Asian prime office prices may fall 10%

Asian real estate prices may fall further and prime office values decline 10 per cent before year's end, Singapore-based property investor Pacific Star Group said.

'Most markets are peaking over the next 12 months, or even trending downwards,' said Frank Vaessen, president of fund management at Pacific Star, which manages US$3 billion of assets globally. 'Broadly speaking, the bottom could come sometime in late 2009 or early 2010.' Faltering economic growth and the global credit contraction may ease demand for office and retail space in Asia. Rising inflation and falling equity markets may also dampen sales of homes in the region.

The price declines will bring valuations to a more 'normal' level after markets rose rapidly the past year, Mr Vaessen said yesterday.

Japan and South Korea's office markets are expected to have the best performance in Asia as they benefit from a supply shortage, Mr Vaessen said. Both markets are set to offer property investors returns of as much as 13 per cent over the next five to seven years, he said.

Retail space in Beijing and Shanghai may also offer higher investment returns, Mr Vaessen said. Investors should stay away from Vietnam, Thailand and Malaysia, he added, citing Vietnam's accelerating inflation and volatile currency and political instability in Thailand and Malaysia. -- 2008 August 7    Bloomberg

Office rents in Singapore on upward climb: property firms

The occupancy cost for office space in Singapore is now higher than in Hong Kong, according to a new report.

Data from property firm CB Richard Ellis (CBRE) show that total occupancy cost here hit US$10.42 per square foot per month (psf pm) at the end of 2007.

By comparison, total occupancy cost for Hong Kong was US$9.74 psf pm at the end of last year.

Total occupancy cost reflects base rents as well as other property-related expenses such as management fees and property tax, according to CBRE.

Prime office rents in Singapore rose 19.1 per cent in just the fourth quarter of 2007, CBRE's report said. For the entire year, office rents rose a staggering 92.3 per cent.

'Competition for pockets of vacant space in the central business district (CBD) remained intense, and several expansion transactions towards the end of the (fourth) quarter suggested that demand may be sustained,' CBRE said.

In response to the report, the Urban Redevelopment Authority (URA) pointed out that CBRE represents just one viewpoint.

A recent Cushman & Wakefield (C&W) report, for example, said that office occupancy cost for prime office space in Singapore was US$10.80 psf pm in end-2007, much lower than the US$19.90 psf pm in Hong Kong.

The discrepancy between the two sets of data was due to the fact that CBRE considers office space in Hong Kong's CBD as well as other areas outside the city centre when compiling office occupancy cost data for Hong Kong - while C&W only considers Hong Kong's CBD.  Both firms look only at Singapore's CBD when calculating occupancy cost here.

Separately, property firm Savills - which said that office rents in Singapore are close to Hong Kong's at present - predicted that rents here could increase by another 15-20 per cent this year.

Office rents in Hong Kong, on the other hand, are expected to rise by a slower 5 per cent in 2008, said Simon Smith, Savills' head of research and consultancy. He expected rents in Singapore to overtake rents in Hong Kong sometime this year.

Mr Smith also said that luxury home prices in Singapore will climb 8-12 per cent this year, after jumping about 50 per cent in 2007.  - 2008  February 22   SINGAPORE BUSINESS TIMES

World's most expensive office rentals in London, Mumbai
Singapore rents grew the fastest at 83%

London and Mumbai tenants paid the most for high-quality offices this year, while Singapore rents grew the fastest as economic growth lured international banks to Asia, said CB Richard Ellis Group Inc, the world's largest commercial real estate broker.

London's West End led with average annual rents of US$328.91 per square foot (psf) this month, compared with US$180.80 for the UK capital's main financial district.

Mumbai had the second-most expensive leases at US$189.51, CB Richard Ellis said in its semi-annual Global Market Rents survey.

Asia's booming economies drove up demand for financial and computing services in the region, catapulting Mumbai to second spot and fuelling Singapore's 83 per cent growth in rents.

The US currency's decline also drove up costs in dollar terms, while a dearth of new space bolstered London rents, CB Richard Ellis said.

'Markets that moved up that quickly had the highest growth rates based on the economy' as well as a scarcity of space, said Ray Wong, director of research operations for the Americas for Los Angeles-based CB Richard Ellis.

