|      
   
      
     112 Robinson (formerly known as HB
    Robinson) sold $168m sale price works out to $1,822 per square foot
 
      
        | 112
          Robinson Road, Singapore |  
        | TRANSACTION
          HISTORY |  
        |   | 
            
              
                | Asset
                  Type: | Office |  
                | Location: | 112 Robinson Road, Singapore
                  in CBD |  
                | Size: | A 14-storey office tower
                  with retail outlets on the 1st floor. |  
                | Net Lettable: | 92,205 s.f. |  
                | Year of
                  Completion: | Constructed in the 80's, a
                  major renovation program was undertaken in 2004. |  |  
      
        
          | Date | Purchaser | Sale
            Price | PSF | Yield |  
          | 2010 Dec | Grace Global | $168
            million | $1,820 | 3% |  
          | 2007 | Credit Suisse Fund | $119 million | $1,290 |  |  
          | 2006 June | CLSA
            Fudo | $  80
            million | $  869 | 7% |  
          | 
              
                Grace
              Global, the Singapore outfit of a low-key Indonesian family, is
              buying the property for long term investment. The building's
              existing gross floor area of about 115,000 sq ft reflects a plot
              ratio (ratio of maximum gross floor area to land area) of nearly
              11.8, which exceeds the 11.2 assigned for the 9,780 sq ft site
              under Master Plan 2008. 112
              Robinson Road is said to be about 90 per cent let. Tenants include
              Saxon Financials and India's Jet Airways. The net yield on Grace
              Global's purchase price is said to be just over 3 per cent. The
              EOI for the office block, which has only five car park lots, is
              said to have been hotly contested. ' Grace
              Global is familiar with Singapore's CBD office market, being the
              owner of 137 Market Street which it bought a few years ago. That
              building is being refur`bished and upon completion around the
              middle of this year will have total NLA of about 43,000 sq ft. |  
     Meanwhile, an expression of interest for Finexis Building at 108
        Robinson Road (formerly known as GMG Building) closed on Dec 16
        attracting a handful of offers. Owner Robinson Land's asking price is
        said to be about $110 million or about $2,042 psf on its strata area of
        53,873 sq ft. Robinson Land - whose shareholders include the Buxani Group of
        Singapore - clinched the 12-storey freehold office block in 2006 for $48
        million and is said to have refurbished it for about $10 million. Due diligence is said to be in progress for the Singapore
        Technologies Building in the Tanjong Pagar area. The pricing is said to
        be close to the seller's asking price of about $1,500 psf or about $148
        million. CBRE figures show that nearly $9 billion of office investment sales
        were done last year. BT Weekend reported that NTUC Income is nearing a
        deal to buy a 49 per cent stake in 16 Collyer Quay in a deal that values
        the office tower at about $2,365 psf on NLA or $661 million. Capital
     Square, a Grade A office development at Church Street, is
        expected to be put up for sale soon. The vendor, German insurer Ergo, is
        said to be eyeing $2,700-2,800 psf on NLA, or crossing the $1 billion
        mark.  --  2011  BUSINESS
     TIMES 
   CDL sells The Corporporate
   Office for $215 m
   Price around $1,956 psf
   of net lettable area; buyer led by Oxley Holding
 
   City Developments Ltd (CDL) is said to be
   selling a 21-storey freehold office block at the corner of Robinson Road and
   McCallum Street for $215 million. The buyer of The Corporate Office is understood to be a consortium led by
   Oxley Holdings group. The price works out to $1,956 per square foot based on
   the building's net lettable area of 109,920 sq ft. The Corporate Office, which is about 25 years old, has 112 carpark lots,
   something of a rarity in office towers in that part of the CBD. About 15 per
   cent of the building's net lettable area is currently vacant and the lease
   for a further 7-8 per cent of space is said to expire early next year. But
   that's not necessarily a bad thing for the buyers. Sources suggest that Oxley - which is headed by Ching Chiat Kwong - is
   looking to move its headquarters into The Corporate Office. The group
   currently operates out of Singapore Land Tower in Raffles Place and is said
   to be gunning for an initial public offer by year end. Oxley has been in the
   news lately for developing projects with shoebox apartments, including Suites@Guillemard
   and VivaVista in Pasir Panjang. On the group's purchase of The Corporate Office along Robinson Road,
   market watchers suggest that in the medium term, Oxley and its partners may
   consider redeveloping the property, which has a land area of 16,032 sq ft,
   into a residential project with commercial use on the first storey or into a
   commercial-residential development. Under Master Plan 2008, the site is zoned
   for commercial use with an 11.2+ plot ratio (ratio of maximum potential gross
   floor area to land area). The site can be developed up to 35 storeys high.
   The Corporate Office's existing gross floor area is said to reflect a plot
   ratio of about 9.27, which points to some unutilised plot ratio. DTZ is thought to have brokered the sale of The Corporate Office through a
   private treaty deal. The property consultancy also brokered the sale of Chow
   House next door a couple of months ago for $101 million to a group led by
   WyWy Group' founder, YY Wong. The price for Chow House, a six-storey freehold office block which has
   redevelopment potential, is said to work out to about $1,300 per square foot
   per plot ratio assuming it is redeveloped into apartments. The site has a
   land area of 9,084 sq ft and is zoned for commercial use with an 11.2+ plot
   ratio under Master Plan 2008. However, outline planning permission has been
   granted to redevelop the Chow House site into residential use with commercial
   use on the first storey. Chow House sits between The Corporate Office and another CDL-owned
   property - The Corporate Building. The property giant's sale of The Corporate Office is its latest divestment
   of non-core assets. In recent years, CDL has also sold North Bridge
   Commercial Complex (near Bugis Junction), The Office Chamber along Jalan
   Besar, Chinatown Point mall, and Commerce Point near Raffles Place MRT
   Station.   -  2010
   October 1  
   BUSINESS TIMES 
   Chevron House sold for $547mGoldman
   funds take big loss, sell property to Deka
 
Chevron House at Raffles Place has been sold for $547 million to a fund managed by
   Deka Immobilien of Germany, taking the total value of Singapore office
   investment sales deals so far this year to nearly $3 billion. 
    
