lack of buyer resistance to the price of the card.’

‘Price was never really an issue for them,’ the spokesman said, referring to the steep membership price of $788.

Facing such gloomy prospects, hotels are sweetening the pot in order to win back customers.

Membership at the Club at the Hyatt now comes with additional vouchers. The new vouchers can be used for hotel stays. This feature has been reintroduced after a three-year break.

Similarly, at the St Regis, additional vouchers are being given out. These vouchers can be used for a variety of services, one of which is the big group dining benefit.

A group of eight to 12 people will be able to dine and enjoy 50 per cent off the total bill. Now, members also have a three-hour grace period where they are entitled to free parking during weekdays.

Hotels are now cautiously optimistic. The St Regis expects to reach its cap of 2,000 members despite the downturn. ‘Most of our members are able to continue their lifestyle despite the recession and, thus far, results have been promising,’ said a spokesman.

Other hotels such as the Grand Hyatt are also banking on long-term clients.

Long-term members of both the Hyatt Gold Passport and Club at the Hyatt are buoying demand and the hotel looks to leverage on them to bring in even more members. Dining vouchers worth $50 are being offered to Hyatt members as referral incentives.

Advantage Plus is also using the same technique, offering free membership renewal to members who are able to get five people to sign up in a period of two weeks.

However, hotels may have to do more to capture the consumer’s dollar.

At a time of economic recession, the cost of membership may appear particularly hefty to some.

‘The new discounts and packages are not enough to offset the high cost of the membership,’ said Thomas Yeo, who previously held several card memberships.

‘After all, you are spending money to spend even more money.’

However, hotels beg to differ.

‘We do not expect to see a drop inmembership numbers owing to the value for money benefits offered by the card,’ a spokesman for Millenium Hotels Group said.

Mr O’Bree noted that the Asia-Pacific region has seen heartening sales figures of late, with membership growth exceeding last year’s.

‘The renewal rate for the card stands at approximately 65 per cent this year, up from 59 per cent last year.’

He said that hotel cards can be used to retain previous lifestyles during the credit crunch. ‘These customers know that the card is value for money, which is especially important in tough times like these.’

No-change Orchard

Source : Straits Times - 21 Mar 2009

I refer to the $40-million makeover of Orchard Road in the article So, What’s New? (LifeStyle, March 15).

Despite the best intentions of the Singapore Tourism Board (STB), I think the money could have been better spent elsewhere. The beautiful flower towers and elegant glass panels are barely noticeable against the steel and concrete towers of the malls.

I have a few suggestions on where the money could have been spent.

Improve the pedestrian walkways and underpasses between shopping malls. Widen them, replace steps with ramps, escalators with travellators and/or lifts. This will make Orchard Road more accessible to people with prams, the elderly and those in wheelchairs.

Consider building elevated walkways connecting the shopping malls along both sides of Orchard Road. The walkways could also serve as blank canvases for artists and designers.

How about turning Orchard Road into a street for pedestrians only? With the Circle Line & Downtown Line MRT extensions, there would be less reason for Singaporeans to drive through Orchard Road. If needed, elevated roadways above Bukit Timah Road or a tunnel under Orchard Road itself could be built.

This would cost a lot more than $40 million but given the economic downturn and the drop in tourist arrivals and spending, it would be cheaper and less disruptive if we were to start work now. - Edwin Chow

The planters may add more greenery to Orchard Road but orchids need the right environment to grow. Most of the orchids died after one week. Kids and other pedestrians also pulled out the flowers to take home as souvenirs.

The glass panels look okay but why ruin the whole look and put multi-coloured lights below them? That makes the panels look cheap. If you want colour, keep to one colour. But get rid of the flashing lights. Orchard Road is a premier shopping district, not a disco. - Todd Beltz

I have the following suggestions to improve Orchard Road.

Widen the pedestrian crossings at traffic junctions. The pedestrian crossings at the Wheelock and Shaw junction, Paragon and Takashimaya junction, Mandarin hotel and Heeren junction, and Paragon and Park Hotel junction are too narrow to cope with the huge crowds at weekends.

Upgrade the escalators between Far East Plaza and Royal Plaza hotel. The escalators are heavily used and break down regularly. And the overhead bridge is an eyesore. - Patrick Chia

Perhaps we should call it ‘Ouch-ard’ Road for the ridiculous amount of money spent on minor cosmetic changes.

The STB is happy to spend $40 million on things that have limited appeal but try getting a $10 deposit back for an expired Singapore Tourism Pass. - Bob Armstrong

The makeover was a big letdown. The changes were so inconspicuous that I thought that the makeover was still in progress. - Bennie Cheok

Punish rogue property agents

Source : Straits Times - 20 Mar 2009

I REFER to Wednesday’s report, “Government to tighten rules for housing agents”.

I agree with National Development Minister Mah Bow Tan that certain standards must be set and tougher measures must be taken against agencies that fail to rein in their agents.

Punitive action - and not the passing of examinations - is the best way to deal with unethical agents.?

Examinations will not prevent a similar incident from happening in the future as this is an issue that involves moral values, not academic knowledge, of the agent.

For example, an agent may pass the Common Examination for House Agents and represent an accredited agency, but continue to make “secret” profits from other sales transactions if he joins another real estate company.

(It is my understanding that some companies still accept agents who have been convicted in court.)

I suggest the following:

1. Housing agencies should do a cross-check on agents who have resigned or had their services terminated by another agency. If they are found to have any previous criminal convictions, they must be barred permanently from returning to the industry.

2. Impose a heavy fine on agents who make “secret” profits at the expense of their clients.

Raymond Lim

JTC will continue to focus on its pivotal role

Source : Straits Times - 20 Mar 2009

I REFER to Mr Paul Chan’s Online Forum letter on Monday, “JTC should focus on helping industries”.

We thank Mr Chan for sharing his concerns and views and we appreciate his acknowledgment of JTC’s contribution to shaping Singapore’s industrial landscape.

Over the years, the visibility and market share of the private sector’s presence in the industrial property segment has grown with the maturing of our economy.

In fact, during pre-divestment days, the private sector was already the dominant player in the provision of ready-built factory space. JTC was a small player in this market segment with a market share of around 20 per cent. JTC did not set the benchmark for rentals but was taking its pricing cue from the market.

As there was already a competitive private sector market supplying ready-built factory space in Singapore, there was no need for JTC to maintain a market presence and compete with the private sector in this segment. This is in keeping with the Government’s “Yellow Pages rule” where the guiding principle is for the public sector to avoid duplicating services already well-performed and provided for by the private sector. Most importantly, customers will benefit from having more options and choices with greater competition in the market.

We would like to assure Mr Chan that JTC will continue to focus on its pivotal role of helping the industrial and manufacturing sectors.

Kelly Wee (Ms)
Director, Communications
JTC Corporation

Groups join forces to get rental cuts

Source : Straits Times - 20 Mar 2009

THE Singapore Retailers’ Association (SRA) has enlisted reinforcements in its continuing bid to get commercial landlords to lower rents.