'In the most expensive markets, if they're close to their peak, the expectation for increase is marginal, but other markets, especially resource sectors, are enjoying an increase in demand so they're going to move up a lot quicker.'

Mumbai's rents rose 55 per cent, driven by computer related tenants, according to CB Richard Ellis.

Midtown Manhattan was the most expensive North American market, with rents averaging US$100.79 psf, 12th- highest worldwide. Downtown New York ranked 46th globally at US$53.47.

Moscow rents jumped 65 per cent after crude oil prices tripled in the past five years, bolstering the economy of the world's second-biggest exporter of the fuel.

Rents in the oil hub of Edmonton, Canada, rose 43 per cent, the ninth- fastest worldwide, as energy companies leased more space to house expanding workforces, the survey showed. Edmonton did not rank in the top 50 markets by rental prices.

Eighty-five per cent of the 171 cities included in the survey saw rental increases in the year ended Sept 30, according to CB Richard Ellis. This bodes well for investment returns, Mr Wong said.

The survey measures the most expensive rents based on US dollars. Rental growth rates were measured in local currency terms. - 2007 November 22   BLOOMBERG

Top rents in HK are 1.8 times higher than in comparable buildings in Singapore

 (SINGAPORE)  - Island-wide Grade A rents are currently just a shade under those of Hong Kong, but the highest rents achieved by Hong Kong Grade 'AAA' office buildings are still about 1.8 times higher than the top rents achieved in comparable buildings here.

A report by Savills reveals that in the CBDs of Hong Kong and Singapore, Grade A rents are now the equivalent of $9.80 and $9.70 psf respectively.

However, top rents in Hong Kong's Grade 'AAA' buildings like the International Financial Centre, Chater House and AIG Tower are closer to $32 psf while those in Singapore's Republic Plaza, One Raffles Quay and 6 Battery Road are at about $17.50 psf.

Rising business costs have come under scrutiny recently and Savills Hong Kong senior director (research and consultancy) Simon Smith does say that there is the perception that Hong Kong and Singapore are in direct competition to attract businesses for this segment of the property market. However, he added: 'I have not come across any financial institutions that have chosen to relocate from Singapore to Hong Kong yet.'

Indeed, Mr Smith believes that the financial institutions that are so important to the economies of both cities are more likely to set up offices in both cities to service different markets.

In terms of new supply of office space, Mr Smith does point out that Hong Kong will see some 'AAA' space become available next year in areas like West Kowloon where the 2.5 million sq ft International Commerce Centre (ICC) is set to open. The ICC is said to have attracted some major financial institutions already.

In contrast, Savills notes that the recently awarded commercial development sites including those at Marina View and Beach Road are expected to generate a combined 3 million sq ft of office space, scheduled for completion between 2010 and 2012.

But competition actually could come from more unlikely quarters.

Savills' survey of regional office rents includes the emerging Vietnamese cities of Hanoi and Ho Chi Minh City and already average Grade A office rents in both cities have outpaced those in Shanghai and Beijing (but are still less than Tokyo, Hong Kong and Singapore).

Mr Smith believes that rising rents and 100 per cent occupancies in Hanoi and Ho Chi Minh City are largely due to the shortage of quality buildings in these cities, and hence adds: 'There is a huge potential there for developers.'

Giving an insight into the pace of development there, he said: 'Vietnam is much like China was in the 1990s, where companies were running their businesses out of hotel rooms. But when the market matures, rents will settle down.'

Savills believes the outlook for Singapore office sector remains positive, with rents continuing to rise, although at a slower pace for Grade A space due to 'resistance from tenants'.

'Demand from multinational companies for offices in suburban areas and high-tech space is expected to increase, especially by those who are more conscious of their bottom-line,' it said.   - 2007 November 22   SINGAPORE BUSINESS TIMES

Asia's skyscraper economies hit glass ceiling
Swanky cities alone won't ensure a pivotal role in the global economy

Move over Frankfurt. Forget Paris, Los Angeles and Toronto, too. Asian cities are rapidly surpassing each of these metropolises as centres for global business.

Tokyo, for example, took the No3 spot behind London and New York, according to MasterCard Worldwide Centres of Commerce Index. More importantly, Asia had four cities in the top 10, the best showing of any region. Europe and the US each had three.

