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Grade A office rents to be hit amid uncertainty in financial sector

Posted by luxuryasiahome on September 18, 2008

The collapse of Lehman Brothers is set to hit Asian office rental rates.

Banks are traditionally the largest users of Grade A office space in the region, and they are likely to cut back on expansion plans and even consolidate current operations in the year ahead.

In the region’s major office markets, Tokyo’s prime rentals are leading the decline.

Others are expected to follow suit over the next 12 to 18 months.

In Tokyo, the cost of each tsubo – or 3.3 square metres – of office space fell for the first time in 35 months in July.

And office rents in similar financial hubs like Hong Kong, Shanghai, and Singapore are likely to go down this road, as the banking industry continues to stumble in this uncertain period.

Colin Tan, Head of Research and Consultancy, Chesterton, said: “There may be more mergers and some banks may actually fold up. And I think this (would have an impact) in the sense that banks are usually the largest user of office space.”

Rental cycles across the region have already been peaking in key cities.

And analysts said a larger-than-expected fall in demand will exacerbate declines.

Grade A office rents in Singapore have fallen from a peak of about S$18 per square foot per month to about S$14. And analysts said it is likely to fall further to S$10 in 2010, which is when the first phase of the Marina Bay Financial Centre is expected to be completed.

Meanwhile, Merrill Lynch analysts expect rents to fall to S$8 by 2011.

Donald Hang, managing director, Cushman & Wakefield, said: “We will probably see developers and landlords trying to activate tenancies on a quicker basis rather than a delayed basis. Last year, a vacant space (would have seen) a rental increase of 5 to 6 per cent, which is why rents went up almost double. But this year, rentals have peaked; it pays to get the premises let out rather than keep it vacant.”

This means companies can expect a tenant’s market ahead.

And with the major support for office space demand weakened, analysts said local firms will be the ones keeping the market afloat.

Mr Han said: “If we look at the last six months, if you asked me the same question, I will be looking into the continued growth in the financial, services sector. But with the recent bankruptcy news we have seen from the US, I think the growth from the financial sector will probably be muted for the time being. And the continued growth…will be more focused on local companies.

“For instance, in Japan and China, we see more Japanese and Chinese corporates looking to consolidate their offices under one building.”

US office REITs in the centre of the storm took a dive on Monday before recovering slightly over the past few days.

Source : Channel NewsAsia – 18 Sep 2008

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S’pore ranks top in global list of destination for meetings and business

Posted by luxuryasiahome on September 18, 2008

For the first time, Singapore has clinched top spot as the best place for meetings and businesses, beating global players such as Paris and Vienna.

The Union of International Associations (UIA) Global Rankings also gave Singapore top billing as the number one Asian country for meetings, a position Singapore has held for the past 24 years.

The Singapore Tourism Board said the country accounted for 22.5 per cent of the meetings held in Asia in 2007.

Over the past ten years, Singapore has also seen a whopping 256 per cent growth in international meetings staged here.

Last year, Singapore hosted 465 international meetings that met UIA’s qualifying criteria, representing a significant 56 per cent growth over 2006.

Most notable among the meetings were the 3rd Hague International Model of United Nations, the 27th International Epilepsy Congress, the 2nd World Glaucoma Congress & Exhibition, the 18th Wonca World Conference 2007 and International Bar Association Conference 2007 which cumulatively drew close to 12,700 delegates to converge in Singapore.

Source : Channel NewsAsia – 18 Sep 2008

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Jalan Kayu residents find ways to coexist with foreign workers

Posted by luxuryasiahome on September 18, 2008

When two dormitories housing 6000 foreign workers sprung up in the private estate of Jalan Kayu in 2005, it led to a flood of complaints from residents.

Manager of Tee Up Dormitory, Kelvin Low, said, “Initially, they hope not to see any foreign workers around the estate. This is unrealistic expectation.”

3 years down the road, not only have foreign workers become a common sight here, they are even mingling with residents.

Some foreign workers even join the police and volunteers to patrol the neighbourhood to discourage rowdy behaviour by fellow workers.

A volunteer of the Jalan Kayu Rangers, Saravana Kumar, said, “Some worker throw the bottle outside the road, I say don’t throw the bottle (on the road), must throw (into) the dustbin.”

Dorm operators have started education programmes, while agencies like the National Environment Agency (NEA) have been brought in to tackle the issues of cleanliness and security.