SRA’s move, started last September, has made little headway so far, despite repeated pleas and gloomy predictions from the association that many retailers will go under if something is not done soon.

To give its effort a fillip, SRA has brought the Restaurant Association of Singapore, the Singapore Jewellers Association, and the Textile and Fashion Federation on board.

In a joint statement, the groups said they were banding together because calls for rental rebates have thus far ‘gone unheeded’.

They said joining hands would give them a new weapon in the fight: Shared information on rental issues, such as where retailers are taking up leases next and the rates they pay.

Such an exchange of information would be unprecedented, said Mr David Wang, vice-president of the Textile and Fashion Federation, which represents clothing exporters and local designers.

Retailers usually guard information about where they are opening next tightly to avoid giving competitors a heads-up.

Also, tenants are now contract-bound not to discuss what they pay in rent with others.

But SRA executive director Lau Chuen Wei said the group is working out how they can share information without breaching contracts, and is thinking of hiring a consultant to research this.

Taken together, this information will help retailers keep abreast of market rates and give them bargaining power.

All four groups say they are pressing their landlords for rental relief because the downturn has left their members reeling.

Singapore Jewellers Association president Ho Nai Chuen, for instance, said his members had seen business halved since the beginning of the year.

SRA has led the charge for lowered rentals since last September, when it made public announcements pressing landlords for rental rebates.

But so far, it has managed to secure a meeting with only one landlord, CapitaLand, which refused to budge on rents.

SRA has been giving increasingly dire predictions about the state of the industry.

Last month, it warned that if the stand-off with landlords continued, up to 20,000 jobs could be lost.

Despite being rebuffed repeatedly, it has continued to lobby the Government to cut the 7 per cent goods and services tax.

The refusal by commercial landlords to lower rents is in stark contrast to what government- linked ones such as the Housing Board, JTC Corp and the Sentosa Development Corporation, have done: A one-year rent cut of 15 per cent for all tenants.

Experts say the reason for this is that government-linked outfits are less driven by the profit motive.

But SRA’s latest move is unlikely to get retailers any closer to their goal.

For one thing, the National Trades Unions Congress (NTUC) has said the employment situation in the retail sector is not as bad as in other sectors such as manufacturing or electronics.

NTUC’s quality lifestyle department director Yeo Guat Kwang said last week that the union was not aware of massive job losses from the retail sector.

Several major landlords interviewed, including CapitaLand and AsiaMalls, said they are already passing on the Government’s 40 per cent property tax rebate in full.

This works out to about a 4 per cent cut for tenants - but they say it is hardly enough to make up for dwindling business.

Mall owners say they prefer to spend on driving up customer traffic. None has decided to give a blanket rental rebate as yet, preferring to engage with tenants on a case-by-case basis.

A CapitaLand spokesman noted that different tenants have different profit margins, and some could well afford higher rents than others.

Landlords have been relying on promotions such as giving away free shopping vouchers and free gifts to attract shoppers and increase tenants’ business.

SRA and its partners, however, are refusing to back down.

Mr Ho warned: ‘If stores start closing down and the malls stand half empty, Singapore’s image as a shopping paradise will be affected.’

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TENANTS’ VIEW

Give us rebates

‘Promotions like voucher giveaways will benefit some, but not everyone. Depending on the products offered, some shops might benefit more, others less, and some might get nothing. I think rental rebates and such promotions go hand in hand. A rental decrease benefits everyone and has a longer lasting effect, and it helps more.’

Mr Tan Yew Jin, business development manager of Alpha Sky, which owns shoe chain Schu. It has outlets in Wisma Atria and Suntec City

‘Shopping voucher giveaways do help, but not so much. Customers at my shop tend to spend up to the voucher’s value, and I usually don’t make much additional sales. In the end, revenue from vouchers accounts for less than 5 per cent of my monthly sales. I think that the most direct way is still giving us a rental adjustment. If people don’t want to spend, promotions won’t really help, and the money put in to drive traffic may not be justified.’

Mr Samuel Chong, owner of aromatherapy and toiletries shop Salo in Liang Court

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LANDLORDS’ VIEW

Promotions helping

‘The focus of the promotions has changed from general market positioning or mall image advertisements to tactical promotions to reward spending at our malls and repeat visits. We have also focused on areas to help tenants, such as setting aside areas for our tenants’ promotions and working with them on joint promotions whenever possible, to increase the awareness of their products.’

Ms Stephanie Ho, general manager of AsiaMalls, which owns six malls, including Liang Court, Tiong Bahru Plaza and the recently opened Tampines 1

‘We have in place a slew of measures that we can activate to help our tenants, ranging from restructuring their leases, reviewing their space efficiency, exploring relocation or downsizing of stores, as well as working with tenants on various promotional fronts, such as pushing sales in atrium spaces, CapitaCard promotions and CapitaVouchers.’

A spokesman for CapitaLand Retail, which owns or manages 18 malls, including the 14 which are owned by real-estate investment trust CapitaMall Trust. Properties include Raffles City, Junction 8 and the upcoming Ion Orchard

Shanghai villa sells for $46m

Source : Straits Times - 19 Mar 2009

A SHANGHAI villa has sold for 205 million yuan, or US$30 million (S$45.9 million), in the most costly residential real estate deal yet for mainland China, the property’s developer said on Wednesday.

Shimao said the 205 million yuan deal was the costliest so far for a mainland Chinese residential unit. –PHOTO: Shanghai Shimao Sheshan Villas

But despite the stunning size of the transaction, the outlook for the market remains murky, those working in the industry say.

Shimao Property Holdings would not disclose any details about the identity of the buyer of the fully furnished, 4,000 sq m villa at its Shanghai Shimao Sheshan Villas development.

A staff at Shimao’s investor relations department confirmed the deal but would not comment on a South China Morning Post report saying the buyer was not a mainland Chinese passport holder.

Another villa at Shimao Sheshan, a scenic area in Shanghai’s western suburbs, sold for 155 million yuan.

Shimao said the 205 million yuan deal was the costliest so far for a mainland Chinese residential unit. But at 51,000 yuan, or US$7,500 (S$11,500), per sq m, it was less expensive than homes in downtown Shanghai’s Tomson Riviera, a luxury complex where a smaller, but still spacious, apartment sold earlier for 130,000 yuan, or more than US$19,000, per sq m.

Although the villa’s price is astronomical by Chinese standards, it is way below the most expensive in the world. The most expensive market, according to Global Property Guide’s 2009 list, is Monte Carlo, averaging US$45,000 per sq m.

New cruise terminal to be ready by end-2011

Source : Straits Times - 19 Mar 2009

IN A nod to the Republic’s ambition to become an international cruise centre, the Singapore Tourism Board (STB) gave a glimpse of its new cruise terminal at a shipping event in Miami, Florida, on Tuesday which attracted industry bigwigs.