Ten years after the Asian crisis, booming markets are attracting capital back to the region. Along with strengthening financial systems, efforts to build modern roads, airports, power networks and skyscrapers are paying off.

Actually, make that record-breaking skyscrapers. While cities such as Shanghai, Taipei and Seoul vie to have the world's tallest tower, others like Tokyo are experiencing building booms like few in modern history. Never mind the risk of earthquakes; a new skyscraper seems to open each week in Japan.

Some caution is in order. Swanky cities alone won't ensure a pivotal role in the global economy. It's equally important for market, legal and political frameworks to keep pace with the construction projects sprucing up wannabe financial capitals.

Tokyo is a case in point. While it's well ahead of Asia's other major financial centres - Hong Kong, Singapore and Seoul - Tokyo is bumping up against a glass ceiling of sorts: poor corporate governance.

'Japan is a world-class country with the second-biggest economy, and it should have a world-class financial system and corporate governance system as well,' Warren Lichtenstein, who controls Steel Partners Japan Strategic Fund (Offshore) LP, said in Tokyo on June12. Until it does, he said, 'there is no way' Tokyo will become a peer of London or New York.

The 'Big Bang' of the late 1990s didn't deregulate Japan as hoped. These days, the financial pages are filled with stories of companies concocting 'poison pills' to fight off mergers, confusion about the environment in which banks and brokerages operate and poor transparency in the executive suite.

While things are changing, Taku Yamamoto personifies the growing sense of impatience hanging over Tokyo.

Mr Yamamoto heads the investment department at Japan's Pension Fund Association, which oversees US$107 billion of stocks and bonds. The pension manager plans to use annual shareholder meetings to pressure companies.

'We're after the executives who've mismanaged their financial affairs,' he told Bloomberg News on June7. 'We want companies to boost long-run total returns, whether that be by higher dividends, buybacks or expansion.'

That is, of course, good news. Japan needs more such shareholder activism, and it's increasing, according to observers such as Kathy Matsui, chief strategist at Goldman Sachs (Japan) Securities Ltd.

Prime Minister Shinzo Abe's cabinet is also considering steps to improve things. Kotaro Tamura, vice-minister for Japan's Financial Services Agency, on Tuesday told Bloomberg News that companies need to become 'more global'. Yet Japan is late in getting serious about something it should have addressed long ago.

Corporate earnings at many Japanese companies are routinely leaked to the media, and only foreigners operating here seem to find anything wrong with that. Even the Bank of Japan's (BOJ) rate decisions often get leaked, something that would be unthinkable at the Federal Reserve or the European Central Bank.

All this is holding Tokyo back. Japan is enjoying its longest expansion since World War II after almost a decade of deflation. Far from enjoying huge capital inflows, the yen is down 6.6 per cent versus the dollar and more than 12 per cent versus the euro in the last 12 months.

Japan's preference for a weak yen is another reason the country is less than inviting as an investment destination. Unsteady leadership by BOJ governor Toshihiko Fukui hardly helps.

These should be heady days in Tokyo. One reminder of that came in a recent survey by the Economist Group, which declared Japan the world's most innovative nation. The rankings were calculated by comparing the number of patents per million of population for 82 nations. Japan was a clear standout.

Yet China is getting most of the attention in Asia, followed closely by India. Japan needs to work harder to remind investors it's recovering, something to which Asia's traditional growth engine isn't accustomed.

Tokyo is a cautionary tale. It boasts some of the best infrastructure anywhere, globally dominant companies, a highly educated labour force and prints Asia's only truly international currency. Yet Japan's failure to internationalise its markets means its appeal trails that of Hong Kong, Singapore and Seoul.

There's little doubt Asia, seeking to draw more attention to its economies, is reaching for the sky - literally. In 2003, Taipei opened the world's tallest building; prior to Taipei, Kuala Lumpur was home to the tallest. Soon, Shanghai, Seoul or Dubai may grab the title.

Asian cities hope such projects will boost their efforts to become financial hubs. It sure helped Malaysia, where the twin Petronas Towers brought prestige to an economy that drew little notice from foreign investors. When CNN needs an Asian backdrop for a news segment, Kuala Lumpur's towers often are it. They're among Asia's few globally recognisable buildings.