Chairperson of Jalan Kayu Neighbourhood Committee, Terry Fong, said, “For NEA, they have people to clean up during the weekends because you cannot completely stop and tell the workers to not litter here. For the police, they have regular patrols.”

With facilities like beer gardens, exercise fields, food outlets and mini-marts within the dormitories, foreign workers also have less of a need to encroach residents’ space.

In December 2007, 100 foreign workers from these dorms and 100 residents also jointly participated in a walk-a-jog. There are plans for more such interaction sessions to foster understanding between the two groups.

After all, these foreign workers are not too different from Singapore’s early settlers.

Minister for National Development Mah Bow Tan said, “It reminds me of the story of our own forefathers who came from China, India and lived in dormitories, sometimes (in) substandard conditions, (with) 30, 40 in a room. The story I hear today is similar to stories I hear from our own parents.”

And like Singapore’s ancestors, these workers play a critical role in Singapore’s development.

Source : Channel NewsAsia – 18 Sep 2008

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Some 100,000 foreign workers staying in illegal quarters

Posted by luxuryasiahome on September 18, 2008

It is estimated that some 100,000 foreign workers are living in illegal accommodations across Singapore, due to a severe shortage of dormitory space.

One particular shophouse, for example, houses about 35 foreign workers. The narrow shophouse is cramped, and there are no windows or ventilation. In one of the rooms, six bunk beds are packed into a tight space measuring 1.5 metres by 6 metres.

Despite the squeeze, one worker said he would rather stay at this shophouse illegally, than in a dormitory.

“Ali” said: “(When) I stayed in the hostel (with workers from) India, Thailand, Bangladesh, some (of them would) drink, vomit on the floor. Some (would) want to fight. (All of us staying here are from) Bangladesh. (It is) comfortable, (there is) no fighting….(and) no drinking.”

But illegal dorms like this pose fire safety and public health risks.

Jolovan Wham, executive director, Humanitarian Organisation for Migration Economics, said: “To comply with existing fire safety regulations, you need to have staircases and fire exits, and there cannot be too many people living in one place, otherwise it will pose as a fire hazard.

“Some of these living quarters are unhygienic and dirty, and not much is done to ensure that these places are suitable for workers to live in. So I think it is also in the national interest, in Singaporeans’ interest that foreign workers are housed in appropriate conditions that are clean and hygienic because it affects everyone’s living environment.”

Singapore’s National Development Ministry said that while private residential properties such as apartments or landed houses can be rented out to foreign workers, they should not be converted into workers’ dormitories.

Housing a large number of workers in private residential properties could affect the surrounding residents.

The National Development Ministry said that upon receiving a complaint, the Urban Redevelopment Authority will carry out an investigation and conduct a site inspection to ascertain the use of the premises.

If the unauthorised use persists, the owners or tenants may be charged in court for non-compliance of the Enforcement Notice.

If convicted, the offender may be fined up to S$200,000 or imprisoned for a term of up to 12 months or both.

If the offence continues after conviction, a fine of up to S$10,000 per day may be imposed.

However, the shortage of dormitories has forced many employers to house their foreign workers in illegal quarters.

Source : Channel NewsAsia – 18 Sep 2008

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CapitaMall down on CEO change, market woes

Posted by luxuryasiahome on September 18, 2008

CapitaMall Trust, Singapore’s biggest real estate investment trust, fell 13 per cent to a two-year low on Thursday, as news of its CEO’s departure combined with wider market fears weigh on its shares.

CapitaMall announced on Wednesday that Pua Seck Guan is resigning as CEO ‘to pursue his personal interests’, and will be replaced by Lim Beng Chee. The trust’s parent CapitaLand said Mr Pua will also step down as CEO of its retail arm.

‘CapitaMall Trust has historically traded at a valuation premium to peers, largely attributable to Mr Pua’s strong track record of delivering shareholder returns,’ said Merrill Lynch analyst Melinda Baxter in a note to clients.

‘We expect the market to react negatively to this news,’ said Ms Baxter, cutting the bank’s target price for the stock to $3.00 (US$2.09) per share from $3.66, but maintained a ‘buy’ recommendation.

A dealer with a local brokerage said CapitaMall shares were also being beatened down as widespread fears stemming from the US financial turmoil led investors to sell shares.

‘This is market-driven. Investors on the whole are selling off shares on the market today,’ the dealer said.

At 0200 GMT, CapitaMall Trust was trading at $2.43 with 4.6 million shares changing hands, underperforming the Singapore Reit index which was down 6.1 per cent.

CapitaLand lost 7 per cent with 5.5 million shares traded.