The new terminal will boast berths that can accommodate the world’s largest ships.

It will help Singapore achieve its ambition of becoming a cruise hub for the region by doubling the handling capacity of the current HarbourFront terminal, which is already struggling to cope with the growing number of ships and people arriving there.

Worse, the existing terminal at HarbourFront has a height restriction of 52m, making it impossible for many bigger ships to dock there.

The new terminal at Marina South will not have any size or height restrictions.

However, it will be ready only by 2011, a year later than originally planned. No reason for the delay was given in STB’s press statement.

Miami’s Seatrade Cruise Shipping Convention is an important annual event at which shipping industry movers and shakers meet to discuss the latest developments.

At the event, STB’s director for destination marketing and cruises, Mr Chew Tiong Heng, said: ‘Even amid the current economic climate, the STB is committed to delivering this key infrastructure by the end of 2011 to help position Singapore as a regional cruise hub.

‘We believe the terminal’s rooftop, depicting a modern interpretation of low rolling waves will be a very welcoming sight to passengers as their cruise ships sail into Singapore.’

The new cruise terminal was designed by a collaboration between United States-based Ajamil and Partners and local firm RSP Architects Planners and Engineers.

The ground-breaking for the project is expected to begin in the next quarter.

Credit squeeze as banks tighten home loan criteria

Source : Straits Times - 19 Mar 2009

GETTING a mortgage has become a far trickier proposition these days with banks tightening up loan criteria, with some owners being asked to stump up more cash when values fall.

Loans of 80 or even 90 per cent of a property’s value are still possible, especially if the buyer intends to live in the home, but investors on their second or third property are finding it tougher.

The banks’ moves come amid a real estate market hit hard by the economic crisis. Prices have fallen and are continuing to fall, forcing lenders to aggressively re-assess their loan criteria.

Once common, loans of 80 per cent are less so these days. Maybank, for instance, is granting loans of up to 70 per cent of valuation prices for its latest home loan fixed rate package.

Ms Ally Yang, a chief mortgage consultant at www.homeloan.com.sg, told The Straits Times: ‘It is very difficult to get 90 per cent financing nowadays. The banks need to see all the savings the customers have, to see if they are sufficient for the 10 per cent down payment and 24 months of instalment payments.’

Unlike Singaporean owner-occupiers, most investors as well as non-taxpayers will be able to get only up to 70 per cent financing, compared with 80 per cent last year, said Ms Yang.

Banks are becoming more careful on the eligibility condition and are doing more checks even as they compete for the good customers, she said.

It is even harder for investors, who have to pay a higher interest rate on loans than an owner-occupier - perhaps an extra loading of 0.25 per cent on the standard package, she added.

The squeeze is also forcing some buyers of new properties to think hard about their purchases, with experts warning them against holding off too long on taking loans in case prices fall.

Some owners are already having to shell out cash to make up the shortfall between their purchase prices and the valuation now. Take a home that you agreed to buy for $1 million, with a 20 per cent deposit and the assumption of obtaining a loan for $800,000.

If the valuation falls to $900,000, the 80 per cent portion is now $720,000. So you need to chip in $80,000, in addition to your $200,000 deposit, to make up the $1 million purchase price.

It is standard practice for banks to engage independent valuers to determine the market value of properties.

However, most new launches do not have this problem. Frasers Centrepoint’s Caspian in Jurong, for instance, sold 517 units out of 600 launched units last month - quite a feat these days.

‘In today’s market, developers will not want to launch at a price that cannot be matched by the banks,’ said PropNex chief executive Mohamed Ismail.

Most developers will check with valuers to see if their prices can be supported before they launch their projects, said DTZ executive director Ong Choon Fah.

‘For most new launches, particularly projects aimed at upgraders, banks would be able to match their selling prices,’ agreed Knight Frank’s executive director of residential, Mr Peter Ow.

More developers are linking with banks to offer the interest absorption scheme. This lets buyers defer the bulk of the price until completion, provided he takes a loan at the point of sale. First-time buyer Brandon Goh took it up and got 80 per cent financing for his $693,000 unit at Caspian last month.

Mr Ow, who is marketing Double Bay Residences in Simei, said buyers in the project can even get up to 90 per cent financing from DBS.

HSBC clients can get loans of up to 90 per cent valuation if ‘their financial profile…meets the bank’s criteria’, said its head of personal financial services, Mr Sebastian Arcuri.

Given that the market may soften further, experts say buyers of newly launched properties should commit to a home loan now, rather than later.

Said Mr Ismail: ‘It is in the interest of the buyer to lock in the value of their property as soon as possible. Generally, the value at new launches will be matched by the banks, but not necessarily down the road.’

Singapore third costliest in office rental despite fall

Source : Straits Times - 19 Mar 2009

OFFICE rents here fell by 22 per cent last year, but Singapore is still the Asia-Pacific’s third costliest city for business tenants, according to Colliers International’s latest review. Hong Kong and Tokyo were No. 1 and No. 2 respectively.

The global office real estate review tracked office costs in 172 cities worldwide for the first and second halves of last year. It found that Singapore’s office occupancy costs, defined as the annual average gross rents of central business district Grade A office space, fell from US$125.06 psf (S$191.17) in the first half of last year to US$97.07 psf in the second half.

Across the Asia-Pacific, 16 other cities also registered declining rents. Nine of the 20 cities surveyed saw rents plummet more than 20 per cent during the year. Beijing and Taipei were the only two cities in which rents rose.

Despite remaining the third costliest in the region, Singapore’s office occupancy costs were 45 per cent cheaper than those of Hong Kong’s at the end of last year, up from last June’s 41 per cent, and 24 per cent less than Tokyo’s as compared to just 3 per cent last June, said Ms Tay Huey Ying, director of research and advisory at Colliers International.

On a global scale, Singapore is the sixth most expensive city, behind Hong Kong, Moscow, Tokyo, London’s West End and Dubai.

In the light of the global economic downturn, Mr Nicholas Mak, Knight Frank’s director of research and consultancy, said that the outlook for office occupancy costs is ‘more downside than upside for the next year or so’.

Banks, financial institutions and supporting businesses such as law and accounting firms were the biggest users driving demand for office space in the last three years or so. Facing contraction, they now need less space, which is dragging down rents.

‘Most banks completed expansion plans many months ago and may now even be thinking of shrinking,’ said Mr Mak.

This is seen not just in falling rents but also in higher vacancy rates. Ms Tay said: ‘The growing vacancy rate seen for Singapore is due to the interplay of dwindling demand against surging supply.’

At the time of the review, at least 10 million sq ft of office construction was under way in Singapore.

The Sail generates top gains in subsale deals

Source : Business Times - 19 Mar 2009

Largest windfall of $6.7m achieved for a unit above the 60th floor

TRANSACTIONS at The Sail @ Marina Bay last year topped the subsales deals that generated the highest gains, both in absolute as well as in percentage terms, a caveats analysis by Savills Singapore shows.