      
        |    |  
    | Changing
      hands: The latest transaction price works out to $2,083 psf of net lettable area |  The price for Chevron House works out to
   around $2,083 per square foot based on the building's existing net lettable
   area (NLA) of 262,650 sq ft, BT understands. Chevron House, which was formerly known as
   Caltex House, is a 33-storey building on a site with a remaining lease of
   about 78 years. The property is being sold by Goldman
   Sachs funds, which are walking away with a loss, having paid $730 million or
   about $2,780 psf for the property in 2007. That acquisition was funded mostly
   by a consortium of lenders headed by Standard Chartered. The latest
   transaction is slated for completion by late October, ahead of the expiry of
   the financing facility, sources say. Chevron House is the second Singapore
   office property to be sold by Goldman Sachs funds lately following last
   month's $870.5 million divestment of DBS Towers One and Two along Shenton Way
   to Overseas Union Enterprise. Goldman reaped a profit from that transaction;
   it paid $690 million for the office blocks in 2005. The US bank's funds also bought Hitachi
   Tower, behind Chevron House, in early 2008 for $811 million or about $2,900
   psf of NLA. The 999-year leasehold office tower, fronting Collyer Quay, is
   expected to be put up for sale within the next few months given that the
   financing facility on the asset - also extended by a Stanchart-led consortium
   - is said to end early next year. The Singapore office market has seen a steady rental recovery after the
   slump in the wake of the global financial crash. 'The fundamentals are attractive. Investors have realised this over the
   past three months and investor appetite has increased significantly. Parties
   looking to invest include Reits, other property funds and private investors.
   Appetites range from $100 million to $500 million-plus,' said a market
   watcher. Deka, which is buying Chevron House, is a unit of DekaBank in Germany. The
   deal marks Deka's first major property acquisition in Singapore and is said
   to be at close to 4 per cent net yield. Chevron House is currently 98 per
   cent let. Major tenants include Chevron and Visa. The property comprises a four-storey retail podium, 29-storey office tower
   and three basement levels. B1 has shops linked directly to the Raffles Place
   MRT Station, while B2 and B3 contain 96 carpark lots. It is thought that the property was marketed through an expression of
   interest exercise which closed in the third week of August. BT understands the exercise was well received and that about six parties
   were then shortlisted for due diligence and further negotiations, culminating
   in the sale to the Deka-managed fund.    
   - 2010 September 25   BUSINESS
   TIMES 
   PRESS CLIPPINGS
   
     
     
      Chevron House could be the next big office
      deal on the cards, say market watchers. This follows the sale of about
      $1.9 billion worth of office blocks so far this year. Chevron House was
      bought by Goldman Sachs funds in late 2007 for $730 million or about
      $2,780 per sq ft of net lettable area and the purchase was mostly funded
      by a consortium of lenders led by Standard Chartered. That financing
      facility is understood to be expiring in October and the bankers and
      Goldman Sachs are said to be weighing their options.
       
        
          
            |   |  
            | CHEVRON
              HOUSE Bought by Goldman Sachs
              funds in 2007 for $730m or about $2,780 per sqft of net lettable
              area
 |  BT understands that potential buyers
      have been knocking on the doors of Goldman Sachs and the lenders and that
      property agents could soon be appointed to conduct a sale process such as
      a tender or expression of interest. 'The way I look at it, Goldman could
      have about three options - seek refinancing, bring in a joint venture
      partner or sell the asset completely,' suggests an industry observer. Analysts say that the consortium of
      banks could have loaned the Goldman funds about 65 per cent of the 2007
      purchase price, which would work out to about $1,800 psf of net lettable
      area. The loan-to-value covenant on the financing facility would have been
      breached sometime ago following the steep slide in office capital values
      last year. Interest coverage ratio for Chevron House would also have
      fallen on lease renewals in the building; average Grade A office rents in
      Singapore today are about $9 psf a month, or 40 per cent lower than the
      $15 psf three years ago. Analysts polled by BT estimate the
      property could fetch anything from about $1,900 psf to $2,200 psf (or
      about $500 million to $577 million). The most recent benchmark would be
      the $2,125 psf that Ho Bee achieved when it sold four office floors at
      Samsung Hub at Church Street. While Samsung Hub is a much newer asset and
      stands on a site with superior leasehold tenure (999 years) than Chevron
      House (which is on a site with 78 years' remaining lease), the latter
      boasts a more choice location next to Raffles Place MRT Station. Goldman Sachs funds also bought Hitachi
      Tower, behind Chevron House, in early 2008 for $811 million or about
      $2,900 psf of NLA. Stanchart also heads the consortium of lenders for that
      purchase; the financing facility is said to end early next year. So a sale
      of Hitachi Tower could also be on the cards a little later down the road. Hitachi Tower would be worth more than
      Chevron House, say analysts, citing its superior land tenure (999 years)
      and facing (along Collyer Quay). However, one drawback about the asset is
      the impending departure of American Express - which is said to occupy
      about 70,000 sq ft - to Marina Bay Financial Centre Tower 2. Last week, Goldman Sachs funds sold DBS
      Towers One and Two along Shenton Way for $870.5 million or around $970 psf
      of NLA, marking the biggest commercial property deal in Singapore since
      mid-2008. Goldman Sachs reaped a profit from that deal, having paid $690
      million for the property in 2005. Some of the blocks sold this year were
      'pure office' deals, that is the buyers bought the assets on their
      existing office use - such as 1 Finlayson Green and Robinson Point - while
      others such as Chow House and StarHub Centre were probably acquired for
      their potential for redevelopment into other uses. Interest from both local and foreign
      investors in the Singapore office market has been warming on the back of
      recovering office rentals and the easier climate for fund-raising.  
      -  2010 August
      21    BUSINESS
      TIMES 
      Marina House Sold
       
     The $148 million purchase price reflects
     about $1,130 per square foot based on the building's existing net lettable
     area of about 130,000 sq ft. The building has a few tenants (the most
     prominent being Indian Airlines) but is substantially vacant - probably a
     deliberate strategy on the part of Hong Leong Group as it weighed various
     options, including the possibility of redeveloping the site into
     residential use.    
     - 2010 March
     26    
     STRAITS TIMES
       