The Straits Times Index was down 3.5 per cent.

Source : Business Times – 18 Sep 2008

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$5.8m confidence boost for SC Global from CEO

Posted by luxuryasiahome on September 18, 2008

He buys 7.79m shares to shore up prices; another director buys 500,000

THE boss of high-end residential property developer SC Global Developments has given a $5.8 million vote of confidence in the firm just as its share price was diving.

Mr Simon Cheong, SC Global’s chairman and chief executive, bought 7.79 million shares at 75 cents each through a married deal on Tuesday.

The price Mr Cheong paid in his $5.8 million splurge was at a hefty premium of about 23 per cent over the counter’s market price of 61 cents per share the same day. SC Global had fallen over 21 per cent over the five previous days. It closed unchanged at 61 cents yesterday.

Also on Tuesday, Mr David Tsang, SC Global’s executive director and director of corporate finance, also bought 500,000 shares for 75 cents apiece.

The two directors bought the shares in their own individual capacities.

A filing to the Singapore Exchange yesterday showed Mr Cheong made his purchase through Edenlia, a wholly owned unit of Cheong SP Holdings, in which Mr Cheong has a controlling interest.

Mr Tsang also purchased the shares via a married deal, through T1 Capital, in which he has a controlling interest.

The counter party is not known as the deal was done through brokers.

‘We suspect the sellers were likely to be a group of individuals rather than sale of shares by an institution,’ said Cazenove analyst George Koh.

‘This purchase by both the executive directors is good news as the purchase price of 75 cents is still at a substantial discount to SC Global’s first-half 2008 net asset value of 97 cents,’ he said.

The transaction raises Mr Cheong’s deemed stake to 210.49 million shares, or 53.305 per cent of issued share capital. He also has a direct stake of 610,000 shares, or 0.154 per cent.

Mr Tsang’s deemed stake is now 5.712 million shares, or 1.447 per cent of SC Global’s issued share capital. He also has a direct stake of 825,946 million shares, or 0.209 per cent.

Said Mr Cheong on their purchase of the shares: ‘We know the company well, and we see value, that’s why we bought.’

The company said it received strong response during private previews of its latest project, Martin No. 38. All the 30 units it released in the first phase of marketing have been sold, with the average price at about $2,130 per sq ft (psf), above the expected price of close to $2,000 psf.

SC Global is down over 74 per cent since the start of the year, compared to a 29.5 per cent decline in the benchmark Straits Times Index, reflecting a cooling residential property market.

DBS Vickers, which has a ‘hold’ rating on the firm, said in a report earlier this month that the ‘high-end sentiment has to turn before SC Global can experience a re-rating, and that change in sentiment will likely lag the catalyst of improved economic sentiment’.

Last January, businessman Oei Hong Leong cashed out all his shares in the developer, leading some market observers to question if the high-end luxury market was close to peaking. He disposed of his 6.78 per cent stake, amounting to 9.824 million shares, in a married deal done through Oei Hong Leong Foundation.

Source : Straits Times – 18 Sep 2008

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Orchard Central over 50% leased

Posted by luxuryasiahome on September 18, 2008

Mall says more tenants in pipeline; confident despite economic turmoil

FAR East Organization’s Orchard Central mall is more than 50 per cent leased some six months ahead of completion, the developer told BT yesterday.

A different world: Orchard Central’s high-traffic basement two will have a Mediterranean concept with food and goods coming from countries such as Italy, Spain, France, Turkey, Morocco and Greece

Rents at the mall, which has a net lettable area of 250,000 square feet, range from $20 per sq ft per month (psf pm) to more than $70 psf pm, said Far East deputy director for retail management Susan Leng. ‘We are still negotiating with a lot of potential tenants who are not in Singapore,’ she said.

Because of this, some leases are taking longer to tie down. But more tenants are in the pipeline, she said. The mall is expected to be completed in Q1 next year.

In July, Ion Orchard – a joint project by Singapore’s CapitaLand and Hong Kong’s Sun Hung Kai Properties, above Orchard MRT station – also said that it is 50 per cent leased. Tenants are paying base rent of up to $80 psf pm.

Both projects have been dogged by rumours of poor demand for space amid the current financial market turmoil.

The upcoming 313@Somerset – the third of only three new malls to come up on Orchard Road in more than a decade – has yet give any details on leasing or tenant mix. In May, Australian group Lend Lease Retail, which is developing the mall, said that it had started marketing to potential tenants six months earlier.