Leaders may see gleaming skyscrapers and fancy infrastructure as vital forms of advertising that say, 'Hey investors, check us out!' That's all well and good, so long as improvements to Asia's financial systems and investment climates keep pace with construction crews. --  2007 June 21  Bloomberg  

William Pesek is a Bloomberg News columnist. The opinions expressed are his own. With reporting by Mike Firn, Patrick Rial and Kotaro Tsunetomi in Tokyo  BUSINESS TIMES  2007: June 21 

Asia prime Office on the Rise

Asia's office markets surged ahead in the first quarter with most cities recording increases in prime office rents. Expansion in the financial services sector provided much of the impetus for upward momentum in the core districts of the regions leading business hubs - Tokyo, Hong Kong and Singapore.

Meanwhile, China's leading financial centre, Shanghai, has benefited from the growth of the banking industry following the country's further round of deregulation of overseas banking players in December, while Beijing and Guangzhou saw robust demand from multinational companies.

In India, another fast maturing emerging destination for multinational companies, major cities continued to face an office space supply crunch, and rentals spiralled further upward under strong demand, with Mumbai, Delhi and Bangalore recording double-digit rental growth during the first quarter. This has prompted occupiers to move more quickly into non-core areas.

In Tokyo, a shortage of prime office space and robust tenant demand continued to drive rents north, further reinforcing the strong position held by Tokyo's landlords during the review period.

Average prime market rents, inclusive of common area management fees, reached US$13.51 (HK$105.38) per square foot per month, an increase of 2.7 percent quarter on quarter and 24.7 percent year on year. Four Grade A office buildings, totaling 2.3 million sqft of net leasable space, opened fully occupied during the quarter. The Grade A vacancy rate continued to tighten, falling by 0.7 of a percentage point to 0.7 percent.

Singapore's office leasing market remained active in the first quarter despite tight supply, and vacated pocket space was quickly taken up.

Expansion in the financial sector continued to dominate leasing deals. Although the SIF Building (59,000 sq ft) was completed early this quarter, it provided little relief to the tight availability.

As a result, prime office rent rose to an average US$5.62 psf per month, an increase of 10.1 percent quarter on quarter and 53.6 percent year on year.

Rents increased 1.3 percent quarter on quarter in Seoul's Grade A office market in the first quarter, due largely to the annual rent adjustment at the beginning of the year. Four new buildings with a total of nearly 1.68 million sq ft of office space came on stream during the quarter.

Despite the new stock and tenant movement to new buildings, vacancy rates remained low as the market quickly absorbed the space.

Demand for prestigious office space in Hong Kong's central business district continued to remain strong, with limited stock available in premium Grade A buildings. The CBD has witnessed rapid rental growth as a result of persistent demand, especially from the banking and hedge fund sectors.

For example, during the period under review, a hedge fund committed to 5,000 sq ft in Two IFC at an effective rent of HK$170 psf per month (lettable).

First-tier cities in the mainland will see supply peak in 2007, but all three of these major metropolitan areas saw sustained strong demand, with a collective 4.4 million sq ft of net absorption in Beijing, Shanghai and Guangzhou recorded in the first quarter.

In Shanghai, average office rent continued to rise, increasing 2.5 percent quarter on quarter to 203.9 yuan (HK$209.06) per sq m per month. As no new supply came on stream during the quarter, available space was rapidly absorbed and there was significant pre-commitment activity.

The citywide vacancy rate tightened 2.1 percentage points quarter on quarter to 5.6 percent. Activity was subdued in Beijing's office market in the first quarter, normally a slow season for office leasing and sale transactions, partly because it coincides with the Spring Festival. Average prime office rents continued their steady increase, rising 0.7 percent quarter on quarter, to 175.2 yuan per sq m per month (gross exclusive).

Towers 1 and 2 of China Central Place, located to the east of the CBD, and Beijing Financial City B (Bank of Beijing) in Finance Street entered operations during the quarter. As a result of the 1.6 million sqft of new supply, the prime office vacancy rate rose 0.7 of a percentage point to 12.6 percent during the quarter.

Relocation or expansion by multinational companies continued to drive office leasing transactions in Guangzhou, with the IT and banking industries dominating the active Grade A office market. Teem Tower opened during the quarter, positioned as a premium Grade A facility.