The Sail @ Marina Bay: In all, there were 74 instances of gains generated from subsale transactions at The Sail in 2008

In absolute dollar terms, the biggest gain of $6.66 million was achieved for a unit above the 60th floor of the 99-year leasehold project. It was bought for $8.8 million or $1,508 psf in November 2005 from the project’s developer, and sold in the subsale market for $15.5 million or $2,650 psf in August last year.

The top percentage gain of 178 per cent was generated by a 49th floor unit at The Sail that was sold for $1.42 million or $2,400 psf in the subsale market in May last year. The seller had picked up the unit for $510,400 or $862 psf from the developer (a joint venture between City Developments and AIG) in December 2004.

Two other units at The Sail also yielded subsale profits of 176 per cent and 175 per cent; the sellers had bought their units from the developer.

In all, there were 74 instances of gains generated from subsale transactions at The Sail in 2008. Market watchers noted that this was because the project’s launch in two phases in 2004 and 2005 was ‘perfectly timed’ before residential property prices shot up in 2006 onwards.

As for subsale deals that produced losses last year, the biggest loss in absolute quantum, $1.03 million, was suffered for a unit around the 20th floor at Scotts Square. It was sold in November last year for $3.7 million or $3,050 psf; the seller had bought it up in the primary market in August 2007 for nearly $4.8 million or $3,890 psf.

The largest percentage loss (36 per cent) was incurred by the owner of a 26th floor unit at Tribeca on Kim Seng Road who had paid the developer $885,800 or $1,553 psf in February 2007 and sold his unit at $570,000 or $999 psf in December last year.

Looking ahead, Savills Singapore director Steven Ming said: ‘It’s reasonable to expect that subsale losses may increase this year, unless macro and global economic problems are ironed out and financing eases,’ he added.

Knight Frank executive director (residential) Peter Ow notes that what would usually make an investor cut losses in the subsale market is when it is time to pay up the developer. ‘An investor exposed to a few properties he has bought on deferred payment scheme may want to cut losses on the first one or two to improve his cashflow, so that when it is time to pay up for the third one, he can afford it,’ he added.

In the event that a buyer has difficulty getting a bank loan and footing the bill for a chunk of the purchase price to the developer when the project receives Temporary Occupation Permit (TOP), some developers may be prepared to repudiate the sale and purchase agreement and forfeit the 20 per cent initial payment collected from the buyer and proceed to resell the unit.

But other developers may sue the buyers and force them to complete the sale and purchase agreement at the contracted price. ‘Most buyers wouldn’t want to take the risk of defaulting because they don’t know the position of the developer and risk being sued and even bankrupted,’ Mr Ow said.

For projects completing in 2011/2012, most investors will tend to hold their units as there is a possibility of a property market recovery, he predicts. ‘But for projects receiving TOP, say, this year, investors will have to weigh risks of whether they have the financial means to pay up. If not, it may be better to cut loss,’ Mr Ow said.

Mr Ow estimates that most investors would be prepared to cut a loss of up to 20 per cent on their purchase price (assuming they have already paid an initial 20 per cent to the developer) since they will then not have to take a further hit.

However, if they subsell the property at, say, 70 per cent of their purchase price, they would have to fork out a further 10 per cent to the developer before the developer agrees to transfer the title to the new buyer.

Occupancy cost of offices falls in Singapore

Source : Business Times - 19 Mar 2009

GRADE A office occupancy cost in Singapore dropped 22 per cent from an annual average gross rent of US$125.06 per sq ft in the first half of 2008 to US$97.07 psf in the second half.

But Singapore remained the third most expensive city in the Asia-Pacific, according to a report by Colliers International.

Occupancy cost is defined as the annual average gross rent of central business district (CBD) Grade A office space. Hong Kong and Tokyo retained their first and second spots, with respective average gross rents of US$177.86 psf and US$128.40 psf.

Worldwide, Singapore was ranked the sixth most expensive city, while Hong Kong was the most expensive.

Tay Huey Ying, director of research and advisory at Colliers, said: ‘Despite the fact that Singapore’s CBD Grade A office rents registered a 22 per cent decline in H2 2008, it has retained a high position in the regional and global ranking.

‘This is because office rents in almost all other cities have been similarly pressured down by the global financial crisis.’

Colliers’ report shows that nine of the major Asia-Pacific cities surveyed registered rental declines exceeding 20 per cent. Brisbane and Perth experienced the steepest declines of more than 28 per cent.

While Singapore remains expensive, Ms Tay believes cost competitiveness has improved slightly, particularly against other key financial cities like Hong Kong and Tokyo.

She noted that Singapore’s office occupancy cost is now 45 per cent cheaper than Hong Kong’s, widening from 41 per cent in June 2008. Compared with Tokyo, occupancy cost here is now 24 per cent cheaper, versus just 3 per cent in June 2008.

The Grade A office vacancy rate in Singapore rose 1.4 percentage points to 8.9 per cent in the second half on 2008. The 8.9 per cent figure is high compared with Hong Kong and Tokyo, both with 4 per cent.

Seoul had the lowest vacancy rate at 0.7 per cent, while Guangzhou had the highest vacancy rate at 23 per cent.

Ms Tay said: ‘The growing vacancy rate in Singapore is due to the interplay of dwindling demand and surging supply.’

Colliers says demand for office space here shrank for the first time in four-and- a-half years in December 2008.

New supply, on the other hand, was about 1.4 million sq ft in 2008 - the largest amount since 2002 and exceeding the cumulative net new supply of office space from 2003 to 2007 by almost 1 million sq ft.

Ms Tay said that in line with the economic contraction, demand for office space in Singapore is set to slide in 2009 and the vacancy rate is set to rise.

‘On the supply side, 2.9 million sq ft of office space is estimated to come on stream in 2009, on top of the bumper crop of net new completion amounting to 1.4 million sq ft seen in 2008,’ she said.

The situation will be aggravated by the supply of 2.5 million sq ft of new hi-spec industrial space due for completion in 2009, as well as a rise in shadow space.

Although close to 50 per cent of the new hi-spec space has been pre-committed, Ms Tay believes the remaining space is likely to compete with the office sector for tenants.

In addition, shadow supply is expected to grow in 2009 as companies downsize or relocate to cheaper premises prior to lease expiry.

Some bleed from subsales but most come out ahead

Source : Business Times - 19 Mar 2009

Deals that run up a loss double in H2 as market worsened

In a tough property year, an overwhelming 95 per cent of those who sold private apartments and condos in the subsale market last year had managed to turn a profit.

But the number of subsales that chalked up losses more than doubled from 24 in first-half last year to 52 in H2, reflecting the deteriorating market conditions, especially in the fourth quarter.

For those who took a loss, the average loss per unit also rose, from about $138,000 or 7 per cent in H1 2008 to $188,000 or 12 per cent in H2 2008.

But there were happy stories. One owner at The Sail, for instance, chalked up a gain of some $6.7 million after having held on to the property for about three years.