      1 Finlayson Green Sold
      Headline price is said to be $145 million ($1,630 per sq ft)
 
       
 The office block that is 1 Finlayson
      Green has been sold, BT understands. The price is said to be about $145
      million, or 37 per cent below the $230.88 million the seller had paid for
      the property in June 2007. A unit of UK-based property fund group
      Develica is believed to have signed an agreement recently to sell the
      19-storey freehold office tower to a foreign-domiciled fund initiated by
      low-profile Indonesian investor Norman Winata. BT understands the sale is being
      effected through a sale of shares in the company that owns the asset. Develica is understood to have borrowed
      from National Australia Bank, Hypo Real Estate and Citibank. Market
      watchers say the three banks would have consented for the sale to take
      place. 1 Finlayson's current net lettable area
      (NLA) is said to be about 89,000 square feet. Based on this, the latest
      transacted price of $145 million reflects about $1,630 per square foot. A market watcher described the pricing
      as 'about right'. In January, CapitaCommercial Trust sold Robinson Point -
      a freehold, 21-storey office building - for $203.3 million or $1,527 psf,
      based on its NLA of 133,139 sq ft. 1 Finalyson Green's location is
      considered to be superior, being closer to Raffles Place MRT Station. For 1 Finlayson Green, some market
      watchers suggest that there could be some other fees or costs associated
      with the transaction which could take its net acquisition price above the
      $145 million headline price paid by the buyer. When Develica bought the property over
      two years ago from Singapore's Hong Leong Group, its NLA was reported to
      be about 86,500 psf. Develica was later reported to have refurbished the
      building for $2 million and increased net lettable area by 7 per cent by
      leasing to one tenant per floor. That would have boosted the property's
      NLA to about 92,500 sq ft. However, industry observers have been citing
      the building's NLA at between 88,200 and 89,000 sq ft recently. 1 Finlayson Green received its
      Temporary Occupation Permit in 1994 'However, this is a relatively small asset in the group's office
      portfolio and establishing a record price for 1 Finlayson Green would help
      to raise the valuations on the rest of its office buildings. So this will
      still benefit the group if it decides to go ahead with an office Reit,' as
      a seasoned observer put it. The group's office portfolio in Singapore includes Republic Plaza, City
      House, Hong Leong Building, 80 Robinson Road, The Corporate Office,
      Commerce Point, and Fuji Xerox Towers. The record price of $2,200 psf for office space was set in early 1996
      when Straits Steamship Land, now Keppel Land, sold seven floors of what is
      now known as Prudential Tower in the China Square area to Prudential
      Assurance Company Singapore. Just last week, BT reported the sale of Parakou Building, a spanking
      new freehold office block at the corner of Robinson Road and McCallum
      Street, for $2,013 psf of NLA, or $128 million. This is the highest per
      square foot price achieved in the current office cycle. The buyer was UK
      fund manager New Star and the seller, Parakou Shipping Group of Hong Kong. 1 Finlayson Green received its Temporary Occupation Permit in 1994. Its NLA is around 76,000 sq ft.   
      - 2010 March 8   BUSINESS
      TIMES 
    Office rents may end long slide to basement
       