Tenants include Siemens, which rented three floors totaling 73,200 sqft as its South China headquarters, and Adidas (24,400 sq ft).

No new office buildings were completed in Taipei in the first quarter and none are expected until 2008 when most of the new space will be reserved for self-use. Though take-up declined slightly from the high level recorded in the fourth quarter, demand remained strong.

Most major prime buildings are at full occupancy, and KPMG and ING Life's moves into Taipei 101 pushed it to over 70 percent occupancy.

Grade A rents edged upward during the quarter and vacancy tightened, trends expected to continue for the remainder of 2007.

In India, office rents in major cities continued to move upwards amid a continued shortage of supply.

Office rents reached new highs across Delhi and the National Capital Region, and given the limited availability of office space in the CBD, the movement to the suburbs, especially Gurgaon and Noida (in order of preference), is expected to continue through at least the medium term.

Vacancy in Mumbai's CBD reached 2.1 percent, another record low, in the first quarter. Space in prominent buildings freed by movements to other micro-markets was rapidly absorbed, largely by financial institutions seeking stopgap space as they consolidate in other areas.

In Bangalore, most developers now prefer to lease buildings upon completion to achieve higher rentals. Rents quoted in the CBD increased by over 15.4 percent quarter on quarter in the first quarter, with most sizable transactions involving space released as leases expired.

The office markets in Jakarta and Kuala Lumpur were robust, with both cities recording positive growth in rentals.

Meanwhile, Ho Chi Minh City's office market continued to grapple with pent-up demand in the first quarter as occupancy levels remained at a record high of 97 percent across all grades, despite the 634,430 sqft of new non-Grade A office space that entered the market.

The prime office market in Bangkok remained sluggish due to Thailand's political instability and uncertainty over policies regarding foreign investors.

Demand was weak as many companies adopted "wait and see" attitude.

Looking ahead, we expect demand drivers to remain strong in most office markets in Asia.

Corporate occupiers requiring more space as the regional business environment improves will have to pre-commit to prime buildings under construction or pay a higher premium to stay in prestigious locations.

The trend towards decentralization will continue in a number of cities as companies seeking lower-cost alternatives and larger floor plates move to non-core or emerging business districts or business parks. - 2007 June 22  THE STANDARD

For expats, costly Asia is cheapest place to live

Asia has become more expensive for expatriates because of inflation and stronger regional currencies, but its average cost of living remains lower than in other parts of the world, according to a survey released Tuesday.

ECA International, a human resources professional organization, said in an annual cost-of-living survey that inflation rates in Asia were three times as high as those in the euro zone and twice that of the United States.

The recent revaluations of the yuan and ringgit have also bolstered the cost indices for China and Malaysia by 1.8 percent and 1 percent respectively, ECA International said.

Its survey covered 250 locations worldwide and measured the cost of living for expatriates by using a basket of 125 goods and services, including groceries, alcohol and tobacco, clothing, electrical goods, cars and restaurant meals.

The roster of Asia's 10 most expensive cities was dominated by Japan and northern Asia, but Dili, the capital of the young republic of East Timor, was ranked a surprising eighth, above Singapore and Beijing. Most goods needed by expatriates in Dili are imported.

"The cost of living in Dili for anybody who wishes to follow an international pattern of consumption is higher than it would be in Singapore," said Lee Quane, ECA's general manager, who is based in Hong Kong.

"In Singapore, a very cosmopolitan country, most goods and services are very readily available.

Dhaka is the cheapest place in Asia, followed by Manila, Ho Chi Minh City, Bangalore, Islamabad and Vientiane, Laos. The most expensive are Tokyo, Yokohama, Kobe, Seoul, Macao and Hong Kong.

Tokyo is second to Oslo globally and is more expensive than London, Paris, Seoul, New York and Sydney.

The expatriate cost of living in Seoul rose 20 percent from last year, the biggest increase among Asian cities, mainly because of the strength of the South Korean won.

Indian locations and Taipei have shown a similar trend strengthening currencies driving up the prices of goods and services.

"Within China, the cost of living in the second-tier cities is increasing faster than elsewhere, closing the gap between them and the principal centers of economic growth."

ECA said the expatriate cost of living in second-tier Chinese cities is now only 25 percent lower on average than Beijing, Guangzhou and Shanghai, compared with 30 percent in 2004.