Savills Singapore’s analysis of caveats showed that the number of loss cases rose as 2008 rolled along, from six in Q1, increasing to 18 in Q2, and stabilising somewhat at 20 in Q3, before jumping to 32 in Q4.

‘There were more owners cutting losses in the subsale market in H2 2008, especially in Q4, following the Lehman fallout and the global meltdown. Sales trickled and more people sold at losses,’ said Savills director (investment) Steven Ming.

And while there was an increase in the number who suffered losses on their subsale deals, the number of subsales that produced profits fell 16.8 per cent from 757 in H1 to 630 in H2. The average subsale gain per unit shrank steadily through the year, sliding from $425,000 or 37 per cent in H1 to $288,000 or 28 per cent in H2.

On the whole, the finding was that it is more rewarding to hold one’s property for a longer period. On average, the biggest gains of $785,000 per unit were pocketed by those who bought in 2004 and sold in H2 last year, followed by those who had picked up their properties in 2005 and divested them in H1 last year, collecting an average gain of nearly $666,000.

The largest average loss of $210,000 was incurred by those who had bought in 2006 and sold in H1 2008.

Around 90 per cent of the 76 investors who suffered a loss in the subsale market for the whole of last year had bought their units in 2007 during the market peak.

Knight Frank executive director (residential) Peter Ow notes that usually an investor would cut losses in the subsale market when it is time to pay the developer. ‘An investor exposed to a few properties bought on deferred payment scheme (DPS) may want to cut losses on the first one or two to improve his cashflow so when it is time to pay up for the third one, he can afford it,’ he said.

Mr Ming points out that in addition to multiple property owners who may find it difficult to get sufficient bank loans to complete their acquisitions, those taking a hit in the subsale market may include ’savvy investors seeking to diversify their investments and allocating a part of the exposure to other undervalued asset classes’.

Savills calculated profit or loss as the difference between sale and purchase prices and did not take into account agent fees and other expenses. The analysis was based on a total 1,761 subsale deals of non-landed private homes captured in the URA Realis system as of March 9, 2009. Of these, it could trace and match previous caveat records for 1,463 units. Savills then compared the latest subsale price of each unit with the earlier price paid by the seller to work out the profit or loss.

Subsales, often seen as a gauge of speculative activity, are secondary market deals in projects that have yet to receive their Certificates of Statutory Completion. This may be anywhere from three to 12 months after the project receives Temporary Occupation Permit (TOP).

Savills’s analysis also showed that the proportion of subsales done below $1 million per unit rose from 38.3 per cent in H1 last year to 45.9 per cent in H2, as affordability became important.

Projects with the highest number of subsale transactions for 2008 were The Sail @ Marina Bay (78 units), Citylights (77 subsales), Varsity Park Condo (59 units), City Square Residences (57 units), The Sea View (52 units), The Esta (49 units) and Park Infinia at Wee Nam (48 units).

Some of these projects also saw the most number of subsale losses for the whole of 2008, for instance City Square Residences (six units), Citylights (four units) and The Sail (four units). In addition, The Cosmopolitan and Watermark Robertson Quay each had four subsale loss cases last year.

In H1 2008, Citylights saw the most subsales, at 60. In H2, The Sail was the top subsale project, with 40 units changing hands.

‘Anecdotally, there appears to be a higher number of subsales that take place for projects that were approaching TOP. For example, the 1,761 subsale transactions in 2008 included 52 projects that received TOP in the same year,’ Mr Ming said. Projects that obtained TOP in 2008 included The Sail, part of City Square Residences, The Sea View and The Cosmopolitan. Icon, City Lights and The Calrose were among the projects that received TOP in 2007.

Mr Ming said that with 10,000 homes expected to get TOP this year, ‘we expect subsale transactions to remain active and the sell pressure will keep up this year, unless debt markets open up and financing for investors eases’.

Worse in store for US commercial property

Source : Business Times - 19 Mar 2009

The US commercial real estate market is bad and investors expect it to get a whole lot worse, according to a closely followed survey by PricewaterhouseCoopers.

‘As investors painfully watch the value of their assets decline, many feel troubled knowing that the ills of the US economic recession have yet to fully impact the commercial real estate industry,’ starts the first- quarter Korpacz Real Estate Investor Survey of more than 100 investors from real estate investment trusts, pension funds, private equity firms and insurance and mortgage firms.

Many investors are struggling with ways to preserve the value of their investments and maintain ownership in the wake of restricted debt sources, declining tenant demand, and falling values, the survey said.

Investors do not expect the commercial real estate sector to rebound until well into 2010 at the earliest.

‘Investors are not expecting this recovery, when it does happen, to be a sharp recovery where it hits bottom and bounces up,’ said Susan Smith, a director at PricewaterhouseCoopers in the real estate group and the survey’s editor. ‘It’s going to be a very slow sluggish recovery,’ she said. ‘There are just too many things right now that are impacting the industry to make investors very confident about what’s going on,’ she said.

Some property owners are lowering rental rates and increasing concessions, which results in lower revenue.

Compared to a year ago, the average amount of free rent landlords are offering has increased to six month in several major office markets, such as Boston, where it rose from 2.15 months; Manhattan, where it grew from 41/2 months and San Francisco, where it rose from 31/2 months.

One investor in the survey suggested ‘making the best deal you can today because tomorrow’s deal will be worse.’ Investors believe that the overall cap rates, or returns, for US commercial real estate over the next six months will rise by an average 0.47 percentage points from 7.49 per cent in the first quarter 2009, the survey said. When cap rates rise, prices fall.

In the retail real estate arena of malls and shopping centres, investors expect power centres, home of the big box stores, to lose value by the greatest amount, with cap rates rising by an average of 0.744 percentage points from 7.63 per cent, according to the survey. They see cap rates for regional malls rising 0.65 percentage points.

Investors expect rent and occupancy for retail properties to continue to decline in 2009, the survey said. Last year, store closings rose 50.1 per cent to 6,913 and forecasts call for more than 8,000 store closings in 2009, according to the survey.

Most investors said they expect the eroding fundamentals to press values down by 10 per cent to 26 per cent from the 2007 peak, with the most pessimistic investors seeing declines of about 40 per cent, the survey said.

Government to tighten rules for housing agents

Source : Straits Times - 18 Mar 2009

THE National Development Ministry is reviewing the framework that property agents work under given the recent spate of unethical practices that have surfaced.

Minister Mah Bow Tan told The Straits Times: ‘The status quo, in my view, is not tenable. I think we need to do something.’

The MND is looking to see if it could get property agencies to keep a closer watch on their agents, among other things.

‘Surely the agencies, who I believe share in the commissions of the agents, have a responsibility too. Whoever is offering a service for a fee must have a responsibility, a duty to maintain certain standards,’ he said.

It may even take even tougher measures if agencies do not rein in their agents, said Mr Mah.

‘We have to see how agents do not mislead, and if they do mislead, they engage in unlawful practices, what action we can take against them.’