      
    The Singapore office market has seen its
    prospects improve dramatically since a gloomy start this year. While office rents are still expected to
    dip further next year, although at a much slower pace than over the past 15
    months, an unexpected flurry of leasing activity recently has led some to
    predict a bottoming-out of office rents as early as mid-2010. 'We are currently witnessing a strong
    recovery in leasing activity. Some tenants are even starting to look at
    expansion,' says CB Richard Ellis executive director (office services) Moray
    Armstrong. Property consultants are predicting a
    return to positive office demand to the tune of more than one million sq ft
    next year on the back of economic growth. But with over 2.7 million sq ft of
    new space slated for completion in 2010, vacancies will continue to rise and
    rents dip, albeit at a slower clip than in 2009. Older buildings suffering a flight of
    tenants to new projects still face a challenging year ahead. Still, some
    expect the authorities to keep a close watch on the Republic's
    competitiveness in office rents. Mr Armstrong suggests 'it is not
    unrealistic to foresee that the government may release a couple of prime
    office sites in the Marina Bay area in the second half next year'. 'A lot will hinge on how the office
    market performs in the next three months. The government wants to ensure the
    supply pipeline is healthy so that businesses feel confident about
    Singapore's ability to meet long-term demand for growth from headquarters
    and corporates.' Jones Lang LaSalle's regional director
    and head of markets Chris Archibold acknowledges 'some talk in the market
    that office supply may become limited in 2013 and 2014 in the CBD Core'.
    'The Singapore government is likely to continue monitoring the office market
    and inject supply into the market through the reserve list in anticipation
    of an upturn to avoid the supply crunch we saw in 2007,' he added. CBRE data shows gross average monthly
    rental value for Grade A office space has slipped 7.95 per cent quarter on
    quarter to $8.10 per square foot in Q4 this year. This is the smallest
    q-on-q drop since office rents began falling in Q4 last year. The latest Q4
    2009 figure reflects declines of 46 per cent for the whole of 2009 and 57
    per cent from the peak of $18.80 psf in Q2/Q3 last year. CBRE is projecting
    a further contraction of 13.6 per cent next year to reach $7 psf by
    end-2010. Colliers International's average grade A
    rental data for various CBD micromarkets show q-on-q dips of 1.9 per cent in
    Raffles Place/New Downtown and one per cent in Bugis/ Beach Road in Q4 2009,
    with rents unchanged in Shenton Way/Tanjong Pagar, City Hall/Marina Centre
    and Orchard Road. For the whole of 2009, the falls ranged from 42 to 53 per
    cent, but Colliers predicts rental declines will moderate to 'within 5 per
    cent' in the first six months of next year from current levels. DTZ projects a 15-20 per cent drop in
    average monthly rental value for prime office space in Raffles Place next
    year, which it says has halved this year to $7.90 psf from $16 psf in Q4
    2008. Mr Armstrong sees rentals stabilising
    around mid-2010 particularly for better-quality buildings. DTZ's SE Asia
    head of occupational and development markets Angela Tan says rents will
    likely bottom in 2011. 'If the economy grows more strongly than expected,
    rents could bottom earlier in end-2010.'  
 The completion of new projects is
    creating a two-tier market. Says JLL's Mr Archibold: 'Given the pick-up in
    leasing activity, we expect the bottom in rentals for new prime Grade A
    office buildings to be as close as H2 2010. However, there's likely to be
    longer downward pressure on rentals in existing prime Grade A office
    buildings as landlords seek to backfill vacancy caused by tenants relocating
    to new developments.' Mr Archibold points to a 'flight to
    quality' by occupiers with leases expiring in older buildings to newer,
    higher-quality buildings, riding on lower rents and the larger contiguous
    spaces that could enable them to consolidate operations into a single
    location. On a brighter note, CBRE's Mr Armstrong
    says he has started seeing some of the resurgence in leasing activity being
    driven by expansion and not just replacement needs. This is laying the
    foundation for decent positive take-up. Analysts expect positive demand to
    continue this quarter following the modest turnaround in Q3. However, with
    some 570,000 sq ft of negative demand in H1 2009, the year will still end in
    negative territory. Colliers' executive director (commercial) Calvin Yeo
    forecasts positive demand of 1.55 million sq ft in 2010; CBRE predicts
    positive take-up of about one million sq ft next year and 2 million sq ft in
    2011. Meanwhile, shadow office space - surplus
    stock put up for subletting - has fallen to about 256,000 sq ft from 583,000
    sq ft at its peak in June 2009, says Mr Yeo. 'We expect shadow space to
    dissipate by H2 2010 as the economy recovers.' Colliers estimates islandwide office
    vacancy rose from 12.2 per cent as at end-Q3 2009 to 12.8 per cent as at
    end-2009. On a full-year basis, this is a 4 percentage point rise. Mr Yeo
    expects the figure to inch up 1.1 points to 13.9 per cent by end-2010.
    - 2009 December 11    BUSINESS TIMES  The vacancy rate in prime Grade A
    buildings rose from 1.8% in Q3 2008 to 6.1% in Q2 this year  The office
    market here, like many around the world, has seen a fundamental shift in
    dynamics over the last nine months, with a marked drop in demand since the
    collapse of Lehman Brothers a year ago leading to a drop in rents. While all
    markets are cyclical, Singapore's commercial property market has seen rental
    fluctuations that are typical of a more volatile market such as Hong Kong. The reason for this is that many new
    developments were cancelled or delayed during the Asian financial crisis/Sars
    period in 2002-2004. The typical four-year construction period for a Grade A
    office building means that there is a lag in the supply pipeline, which was
    adversely affected from 2006-2008. These were the years which saw a
    substantial increase in demand for office space. Much of it came from the
    financial services sector, partly as a result of the global growth of this
    sector and partly as a result of Singapore's successful repositioning as a
    global financial services centre. Jones Lang LaSalle's research shows that
    from the bottoming out of the market in 2004 to the peak in Q3 2008, Grade A
    core CBD vacancy shrank from 11.6 per cent to 1.8 per cent and rents surged
    by 303 per cent. Post credit crisis, the negative take-up and concerns of
    over-supply have led to rents dropping by 48 per cent between Q3 2008 and Q2
    2009. Market sentiment tailed off rapidly
    between Q4 2008 and Q1 this year as occupiers began to give up space at the
    same time that some of the new developments were completed. The result is
    that the vacancy rate in prime Grade A buildings rose from 1.8 per cent in
    Q3 2008 to 6.1 per cent in Q2 this year. A number of occupiers tried to mitigate
    part of their outgoings by either subletting or finding replacement tenants
    for their space. By June, 'shadow space' - currently leased space that
    occupiers are looking to dispose of, including space not available until
    2010 - stood at 800,000 sq ft. If shadow space is included, the vacancy
    rises by about 30 basis points. Part of the decline in sentiment has been
    caused by concern over future supply. Singapore has a larger than normal
    supply pipeline, especially in the core CBD. That said, there is an argument
    that in order to attract inward investment, Singapore has to constantly
    upgrade its office space offering and the new buildings coming to the market
    are, in the main, well specified and offer a significant upgrade to
    occupiers. In the short term, net take-up is
    expected to remain low as there has not been any uplift in new office demand
    despite a less pessimistic economic outlook. Interestingly, the first two
    months of Q3 have seen significantly higher activity in the office market.
    There are two main reasons behind this increased activity. Firstly, activity that is lease expiry
    driven. Given that the first wave of the long awaited new supply has now
    started to hit the market, there is some vacancy in the market and tenants
    now have real options. On the back of this we are seeing a discernible
    flight to quality in favour of the new developments ready this year. The biggest roadblock to relocating today
    is a lack of budget for capital expenditure (capex). On the back of this, a
    number of active inquiries are focused on fully fitted 'shadow space' that
    negates the need for capex spend for fit-out. Secondly, there are quite a number of
    large occupiers (50,000 sq ft plus) in the market who have been sitting on
    the sidelines for the last nine months for various reasons. They might not
    have been able to accurately predict their future headcount, lacked a capex
    budget, or else anticipated a weaker market ahead. These occupiers are now coming to market
    as it has fallen significantly. Also, occupiers of this size would need to
    plan a move 12-18 months in advance, and this is close to the completion
    periods of new supply. A significant number of these occupiers,
    especially those in the financial services industry, are also looking for
    enhanced specifications such as trading floors, enhanced power and
    air-conditioning provision and space for their dedicated equipment - back-up
    generators and air-conditioning, etc. The ability to supply such needs is
    limited and hence the first movers into a building have more chance of
    securing the specifications they need. The increased activity is also being
    generated by the desire among some occupiers to secure branding rights
    (naming or signage rights) to the building they plan to occupy. The