Ms Leng said that Orchard Central faces no problem. ‘I am fairly confident. Business has to carry on, even though economic cycles come and go.’

Unlike Ion Orchard, Orchard Central is looking for mid-range tenants because it is aimed at young working professionals. The fact that no luxury tenants have been named so far is not a concern, Ms Leng said.

She also unveiled the concept for Orchard Central’s high-traffic basement two. The level – which is expected to see high footfall because of its links to Somerset MRT station and shopping centres Centrepoint, Specialist Centre and 313@Somerset – will have a Mediterranean concept and will be called The Med.

With lettable area of 14,370 sq ft, The Med will house retail, lifestyle and F&B units such as restaurants, cafes, ice-cream parlours, wine and cheese specialty shops, bakeries, pizza shops, chocolatiers, delicatessens and florists. Food and goods featured will come from countries such as Italy, Spain, France, Turkey, Morocco and Greece. The level is designed by local firm DP Architects.

Source : Business Times – 18 Sep 2008

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Far East mall banks on F&B

Posted by luxuryasiahome on September 18, 2008

Upcoming Orchard Central to dedicate about 35% of retail space, or 4 storeys, to eateries

WHEN it comes to sating retail appetites, food and beverage (F&B) is playing a bigger part in drawing shoppers to malls here.

That is why Far East Organization’s upcoming project in Somerset Road has dedicated four storeys, or close to 35 per cent of net lettable retail space, to eateries.

An artist’s impression of The Med, Orchard Central’s second basement, the only floor to feature an entirely Mediterranean theme. More than half of the basement will be given over to F&B. — PHOTO ILLUSTRATION: FAR EAST ORGANIZATION

This concentration of food outlets at Orchard Central will be one of the highest in a Far East Organization mall.

Its Central at Clarke Quay also has about 35 per cent of lettable area dedicated to F&B outlets.

Ms Susan Leng, Far East’s deputy director of retail management, told The Straits Times: ‘For Singaporeans, yes, (the top draw) is food. Usually when we go out, we first ask, ‘Where do we eat?’ After eating, we will say, ‘Okay, let’s shop around’.

‘Ten years ago, maybe 18 to 20 per cent of a mall was F&B; today, it is at least 25 to 30 per cent.’

It may be a clever strategy, given that the economy is slowing and global financial markets are in turmoil. After all, even when times are bad, people still have to fill their tummies.

That is why Orchard Central yesterday said that more than half of the second basement of its 12-storey mall will be given over to F&B.

Called The Med, the basement will feature an entirely Mediterranean theme, from the pebbles on the floor to the ceiling lamps and wall signs.

The idea is to create an open bazaar feel found in countries like Italy, Greece and Morocco.

Far East has dedicated 70 per cent of the basement’s net lettable area of 14,370 sq ft to F&B. Three anchor restaurants will occupy 40 per cent of that space.

The remaining 30 per cent of the basement will comprise fashion and accessories outlets and household and decor shops, all selling ‘Mediterranean themed’ items like spices and carpets.

It will be Orchard Central’s only themed floor.

‘Our strategy is to get unique brands (for the restaurants), not to have chain-store concepts,’ said Ms Leng. This includes bringing in new eateries and working with well-known restaurateurs to devise Mediterranean-themed ones.

‘The incremental cost may not be that significant,’ she added. ‘But I think we are able to give a lot more value-added to our retailers.’

This includes pre-fitting shop units with Mediterranean-themed infrastructure, which Ms Leng said will save fit-out costs for all tenants on that floor.

Ms Leng said Orchard Central plans to have more than 80 per cent of leases for The Med signed by the end of November.

She also rejected suggestions that the fresh financial turmoil in the United States will impact the take-up rate.

‘Retailers are in for the long haul. In fact, they may see this as an opportunity to bargain for a better rate,’ said Ms Leng.

She added that Orchard Central is on schedule to start trading next April, while The Med should be running by June.

Source : Straits Times – 18 Sep 2008

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OUE exploring setting up of listed property trust

Posted by luxuryasiahome on September 18, 2008

Plan to inject certain hospitality assets; it has appointed professional advisers

OVERSEAS Union Enterprise (OUE) said yesterday that it is looking at setting up a listed property trust into which it will inject ‘certain hospitality properties’.

Local asset: Artist’s impression of the shopping gallery of Meritus Mandarin, one of OUE properties in Singapore

Professional advisers have been appointed to assist, OUE said in a filing to the Singapore Exchange.