Jakarta and Dhaka were the only cities where the cost of living for expatriates has decreased over the past year.

Despite higher costs, Asian cities have remained cheaper compared with many parts of the world, the survey showed. For example, Singapore is Asia's ninth most expensive city for expatriates, but ranks 114th worldwide. Hong Kong is in sixth place in Asia and in 83rd place in the global index. - Agence France-Presse      3 August 2005 

SAR offices 18th most expensive

Hong Kong has fallen from seventh to 18th place in a list of the world's most expensive office locations, according to a global survey by CB Richard Ellis.

It found prime office rents in the SAR fell 14 per cent between July and December, the sharpest fall among the 158 cities surveyed.

Continued corporate downsizing, lacklustre local economic conditions and the relative weakness of the Hong Kong dollar were blamed for the market's weakness.

Rents also fell in most other Asian cities, as the global economic slowdown, uncertainty over a possible war against Iraq and overbuilding put pressure on property returns.

Only Shanghai and Seoul registered significant increases.

Tokyo saw the second-biggest fall in rentals in the second half of last year, down 13 per cent. The abrupt drop was largely attributable to the record-breaking completion of 4.02 million square feet of offices in the Central Five wards last year.

At the other end of the scale, there were some substantial upward movements.

Shanghai recorded a 3 per cent rise, boosting its placing from 157th to 79th most expensive office location in the world. The city's surge was largely propelled by the influx of overseas and domestic investment, which rose 50 per cent last year from a year earlier.

Rents in Beijing, Singapore, Taipei and Bangalore also fell, due largely to the completion of substantial new office stocks last year that was not counter-balanced by correspondingly robust growth in demand.    - HK STANDARD   17 March 2003 

Southern Chinese city of Guangzhou has announced plans to build the world's tallest tower

Work on the tower, which will measure 580-600 metres (1,914-1,980 feet) above ground, is expected to begin soon.

It comes as China undergoes something of an architectural revolution, although some plans have been dogged by controversy and financial cutbacks.

If national pride is measured by tall buildings, then China is placing itself firmly in the running.

The Guangzhou TV tower will surpass the current record holder - the CN Tower in Toronto. It will be taller, too, than New York's new World Trade Centre, which will measure up at 541 metres to its spire.

Three foreign firms are competing for the project. It is just one of a number of ambitious designs to stud the skyline, as Chinese cities remodel themselves for the future.

But there has been opposition over the fact that the highest-profile projects have been awarded to foreign architects, and in Beijing, several big venues for the Olympics have been scaled back to save money.

But still, the sheer amount of construction under way in China today means it is becoming something of a playground for the world's top architects. - by Louisa Lim     BBC     15 November 2005

OCCUPANCY COSTS

Singapore office occupancy costs down
Office  occupancy costs in Singapore slid 23 per cent in 2002 - the biggest drop in the Asia-Pacific region - a survey by DTZ Debenham Tie Leung shows. But Singapore was not alone. DTZ's Global Office Occupancy Costs Survey 2003, covering 92 business districts in 44 countries, notes that office markets in most major cities weakened in 2002.

'Cost containment remained a major consideration for occupiers . . . many locations were characterized by languid leasing activity, smaller transactions and falling occupancy levels,' DTZ says.

Occupancy costs are defined by DTZ as the average cost per sq ft of leasing some 10,000 sq ft of net usable office space in a modern, well-specified office building in a prime Central Business District location. Occupancy costs include rent and outgoings such as maintenance costs and property tax but exclude rent-free periods, fitting-out costs and other leasing incentives.

Singapore's 2002 occupancy costs were US$34.40 psf a year - down from US$42.53 in 2001. The vast amount of vacant office space no doubt played a part.

According to figures from CB Richard Ellis, about 11 million sq ft of office space - 16 per cent of Singapore's total stock - is now vacant. This is a jump of 47 per cent from a year ago, when the vacancy rate was about 11 per cent.

At US$34.40 psf per year, Singapore is less expensive than Hong Kong (US$59.30), Bombay (US$50), South Korea (US$43.80) and Taipei (US$37.20). But Singapore is ahead of Kuala Lumpur, Bangkok, Hanoi and Australian cities except Sydney.    - Andrea Tan   Singapore Business Times   2 January 2003

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