    availability of this in the market is even more limited and hence occupiers
    will commit early in order to secure them. Given the drop in rents and uplift in
    market sentiment on the back of both the global stock markets and local
    residential market, in the short term we expect to see the office market
    continue to be active. However, given the supply scenario, we expect rents
    to still face some downward pressure, albeit at a more muted pace, and much
    of the activity to be from consolidation or a flight to quality as occupiers
    upgrade. The writer is regional director and
    head of markets, Jones Lang LaSalle   - published 2009
    September 22    BUSINESS
    TIMES  
 Office rents in Singapore fell for the
    fourth consecutive quarter in Q3 2009, but the pace of decline has eased on
    the back of returning business confidence, said CB Richard Ellis (CBRE). Data from the firm said that prime office
    rents in Singapore averaged $7.50 per square foot (psf) per month in Q3.
    This reflected a 12.8 per cent quarter-on-quarter decrease, compared with
    the 18.1 per cent decline in Q2 2009 and 18.6 per cent contraction in Q1
    2009. In all, prime rents have fallen 53.4 per
    cent in Singapore since their peak in Q3 last year. As in Singapore, the slower decline in
    office rents in Hong Kong is partly attributed to the improving stock
    market.  - 2009 September
    2004   BUSINESS
    TIMES Steepest  fall in office occupancy cost A plunge in Grade A office rents has
    raised Singapore's competitive edge somewhat. According to Colliers
    International, office occupancy costs here were the fourth-highest among 26
    Asia-Pacific cities in Q2 this year - down a notch from a quarter ago. As rents stay weak while the economy
    stabilises, property consultants also expect some companies to take
    advantage of the situation to expand. Colliers noted that monthly gross rents
    for Grade A offices in Singapore's central business district (CBD) posted
    the sharpest fall in Q2, compared with other major cities in the region.
    Rents slid 26.2 per cent quarter-on-quarter, averaging at $6.73 psf per
    month in Q2. As a result, Singapore fell from third to
    fourth place in a ranking of office occupancy costs. Tokyo remained the most
    expensive place in the Asia-Pacific to rent an office - average Grade A CBD
    office rents there were 2.2 times that of Singapore's, up from 1.6 times in
    Q1. Hong Kong also kept its No. 2 spot.
    Average Grade A CBD office rents there were 1.4 times that of Singapore's,
    growing from 1.2 times in Q1. Ho Chi Minh City rose one notch to replace
    Singapore in third place on the list. Colliers expects office rents in
    Singapore to continue falling up till H1 next year, albeit at a slower pace.
    This is because demand from most companies is likely to stay subdued, while
    supply of shadow space could increase. This means that Singapore could continue
    slipping in the list of the most expensive Asia-Pacific cities to rent an
    office, said Colliers research and advisory director Tay Huey Ying. While most companies may be cautious
    about expansion, some may take advantage of lower rents to grow in
    anticipation of better times ahead. 'Flight to quality and opportunistic
    expansion can be expected to intensify on the back of continued rental
    weakness,' Ms Tay said. Cushman and Wakefield managing director
    Donald Han agreed, noting that companies have been more willing to relocate
    to larger premises since May or June this year. 'The economy now looks like it's on the
    mend' and some companies 'are budgeting for a possible increase in
    headcount' by some 10-15 per cent, he said. Mr Han added that a few quarters ago,
    most firms were still watching the rental market and would rather extend
    their leases than commit to more space. As rental declines moderate,
    'tenants are going to say - how low can it go?' Colliers cited Dresdner Bank as an
    example of companies expanding or upgrading their space requirements as
    office rents fall. The bank will be moving from Tung Centre at Collyer Quay
    to 71 Robinson Road where it will take up 20,000 sq ft of space  AIG takes 5 floors at new Shenton Way
    tower  In one
    of the bigger office leasing deals in recent months, AIG is understood to
    have leased five floors or about 60,000 square feet at the recently
    completed South Tower of 78 Shenton Way. CB Richard Ellis is said to have
    brokered the deal. AIG is understood to be relocating
    operations from leased premises at two adjacent buildings on Martin Road in
    the Mohamed Sultan Road area to the South Tower. These operations include the entity
    currently known as American Home Assurance Company. BT understands that the
    leasing deal involved some 'structuring'. Among other things, 78 Shenton
    Way's owner, Germany's Commerz Grundbesitz Investmentgesellschaf (CGI), is
    said to have taken over AIG's remaining lease term at Martin Road. CGI also owns 71 Robinson Road, which it
    bought in April last year while still under construction for $743.75
    million, reflecting a record price of $3,125 psf of net lettable area. The
    seller was a joint venture between Lehman Brothers and Kajima Overseas Asia.   
    - 2009 September 23    BUSINESS
    TIMES  Prime office rents check their slide
     The pace of decline in prime office rents
    slowed in the first six weeks of the second quarter and the improvement has
    been most visible in the key Raffles Place sub-market, going by latest data
    from Cushman & Wakefield. The property consultancy's monthly
    average rental value for prime Raffles Place slid 6.6 per cent in the six
    weeks since the end of Q1 2009 to $9.44 per square foot as at May 15, a much
    smaller decline than the 28.8 per cent quarter-on-quarter drop registered in
    Q1 this year. This brings the total year- to-date decline to 33.5 per cent
    from $14.20 psf a month at end-2008. The average Grade A Raffles Place rental
    eased 8.7 per cent in mid-Q2 2009, again a more moderate drop than the first
    quarter's 27.7 per cent Q-on-Q slump. The moderation in rental decline was also
    seen in the other micromarkets in Cushman's prime office basket - namely,
    Shenton, City Hall and Orchard. Cushman's overall prime office vacancy rate
    crept up 0.4 percentage point to 5.5 per cent as at May 15, milder than the
    2.1-percentage point Q-on-Q hike to 5.1 per cent in Q1 2009. 'The deceleration of rent declines is not
    surprising in light of the recent global stock market rally and signs of the
    oft-mentioned green shoots starting to emerge in major economies around the
    world,' Cushman said in its report. This has caused a mood shift among
    landlords - from one of nervousness to a 'more considered and cautious
    stance'. 'The continued caution is understandable in light of competition
    from the oncoming stream of new office supply,' Cushman added. CB Richard Ellis executive director
    (office services) Moray Armstrong acknowledged that the pace of rent
    declines has 'shown signs of easing in the past couple of months' and
    expects this trend to continue. 'There's some semblance of confidence
    seeping back into the system,' he said. 'Relocation and leasing activity has been
    very limited for the past six to nine months. We're looking out for a
    restoration of normal level of leasing activity, combined with the
    restoration of positive occupier demand. Those will be the signs that we're
    emerging out of the office downcycle. We're not there yet,' Mr Armstrong
    added. The office market may be weighed down by
    looming new supply - with 9.9 million sq ft net lettable area of offices
    slated for completion from 2009 to 2013. This year alone, the new supply is
    projected at about 2.56 million sq ft, 83 per cent above last year's 1.4
    million sq ft. Demand-wise, the Singapore office market
    has already seen two consecutive quarters of negative take-up: 366,000 sq ft
    in Q4 2008 and nearly 323,000 sq ft in Q1 2009, based on official figures. Cushman's director of research Ang Choon
    Beng predicts around 40 per cent full-year contraction in prime office
    rents, with a bigger slide expected for Raffles Place. 'While our forecast model predicts that
    prime office rents would continue to be weak through 2009, we believe the
    market has, in some instances, already priced in 70 per cent of the
    anticipated full-year decline. With the significant portion of the rent
    declines behind us, we think tenants can start to be more confident of
    entering into leases.' Cushman's figures show that in the
    Shenton micromarket (which includes Shenton Way, Robinson Rd and Anson Rd),
    the average monthly rental value slipped 6.5 per cent in the first six weeks
    of Q2 2009, slower than the 18.7 per cent Q-on-Q contraction in Q1. The City
    Hall location - which includes the Marina Centre area - saw an average 9.4
    per cent rent reduction in the first six weeks of Q2 from the end-Q1 level,
    against a 27.2 per cent Q-on-Q drop in Q1. Similarly, for the Orchard area,
    the 9 per cent mid-Q2 drop was smaller than the 15.5 per cent slump in Q1. Cushman's director of commercial and
    industrial agency Kelvin Chiang says that along with an uptick in tenant
    inquiries and demand in the first six weeks of this quarter, there wasn't
    much sublease (shadow) space being added to the market. Neither does he
    foresee any significant supply of additional 'shadow space' - which refers
    to excess space that companies try to sublet - in the months ahead. DTZ executive director (occupier
    services) Angela Tan says that while there has been no let-up in the amount
    of shadow space in the market, there is healthy interest in such space as it
    offers 'good value proposition for short-term use since the space usually
    comes fully fitted out and reduces the initial set-up cost for the new
    occupier'.  - 2009 May
    21   BUSINESS
    TIMES To let: 400,000 sq ft shadow
    office space
    Financial institutions in search of tenants for
    space that they pre-committed to
 