This is the first time that the Government has hinted at the possibility of mandatory regulations for the real estate industry. For years, it has maintained that the industry should regulate itself despite the fact that various such attempts have been found lacking.

Although housing agencies are licensed by the Inland Revenue Authority of Singapore, the over 20,000 housing agents here are not regulated. They do not need to meet minimum standards and can continue in the trade even if they are found to have done wrong.

In a highly publicised case last month, a couple took ERA Realty Network to court after they sold their downtown apartment for $688,000 in 2007 and learned subsequently that their home was bought and resold by the wife of their agent’s boss for $945,000. The couple won the case and have since received the difference of $257,000 back from ERA.

ERA had argued during the case that the agency was not liable for the actions of its agents because they are considered independent contractors.

Years of infighting have left housing agencies unable to agree on common standards for self-regulation.

The Institute of Estate Agents has only a small fraction of agents as its members and there is confusion over what it takes to be an accredited agency under the four-year-old Singapore Accredited Estate Agencies (SAEA) scheme.

The board behind the programme initially required accredited agencies to have all their agents pass the Common Exam for House Agents (Ceha) by this year, but introduced a scaled-down test called the Common Examination for Salespersons (CES) just before that deadline.

Mr Mah said: ‘I don’t think it worked well, based on all accounts…It’s not satisfactory. The whole current system is not satisfactory.’

His comments buoyed industry players like Mr Jeff Foo, the president of the Institute of Estate Agents, who said: ‘It’s about time for a change. We have to do things in the interests of the consumer.’

But the chairman of the SAEA, Mr Peter Koh, maintained that voluntary accreditation was making ’satisfactory progress’. About 300 agencies with more than 6,000 agents under them have been accredited so far.

‘With government support, we can do better. We are doing our level best given that it’s so fragmented.’

Get master tenants to pass on benefits to property users

Source : Straits Times - 18 Mar 2009

I AM an entrepreneur running a small and medium-sized enterprise (SME) and am heartened by the Government’s bid to alleviate the effects of the downturn with several measures, one of which is to provide rental rebates to properties leased from JTC Corporation, the Housing Board and Singapore Land Authority (SLA).

These rental rebates, which comprise 15 per cent of the rents payable, are intended to help tenants, licensees and lessees by lowering their costs and steadying their cashflow.

My company has a staff strength of 15 and we are located in a building as sub-tenants of a master tenant who leased the building from the SLA. We renewed our lease with SLA’s master tenant in mid-2008. Then, our master tenant, a listed company, informed us that due to market conditions, it would have to raise the rents.

It was a take-it- or-leave-it offer and we stayed after renewing our lease with a 110 per cent increase in rent. Several smaller tenants in our building had to move out and the master tenant found no problem filling the vacancies.

Recently, we received a notice from the master tenant that it would pass on ’some of the rebate’ received from the SLA. This amounted to less than 6 per cent of our current rental rate.

In other words, our master tenant saw it fit to retain most of the rental rebates passed on by the SLA.

Much as I appreciate the Government’s generous gesture, its aim has been diluted. The rebates are meant for actual tenants - businesses who occupy the premises and hire employees - thus saving jobs.

While master tenants are certain to point out that they too hire employees and have commercial decisions to make and account to their shareholders, it must be pointed out that they would have enjoyed savings for premises occupied by their employees and would also enjoy a business boost in being able to attract more tenants for any unoccupied units with the rebate scheme in place.

Any entitlement to retain the rental rebates - not because it physically occupies the property but because it happens to be a property master tenant - unwittingly makes the Government a windfall provider.

In my company’s case, I understand that our master tenant also occupies an SLA property for its other operations, so it has enjoyed a double-boost.

While a perfect policy is impossible, the current one on rental rebates should perhaps be tweaked to achieve its full effect.

Tan Suan Tiu

Sentosa’s tenants get 15% rental rebate

Source : Straits Times - 18 Mar 2009

ANOTHER government-linked landlord is offering a 15 per cent rental rebate to its tenants - generous when compared to the 4 per cent that commercial landlords are offering at best.

Sentosa Development Corporation (SDC) announced this yesterday as a way of helping its tenants keep a lid on business costs during the downturn.

The rebate will apply until the year end, and be backdated to January for the 47 tenants on the resort island.

This follows announcements in January by four other government agencies - the Housing Board, JTC Corporation, the Singapore Land Authority and the National Environment Agency - that they were slashing rents by this quantum.

More than 36,000 businesses which rent hawker stalls, factories, offices or land from the four statutory boards are benefiting from their foregoing of $311.6 million in lost rental revenue.

Businesses leasing space from commercial landlords, on the other hand, have clamoured for deeper rebates than the 4 per cent they have been given as a result of the Government offering their landlords a 40 per cent property tax rebate.

Singapore Retailers Association president Jannie Tay said more careful spending by consumers has taken away 20 to 30 per cent of the income of the association’s members in the last two months, even as they were being ’squeezed’ by the high rents that were negotiated during boom time.

She said: ‘What retailers need now is a reduction in base rent. If not, many will not be able to survive this crisis.’

Sentosa’s tenants, which exclude the seven hotels, will make monthly savings of between $180 and $3,000 for the year.

The hotels get a 40 per cent property tax rebate direct from the Government.

Among the tenants on the resort island is Sentosa Luge and Skyride. Its general manager Lyndon Thomas said he was ‘ecstatic’ about the rebate, especially since it was unexpected.

‘It is a really pleasant surprise. Any savings are great in my view,’ he said.

The rebates will cost the statutory board more than $600,000 in lost rental revenue for the year.

SDC chief executive Mike Barclay said the rebates were Sentosa’s way of channelling the savings it will get from the Government’s property tax rebates back to its island partners.

Overall tourism numbers are down, but SDC said its participation in promotions run by the Singapore Tourism Board have kept things humming on the island.

More than 6,000 free passes were given out over three weekends last month; this month, the promotional deal admits two children or senior citizens for free with every two paying adults.

Four industry bodies tie up to engage landlords on rental costs

Source : Channel NewsAsia - 18 Mar 2009

Four industry bodies in Singapore have banded together to battle the current downturn.

The Singapore Retailers Association, the Restaurant Association of Singapore, the Singapore Jewellers Association, and the Textile and Fashion Federation have pledged to share information and create a unified stance on matters common to their industries.

In a joint statement, the four industry bodies say they have tied up to engage and seek partnerships with landlords in a bid to prevent more shop closures and job layoffs.

The unprecedented move comes in response to landlords’ refusal to heed calls to offer rental rebates to help tenants weather the current economic downturn.

The industry bodies say they will “work together in an attempt to secure a future for their respective sectors and for Singapore, before Singapore’s image suffers from empty shop units and half-full shopping malls”.

According to the associations’ members, occupancy costs remain the biggest burden. And if it is not addressed, it could lead to more stores closure and push up the unemployment rate.