In Singapore, OUE has Meritus Mandarin Singapore and Marina Mandarin Singapore. It also has a beach resort and spa in Malaysia and three hospitality assets in China.

There is no certainty that a listed property trust will be established or that any transaction relating to or involving the company or its subsidiaries will be entered into as a result, OUE said.

‘Shareholders should bear the foregoing in mind when dealing in the shares of the company,’ it said.

OUE, controlled jointly by Malaysian tycoon T Ananda Krishnan and Indonesia’s Lippo Group, said that if it does enter into any definitive transaction relating to a listed property trust, it will make a prompt announcement.

OUE has chosen a ’strange time’ to look at listing a real estate investment trust (Reit), a property analyst said yesterday, saying the current market turmoil means new listings are bound to be poorly received.

But if OUE ‘takes its time to make up its mind’, market conditions might have improved by the time the trust makes it to the market, the analyst added.

Singapore-listed Reits, or S-Reits, are beginning to look attractive compared with developer stocks, some analysts have said lately.

DBS Vickers Research said this month that the share prices of S-Reits have fallen since the start of the Q2 2008 reporting season in July, in tandem with the decline in broader Singapore market.

But the Reit index has done better than developers, the research unit said in a report.

Similarly, in a Sept 16 report DMG & Partners property analyst Brandon Lee said he prefers S-Reits to developers.

He cited the ‘constant ammunition of negative newsflow currently being fired at developers’ as one reason for this.

‘In the near term, we are still recommending the S-Reits, for their earnings visibility and income predictability, as well as higher yields with the recent correction in share prices,’ he said.

Source : Business Times – 18 Sep 2008

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Lehman’s fall marks office rent peak here

Posted by luxuryasiahome on September 18, 2008

Consultants expect demand for prime office space to ease as growth slows

The collapse of Lehman Brothers Holdings Inc may contribute to an easing of demand for prime office space in Singapore, where commercial rents are already peaking amid slowing economic growth, property consultants said.

The market turmoil that also this week forced the sale of Merrill Lynch & Co to Bank of America Corp and a bailout of American International Group Inc will probably further slow expansion by international companies in Singapore, said analysts at DTZ Debenham Tie Leung and Cushman & Wakefield.

‘Rents have peaked and with the collapse of Lehman and the further shakeout in financial markets, this is going to accelerate,’ said Ong Choon Fah, Singapore-based regional head of research at DTZ Debenham, a property consulting firm. ‘Financial companies are the ones occupying the very prime space and a lot of them are in survival mode.’

Home prices and office rents in Singapore have cooled after rising to records last year, and Colliers International said this month that office-vacancy rates in the US will rise to the highest in three years as financial-services companies slash jobs after reporting writedowns of US$515.8 billion.

Gains in Singapore office rents will be limited as global economic growth slows, the property researchers said. Singapore’s economy is forecast to grow between 4 per cent and 5 per cent this year, slowing from 7.7 per cent in 2007, as demand for Asian-made goods wanes and writedowns mount at banks and securities firms.

Lehman, which this week filed the biggest Chapter 11 bankruptcy in history, occupies office space in Suntec Real Estate Investment Trust’s Suntec development. The firm has about 270 employees in Singapore.

Suntec Reit, a property trust partly owned by Hong Kong billionaire Li Ka-shing, has dropped 26 per cent in Singapore trading this year. CapitaCommercial Trust, an office landlord run by South-east Asia’s largest developer, has slumped 36 per cent during the period.

So-called Grade A office rents will probably drop to about S$14 a square foot a month in 2009 from S$16 this year, Merrill Lynch analysts led by Kar Weng Loo estimated in an Aug 26 report.

Rents may fall further to S$10 in 2010, when the first phase of the 2.6 million-square-foot Marina Bay Financial Centre is scheduled to be completed, and to S$8 by 2011, the brokerage said. For the second half of 2008, rents for prime office space will be little changed after climbing about 7 per cent in the previous six months, said Donald Han, Singapore-based managing director of Cushman & Wakefield. Still, supply of prime office space is likely to remain tight until 2010 and any office space vacated by Lehman will probably be filled quickly, Mr Han said.

‘The market is still in a very healthy state and occupancy in Suntec, where Lehman has its offices, is in excess of 96 per cent,’ Mr Han said.

‘The only issue is that negative sentiment will creep in, with the fact that such a big investment bank that has a long history of operating in Singapore is collapsing will shock the market.’

Source : Business Times – 18 Sep 2008

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