 Close to 400,000
    square feet of shadow office space is now available as financial
    institutions scramble to find replacement tenants for the space that they
    pre-committed to in the boom years.
    
     A white paper on the subject by Colliers
    International says that the amount of shadow office space in Singapore rose
    by a steep 48 per cent over the last two months to hit 370,000 sq ft in May
    2009 - up from 250,000 sq ft in March. This is equivalent to 0.5 per cent of the
    islandwide office stock, or about the size of MAS Building at Shenton Way. Likewise, Jones Lang LaSalle (JLL)
    estimates that some 400,000 sq ft of shadow office space is now available.
    The bulk of this came onstream from February to May this year, said JLL's
    regional director and head of markets, Chris Archibold. Shadow space is loosely defined as excess
    office space that companies have leased but are looking to sublet to a third
    party for reasons such as reduction in headcount. Colliers' white paper, which was released
    yesterday, identified the financial industry as the largest contributor of
    shadow space. It accounts for 46 per cent of all shadow space currently
    being marketed. 'This is hardly surprising,' said
    Colliers. After all, the financial services sector experienced explosive
    growth of 11.7 per cent in 2006 and 15.7 per cent in 2007. During this
    period, many financial institutions - including Citigroup, Credit Suisse,
    Deutsche Bank, Merrill Lynch, Prudential Assurance and UBS - embarked on
    aggressive expansion plans. 'With the current economic downturn being
    fuelled by the collapse of the global financial markets, the reverse is now
    true,' Colliers observed. The white paper also gave a breakdown of
    where the available shadow space is located. Of the 370,000 sq ft of shadow space
    available as at May 2009, some 42 per cent is located in the Raffles
    Place/New Downtown micro-market. A further 24 per cent is located in the
    Marina/City Hall area, while the Shenton Way/Tanjong Pagar micro-market
    accounted for some 14 per cent. Even more shadow space is likely to
    become available over the rest of the year and in 2010, analysts said. Colliers projects that some 400,000 to
    600,000 sq ft of additional shadow space could become available by 2010 from
    just financial institutions. The problem will be worsened when
    construction of new major office buildings, in which financial companies
    have pre-committed to large amount of spaces, is expected to be completed. 'This will add to the downward pressure
    on rents exerted by the potential supply of 9.6 million sq ft from Q1 2009
    to Q4 2012, and could keep rents depressed for a prolonged period of time
    and delay market recovery until after 2010,' said Colliers. It projects that Grade A office rents
    will decline by up to 60 per cent in 2009 and 20 per cent in 2010. JLL's Mr Archibold, who similarly
    estimates that another 400,000 sq ft of shadow office space could be added
    up to 2010, also expects rents to take a hit from the increase in shadow
    space. Colliers' data shows that as at March
    2009, grade A office rents in the Raffles Place area have plummeted by some
    41 per cent since peaking in Q3 2008. The intense race for tenants has even
    resulted in landlords offering incentives such as rent holidays in addition
    to closing rents that are sometimes 25-30 per cent below asking rents in
    order to retain or secure new tenants, the firm observed.  -
    2009 June 11    BUSINESS
    TIMES  Office occupancy posts steepest fall
    since 1997
     The islandwide average office occupancy
    rate slid 2.1 percentage points quarter on quarter to 93.6 per cent in Q1
    2009, according to DTZ. This is the steepest quarterly fall since Q3 1997,
    when a decline of 2.6 percentage points was recorded.
    
      
        
          |   |  
        | No lack of space: During
          the last office slump, shadow space also emerged, and according to CB
          Richard Ellis research reports, this amounted to more than one million
          sq ft at end-2002 |  The average office occupancy rate at
    Raffles Place was 92.9 per cent at end-Q1 2009, translating to the greatest
    quarterly decline of 2.7 percentage points since Q4 2004 when the occupancy
    rate fell 2.8 percentage points, DTZ said. 'Office occupancies in Anson Road/Tanjong
    Pagar and decentralised areas suffered even larger declines of 3.6
    percentage points to 93.7 per cent and three percentage points to 95.2 per
    cent respectively, due partly to the completion of Murray Terrace and two
    transitional office projects - 11 Tampines Concourse and Mountbatten
    Square,' the property consultancy group said yesterday. Office vacancies are
    expected to rise further and rents will slide. DTZ executive director Ong Choon Fah
    said: 'Office demand has almost collapsed. Substantial new supply is
    starting to come on stream from this year, followed by more supply next year
    and in 2011. In addition, there is competition from shadow space.' Shadow space refers to excess space that
    companies try to sub-let. There was at least 106,000 sq ft of such space
    available for leasing in Q1, according to DTZ. 'This constituted only 2.9
    per cent of the total vacant office space, but is expected to grow in the
    next few quarters as more companies are likely to return excess space to the
    secondary market through cost-cutting measures,' DTZ said. 'In addition,
    some companies which have pre-leased space in new projects completing within
    these two years are likely to sub-lease excess space as they further
    streamline business operations and intensify space usage.' BT understands that Macquarie is prepared
    to sub-let some of the space it has signed up for at Marina Bay Financial
    Centre's (MBFC) Tower 2 under the project's first phase, which is slated to
    be ready in Q2 2010. Macquarie has taken more than 74,000 sq ft on levels 16
    to 18 of the tower. Market watchers said they would not be
    surprised if DBS Group too tries to sub-let part of the 700,000 sq ft it has
    leased at MBFC's Tower 3, in the project's second phase, given that it axed
    some 900 staff in November. Elsewhere in Singapore, Citibank is said
    to be offering over 100,000 sq ft of shadow space at various locations,
    including Capital Square, Marsh & McLennan Centre and Millenia Tower. DTZ executive director Angela Tan said:
    'Shadow space, which usually comes with existing fit-outs and shorter lease
    terms, allows tenants to save on initial set-up costs and provides
    flexibility.' Shadow space also emerged during the last
    office slump. According to CB Richard Ellis research reports, this amounted
    to more than one million sq ft at end-2002. DTZ said the fall in office rents
    gathered momentum in Q1 2009, with an average decline of 18 per cent from
    the preceding quarter across the island. Prime office rents in Raffles Place
    dived 25 per cent quarter on quarter to an average of $12 psf per month in
    Q1. Average office rents in Tampines Finance
    Park fell the most, easing 32 per cent to $5 psf per month amid an increase
    in supply emanating from the newly completed 11 Tampines Concourse and the
    availability of shadow space at Tampines Plaza.  -
    2009 April 2    BUSINESS
    TIMES  Prime office rentals on fast slide
    down
     The slide in prime office rents has
    continued into the first quarter of this year. CB Richard Ellis estimates
    that average Grade A and prime office rental values in Singapore both
    slipped about 18 per cent in Q1 this year over the preceding quarter. CBRE's estimate of the Q1 2009 average
    gross monthly rental of Grade A office space was $12.30 per square foot,
    down 34.6 per cent from the peak of $18.80 psf in Q2 and Q3 last year. 'We foresee the average monthly rent for
    Grade A space to fall to single-digit level during the course of second-half
    2009,' CBRE executive director (office services) Moray Armstrong said. Vacancy for Grade A offices also rose
    from 0.9 per cent in end-2008 to 2.9 per cent by end-March 2009. CBRE predicts that more of the same can
    be expected for H1 2009 as demand stays weak. 'Vacancies can be expected to
    rise sharply and there will be no arrest in the slide of rents,' Mr
    Armstrong reckons. 'I think there's likely to be
    higher leasing activity by year-end and certainly going into 2010 - although
    the outlook for rents remains bearish,' he added. He also forecasts that 'the Singapore
    office market could see negative take-up for the whole of this year in
    excess of one million sq ft, around the levels the market has experienced as
    recently as 2002/2003'. Last year, the market saw a net increase
    in office demand of slightly under 200,000 sq ft, not even 10 per cent of
    the figure for 2007. Cushman and Wakefield Singapore managing
    director Donald Han said that negative net demand for office space for 2009
    could be anywhere from 500,000 sq ft to one million sq ft, depending on how
    badly the economy fares. He estimates that average monthly Raffles
    Place rents will slip by about 30 per cent for the whole of this year to
    slightly below $10 psf by end-2009. 'About 38 per cent of prime office space
    in Singapore is occupied by the financial services sector and this is the
    segment that's worst hit this downturn,' Mr Han pointed out. CBRE's average monthly rental estimate
    for Grade A space - which covers the best office space within the firm's
    prime office basket - of $12.30 psf as at end-March this year is 18 per cent
    lower than the $15 psf as at end-2008. Its $10.50 psf estimate of monthly
    average prime rental value as at end-March 2009 represents an 18.6 per cent
    quarter-on-quarter decline from $12.90 psf as at end-2008. The end-Q1 2009 rental estimates for both
    categories of office space represent drops of about 34 per cent from the
    same period last year. CBRE reckons that the Grade A vacancy
    rate rose from 0.9 per cent as at end-2008 to 2.9 per cent as at end-March
    2009. In the broader Core CBD comprising the micro-markets of Raffles Place,
    Marina Bay, Shenton Way and Marina Centre, the vacancy rate increased from
    4.6 per cent as at end-2008 to an estimated 6.9 per cent as at end-March
    2009. These vacancy figures do not take into account 'shadow space' or
    excess space that companies try to sublet. 'Right now, the shadow space is at a
    tolerable level, but we haven't seen the full knock-on impact of attrition
    and realignment of businesses. In due course, shadow space will grow as
    subletting activity rises, and this will serve to further erode rentals,' Mr
    Armstrong said. Pre-lease momentum in new office
    developments has stalled in the past two quarters as corporates grapple with
    more immediate challenges within their businesses before even looking at
    long-term premises planning, CBRE said. But some end users now have a bit
    more clarity on their requirements. 'Some of the merging companies will
    necessarily need to co-locate and those are the deals starting to emerge,'
    Mr Armstrong said. Towards the later half of 2009, CBRE
    expects a few selective office deals to firm up, largely due to the expected
    premises consolidation requirements arising from mergers and company
    restructuring.   - 2009
    March 25    BUSINESS
    TIMES  Raffles Place Q4 office rents slide
    15.8%
     Prime office rents in Raffles Place sank
    15.8 per cent quarter-on-quarter (qoq) in the final three months of 2008 to
    an average of $16 per square foot per month (psf pm), representing the first
    decline since Q4 2003, according to DTZ Research. 
      