Just last week, the Singapore Retailers Association said it expects job losses to surge by the end of June - hitting as many as 20,000 over the next few months.

US mortgage applications spike on refinance demand

Source : Business Times - 18 Mar 2009

US mortgage applications surged in the latest week, driven by a spike in demand for refinancing as the average rate on 30-year fixed-rate home loans fell, the Mortgage Bankers Association said on Wednesday.

Refinancing applications jumped 30 per cent in the week ended March 13 as the borrowing rate dipped 0.07 percentage point to 4.89 per cent, tying the record low reached in early January in a survey that dates to 1990.

The MBA’s market index, which includes both purchase and refinance loans, jumped 21.2 per cent to 876.9, the highest since mid-January.

But purchase applications rose just 1.5 per cent last week to 257.1, a one-month high.

The Mortgage Bankers Association said its seasonally adjusted refinancing applications index jumped 29.6 per cent in the week ended March 13 to 4,497.6, also the highest level since mid-January.

Home loan rates have fallen as the government has purchased more than US$250 billion of mortgage-related assets and announced unprecedented steps to stabilise the deepest housing slump since the Great Depression.

A year ago, the average rate on a 30-year mortgage was closer to 6 per cent.

The Federal Reserve purchases of mortgage-related assets is nearing the half-way mark targeted by the end of June to help cut mortgage costs and revive housing. The programmes are widely expected to be expanded to bring borrowing costs down, stimulate purchases and help struggling homeowners to refinance and avert foreclosure.

Yes, heritage needs better planning

Source : Straits Times - 18 Mar 2009

I AGREE with Mr Murali Sharma’s letter on Monday, ‘Save vanishing piece of past’, that there is lack of planning in the pursuit of plot ratio increase.

Over the last 10 years, Telok Kurau has seen steady increase in condominium construction, peaking over the last two years. This trend destroys the quiet historical landed housing area and causes heavy traffic of vehicles which the old, narrow streets cannot sustain.

Surely, the expansion and development to house an increasing population can be done in areas where you do not have constraints of existing narrow roads. To worsen the situation, many of the lorongs or streets in Telok Kurau are dead-end streets.

One end is the Telok Kurau Park Connector. Consequently, all traffic exits into Telok Kurau Road with long queues. In the extreme case of a fire, for instance, I worry that safety will be compromised due to this congestion.

Similar problems apply to other areas on the island. It is not too late to review the planning and rethink the change of plot ratios.

Jack Chew

Sentosa’s tenants get 15% rent rebate

Source : Business Times - 18 Mar 2009

SENTOSA Development Corporation said yesterday it will give its tenants a 15 per cent rent rebate.

The move - backdated to Jan 1 and effective until the end of this year - will benefit 47 tenants who run attractions, beach pubs, food and beverage and retail outlets, and other businesses such as bicycle hire kiosks.

They will get monthly rent rebates of between $180 and $3,000. About 80 per cent of tenants on the island will benefit. The other 20 per cent, who pay property tax direct to the government, will not be eligible as they will benefit from the government’s property tax rebate.

In January, the government said owners of industrial and commercial property will get a 40 per cent tax rebate this year.

Similar measures to help tenants were put in place during the last economic recession in 1997-98 and the Sars outbreak in 2003, Sentosa said.

It joins other government agencies - such as the Housing and Development Board, Singapore Land Authority, JTC Corporation and National Environment Agency - in giving tenants 15 per cent rent rebates.

‘Sentosa is channelling the savings we will get from the government’s property tax rebates back to our island partners,’ said Mike Barclay, chief executive of Sentosa Development Corporation.

‘These rebates are consistent with our wider objective of working with our island partners to create irresistible value for all guests visiting Sentosa.’

In the coming months, Sentosa will also spearhead several sales and marketing campaigns on behalf of its tenants.

CBRE tops brand survey yet again

Source : Business Times - 17 Mar 2009

FOR the eighth year in a row, CB Richard Ellis (CBRE) has been named the leading global brand in commercial real estate, according to a survey of real estate professionals from around the world.

CBRE said last week that it has achieved the honour every year since the survey’s inception in 2002.

The survey, conducted by The Lipsey Company, measures how industry participants perceive commercial real estate brands.

More than 40,000 professionals from Reits, institutions, lenders, commercial brokerages, and asset and property management firms participated in the survey. Responses came from the US and international real estate professionals.

‘Our peers have spoken, and for the eighth straight year, they have chosen CB Richard Ellis as the top commercial real estate services brand in the world,’ said Pauline Goh, managing director, CBRE Singapore.

The Lipsey Company provides training and professional development services to the commercial real estate industry.

CBRE is a Fortune 500 and S&P 500 company headquartered in Los Angeles. It has over 30,000 employees (excluding affiliates), and its network includes more than 300 offices (excluding affiliates) worldwide.

CBRE provides a wide range of services including advising and executing property transactions; property, facilities and project management; mortgage banking; valuation services; and research and consulting.

S’pore takes fifth spot in global ranking

Source : Business Times - 17 Mar 2009

It moves up from 12th place due to rents falling in some European countries

SINGAPORE has emerged as the world’s fifth most expensive location for industrial property occupancy costs in the latest 2009 ranking by Cushman & Wakefield, up from 12th position in the 2008 ranking.

Cushman & Wakefield Singapore managing director Donald Han said: ‘Singapore’s rise up the world ranking is partly due to countries which used to be more costly moving down. In terms of rental growth, Singapore remained stable in 2008.

‘However, with Singapore being an export-reliant economy, we expect demand for industrial space to be reduced significantly in the next 12 months, leading to a fall in rental rates. We are already experiencing a huge fall-off in non-oil domestic exports to the USA and China in the first month of 2009 - about 50 per cent contraction in both markets.’

Cushman’s data showed that Singapore posted zero growth in industrial property rent in local currency terms last year.

It noted that the industrial property market started 2008 as the best performing sector in the wider property market within Singapore.

‘However, the slowdown with the closely linked US economy started the deterioration of the domestic economy and by the end of the year, the market had slowed significantly.

‘With rents falling in the final quarter of the year, the rental growth seen in the first quarter virtually disappeared by the end of the year,’ the report noted.

Occupancy of industrial property deteriorated throughout the world in all but a handful of markets in 2008 and global rental growth slowed to 2.4 per cent, down from 6.1 per cent in 2007.

The more mature markets of North America and Western Europe were the first to underperform early in 2008 but by the year’s end, all regions of the world had been affected by the global economic downturn, Cushman said.

Industrial commercial property markets in Central and Eastern Europe (CEE) and South America were the best performing globally in 2008. Annual rental growth in CEE was 6.7 per cent in 2008, almost the same level as in 2007. The Polish and Ukrainian markets were both very active over the year, for example, with considerable demand for a relative shortage of quality accommodation. Rents increased in Poland by 28 per cent and in Kiev, Ukraine, by 25 per cent.