        
          |    |  
        | Ample supply: In
          Raffles Place, the average office occupancy fell 1.3 percentage points
          qoq to 95.6 per cent in Q4 2008. Island-wide, occupancies slid 0.8 of
          a percentage point to 95.6 per cent |  The drop was the biggest among the micro
    markets tracked by DTZ. Office rents in the Marina Centre micro market also
    fell a hefty 12.9 per cent qoq to $13.50 psf pm. 'While the low level of new office supply
    supported rents in the first nine months of 2008, the market began to favour
    occupiers in Q4 as demand fell,' DTZ said. 'Landlords have lowered their
    asking rents and are offering attractive incentives to retain existing
    tenants and attract new ones.' Office vacancies edged up further in Q4
    2008 as demand dwindled. Except for Tampines Finance Park, where occupancy
    remained at 96.8 per cent, occupancy in all other micro markets declined. In Raffles Place, the average office
    occupancy fell 1.3 percentage points qoq to 95.6 per cent in Q4 2008.
    Island-wide, office occupancies slid 0.8 of a percentage point qoq to 95.6
    per cent, as new supply was added and demand weakened as companies shelved
    expansions, cut back on space needs or shifted to cheaper locations such as
    high-tech industrial space or converted state property. DTZ said that shadow space is beginning
    to surface as occupiers dispose of excess space, although the amount
    available for occupation in Q4 2008 was still insignificant, at about one
    per cent of total vacant office space island-wide. In response to falling demand, there has
    been a cutback in new office supply - but not enough to ease an impending
    glut as most major projects are already under construction, DTZ noted.
    Deferred developments totalling about 872,000 sq ft of new office space
    include South Beach, office extensions at Tampines Mall and Funan DigitaLife
    Mall and the redevelopment of Marina House. DTZ puts potential office supply
    from 2009 to 2013 at 11.3 million sq ft, compared with an earlier estimate
    of 12.1 million sq ft. DTZ said that in view of the
    deteriorating global financial situation and the large amount of new office
    space coming on stream in Singapore this year, occupancy rates and rents are
    expected to decline further in 2009. The firm also noted that sentiment in the
    industrial property market has soured, as the manufacturing and office
    sectors continue to weaken. Rents for private conventional industrial space
    declined in Q4 2008 for the first time since Q3 2003. Rents for first-storey and upper-storey
    private industrial space dipped 2.1 per cent and 2.4 per cent respectively
    qoq to $2.30 and $2 psf pm. Rents for hi-tech industrial property slid 4.4
    per cent qoq to $4.30 psf pm - the first decline since Q2 2004.
    - 2009 January 6    BUSINESS
    TIMES Prime office rentals coming down  
    Q4 sees them crash by up to
    20% in some cases as tenants call the shots
 Landlords may be frowning but those
    looking for office space have reason to cheer. After climbing steadily for
    nearly four years, average Grade A and prime office rental values in
    Singapore are estimated to have slipped about 20 per cent in the fourth
    quarter of this year over the preceding quarter, according to latest figures
    by CB Richard Ellis. Grade A covers the best office space
    within CBRE's prime office space basket. The Q4 decline means that for the whole
    of this year, the estimated fall in rentals is around 13 per cent for Grade
    A space and 14 per cent for prime space. 'Modest rental growth featured in
    the early part of 2008, but the market had peaked by Q3 2008. It was only in
    Q4 that the sheer depth of the financial crisis pitched the office market
    into decline,' CBRE executive director Moray Armstrong said. 'We expect further downward pressure on
    rents through 2009,' he added without elaborating. The firm estimates the average monthly
    Grade A office rental value at the end of this year at about $15 per square
    foot, down from $18.80 psf in Q3. The average prime office rental value in
    Q4 is estimated to have eased to $12.90 psf from $16.10 psf in Q3. The Q3
    figures were unchanged from the preceding three months. The latest figures confirm that the
    office upcycle which had seen rents galloping over the past two years has
    ended. Office rents nearly doubled last year,
    rising 96 per cent for Grade A category and 92 per cent for prime space.
    That was on top of respective gains of 53 and 50 per cent posted in 2006. Putting the latest rental slide in
    perspective, Mr Armstrong said: 'The extraordinary pace of rental growth
    experienced through the past three years was clearly not sustainable and
    would have been arrested by the increased volume of new supply in the
    pipeline. We had already anticipated a supply-led softening in the market
    from 2010 onwards. 'The rapid deterioration in the economy
    and loss of business confidence have accelerated the process as office
    demand has dried up.' Tenant retention is the top priority for
    existing landlords. Next year is likely to be a market where lease renewals
    outnumber relocations, Mr Armstrong says. Cushman & Wakefield Singapore
    managing director Donald Han predicts Grade A office rents will weaken a
    further 10-15 per cent in first-half 2009 from current levels. 'Landlords
    are more keen to provide existing tenants with an incentive to retain them,
    in terms of rental discounts during lease renewal negotiations; because if
    they leave, the landlord will suffer downtime until it finds a replacement
    tenant that will also have to be given fitting-out time. This means loss of
    rental income.' The office rental slide reflects a
    reversal of the market dynamics to a more demand-led rather than a
    supply-led model, Mr Han argues. 'Office rents had surged because of a
    shortage of existing office stock; now rents are softening because of
    weakening demand,' he explains. Another seasoned market watcher said
    while a 20 per cent drop in Q4 rentals seems alarming, the absolute drop of
    about $3.20 to $3.80 psf in monthly rents is not so, given that 'rents were
    at artificially high levels' on the back of shortage of existing Grade A and
    prime space. Grade A vacancy rates had been sub-1 per
    cent for almost two years before rising to 1.2 per cent in Q3. Some analysts
    estimate this will rise further to over 2 per cent by end-2008. CBRE does not expect to see significant
    changes in vacancy levels until sizeable new office developments start to be
    completed from 2010. Tenants, meanwhile, are looking to
    contain costs during the economic downturn, Cushman's Mr Han observes. CBRE's Mr Armstrong says: 'Corporates
    will be under severe pressure to contain and indeed reduce costs. (But) the
    reality in the Singapore office market is that many tenants with renewals
    and rent reviews next year under leases committed three to four years ago
    will still be faced with rents that could potentially increase by 75 per
    cent to 150 per cent. We expect some fairly robust negotiations.' He also predicts an increase in
    subletting and surrenders of space by tenants if job attrition in the key
    financial services sector spirals. 'Take-up in new developments will
    inevitably be sluggish until demand improves and tenants are able to secure
    capital expenditure approvals to relocate. It will be highly competitive,'
    Mr Armstrong says.   - 2008
    December 11     BUSINESS
    TIMES  Lehman's collapse marks
    Office Rents peak 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.’  - 2008 September
    18    BUSINESS
    TIMES  Grade A office rents in CBD slide for first time in
    years  Average monthly rent at Raffles
    Place slips 1.4% to $17.64 psf in Q3
 