In South America, industrial rents rose by 12.4 per cent over the year with the Rio de Janeiro, Brazil, market recording the highest global rise in rents of 46 per cent.

Most Western European countries saw rents hold firm in 2008 as occupier demand steadily declined over the year.

‘In fact, the global downturn in rents is really demand-led, as many industrial markets remain undersupplied in terms of modern space.

‘Falling take-up is a trend evident across most global industrial markets and one that is expected to continue well into 2009,’ Cushman said.

Home sales surge on new launches

Source : Straits Times - 17 Mar 2009

Analysts ask if February spike from new heartland condos can be repeated

SALES of new private homes surged dramatically last month to the sort of levels seen in the property boom.

All 293 units at Alexis in Alexandra Road (left) were sold at a median price of $1,083 per sq ft (psf). — PHOTO: THE BUSINESS TIMES

However, some property analysts cautioned that the spike in sales to 1,323 units in February may have been a blip - attributable largely to two popular launches of mid-priced heartland condos.

Still, the new Urban Redevelopment Authority (URA) figures showed that last month’s bumper sales were equal to more than a quarter of all the sales of new private homes last year - 4,264 units.

The February figure is also a huge jump from the dismal 108 unit sales in January as buyers stayed away amid deepening economic gloom and Chinese New Year festivities.

‘It has been more than one year since we last saw total transactions surpassing the 1,000 mark,’ said Jones Lang LaSalle’s local director and head of research, South-east Asia, Dr Chua Yang Liang.

The launch of new units was also up sharply last month, to 1,069 units from just 204 units in January.

Analysts say two newly-launched heartland condos, Alexis and Caspian, proved especially popular with upgraders who had been biding their time amid the sharp run-up in prices during the boom.

All 293 units at Alexis in Alexandra Road were sold at a median price of $1,083 per sq ft (psf) while Caspian in Jurong sold 517 units at a median price of $603 psf. Prices started from $450,000 at Alexis and $340,000 at Caspian.

A third project, originally launched in 2006, The Quartz in Buangkok Drive, sold 168 units last month at a median price of $591 psf after it was relaunched at a lower price. The 99-year leasehold condo was first released at $490 psf on average, which rose to $650 psf in 2007.

Apart from these three, no other project had notable sales. Livia in Pasir Ris launched another 80 units last month, selling just 16 at a median price of $620 psf. A new launch, The Beverly in Toh Tuck Road, offered 31 units last month but sold none. It sold a few this month.

For a second straight month, no units were sold at the decidedly upmarket price range of $2,500 psf to $3,999 psf, said Knight Frank’s director of research and consultancy, Mr Nicholas Mak.

CBRE Research executive director Li Hiaw Ho said the top three sellers were projects in the heartland, where a majority of the buyers are HDB upgraders.

They have been waiting on the sidelines during the run-up of home prices in 2006-2007, when there was a lack of mass-market projects for sale, he said.

Apart from pent-up demand, consultants said sales at Caspian and Alexis were driven by the availability of small, affordable units - mainly under $800,000.

Private home sales for the January to March quarter could be about 1,800 to 2,000 units, according to Mr Li, going by the ‘brisk sales’ at Double Bay Residences, Suites @ Kembangan and others so far this month. The 646-unit Double Bay in Simei has, for instance, already posted sales of at least 210 units at $600 psf to $650 psf since its March 6 preview.

Developer home sales hit 18-month high

Source : Business Times - 17 Mar 2009

Developers sold 1,323 new housing units in February - eleven times more than in January.

Urban Redevelopment Authority figures show sales hit their highest level since the previous peak of 1,723 units in August 2007, leading some to say that market momentum has returned.

Colliers International’s director for research and advisory Tay Huey Ying said that if developers stick with current pricing and product strategies, ‘this trend will stay’.

‘We have always said there are buyers waiting to buy,’ she said, adding that smaller units at lower prices ‘are within a buyer’s risk appetite’.

DTZ senior director Chua Chor Hoon said: ‘Despite the credit crunch there is still plenty of liquidity in the market. Many people have not committed to purchases in the past two years, and savings interest rates are so low now.’

Barclays Capital economist Leong Wai Ho also reckons low interest rates could be a factor in the sales spike, saying ‘abysmally low loan and deposit rates remove the incentive to keep idle balances in cash’.

Still Mr Leong does not think February’s momentum is sustainable. ‘The risk going forward is that HDB upgrader demand is likely to unravel as the pain from rising joblessness and lower wage payouts starts to bite,’ he said.

He also noted that two new launches accounted for the spike in February. ‘Take those two projects out and you have a good idea what is happening in the broader market,’ he said.

The two projects are the 712-unit Caspian at Jurong and the 293-unit Alexis @ Alexandra, which sold 517 and 293 units at median prices of $603 and $1,083 psf respectively.

Other significant transactions in February were at the 625-unit The Quartz, with 168 units sold at a median price of $591 psf; the 38-unit Palmeria Residence with 22 units sold at a median price of $775 psf; and the 31-unit D’Chateau @ Shelford with 21 units sold at a median price of $1,000 psf.

PropNex CEO Mohamed Ismail believes more than 50 per cent of February’s sales involved HDB upgraders, as 70 per cent of the units sold were under $1,000 psf.

‘Developers have slashed prices, accepting minimal profits,’ he said. ‘This makes it irresistible for serious buyers, be they investors or HDB upgraders.’

Jones Lang LaSalle’s local director and head of research (South-east Asia) Chua Yang Liang said all regions registered strong take-up rates, with 102 units sold in the Core Central Region, 840 sold in the Outside Central Region and 381 units sold in the Rest of Central region.

But he doubts the rally can be sustained. ‘The strong market showing in February is likely to be a short-term blip in the overall larger scheme of things,’ he said.

While February sales were healthy, returned units from speculators without the means to hold could become a dampener. Already, classified advertisements have appeared for sub-sales at Caspian and Alexis.

DMG Research analyst Brandon Lee thinks speculation is still ’subdued’, with most buyers either Singaporeans or permanent residents purchasing units to occupy.

‘Volume in the sub-sale market remains tepid, at less than 100 units transacted in February,’ he said.

Selling 1,000 units a month will be hard to achieve, he feels. ‘A more reasonable figure would be 500-600 units for the next three months. After that, the picture would possibly revert back to a normal 200-300 units as the economy worsens and the HDB resale market softens.’

March sales have already hit about 300 units, with 210 sold at the 646-unit Double Bay at Simei, as well as about 25 at the 104-unit Domus in Novena. It is also understood that the 60-unit Kembangan Suites project is fully sold.

Knight Frank’s director of research and consultancy Nicholas Mak said that leaving aside Caspian and Alexis, February’s sales of 513 units were the strongest in seven months.

But he cautions that there is a ‘limited’ pool of buyers for small units, and says HDB upgraders could become more discerning. ‘If an HDB upgrader moves from a four or five-room HDB flat to a one or two-bedroom condo, it’s not really upgrading,’ he said.