      
       Grade A office rents in Singapore's
    Central Business District (CBD) have declined for the first time since the
    office market troughed in 2004. The average gross monthly Grade A rental
    value for the Raffles Place area slipped 1.4 per cent to $17.64 per square
    foot (psf) in the third quarter, from $17.89 psf in the preceding quarter,
    according to the latest data from Knight Frank. The Suntec/Marina Centre/City Hall area
    led the declines in Grade A office rentals in Q3, with a 6.2 per cent
    quarter-on-quarter fall to $15.13 psf. In the Shenton Way/ Robinson Rd/Tanjong
    Pagar area, the drop was 2.8 per cent, followed by a 2.7 per cent decline
    along Orchard Road. Knight Frank director (research and
    consultancy) Nicholas Mak said that he expects office rentals to continue
    declining by 14-19 per cent islandwide in the next 12 months (from current
    levels) as the global financial turmoil and possible mergers and
    acquisitions contribute to consolidation and reduction in office demand. Giving her take on weakening office
    demand, DTZ executive director Ong Choon Fah said: 'Most companies are in
    cost containment mode and would be looking for ways to manage the increase
    in their accommodation costs. There has also been quite a lot of leakage of
    CBD office demand to business parks and vacant state properties converted to
    offices.' Mrs Ong reckoned that headline office
    rents may not come down much but noted that leasing incentives like
    rent-free periods have started to reappear. Agreeing, an analyst said:
    'Major landlords will try to maintain headline rents, because once rents
    come down, it affects their whole portfolio.' Besides weaker demand for office space
    amid the financial turmoil, Knight Frank's Mr Mak attributed the softening
    rentals in Q3 to the government's efforts to increase office supply
    (including transitional office sites). 'In addition, landlords are more
    cognisant of the substantial supply of office space that will be completed
    from 2010 and have become more realistic and flexible in their rental
    expectation when it comes to lease negotiations; they want to hold on to
    their tenants and maintain their buildings' occupancy rates,' Mr Mak said. The fall in the average Grade A Raffles
    Place rental value in Q3 marks the first quarterly decline since Q2 2004.
    This incipient weakening follows a rapid escalation in office rentals over
    the past two years on the back of tightening supply and strong demand from
    occupiers, including global financial institutions expanding their
    operations in Singapore. Average Grade A Raffles Place rents surged 82 per
    cent last year and that was on top of the 67 per cent gain posted in 2006,
    according to Knight Frank. But it's a different story now. 'Since Q1
    2008, there appears to be a crack in the growth momentum for office demand
    in the Downtown Core area due to external factors such as the US sub-prime
    crisis that began in the second half of last year,' said Mr Mak. The slowdown in demand in the Downtown
    Core area - which includes the key office districts like Raffles
    Place/Marina Bay, Shenton Way and Marina Centre - and tapering off in
    rentals in Q3 does not come as a surprise, he adds. 'The tenants in this
    area are primarily financial institutions, many of which had already
    completed their expansion or consolidation plans over the last 24 months and
    some are adopting a more cautious approach by putting any further expansion
    plans on hold,' Mr Mak observed. Knight Frank's data showed that Grade B
    offices in Singapore also experienced downward pressure on rentals in Q3.
    The biggest fall was in the Orchard Road location, where the average rent
    decreased 7.8 per cent quarter-on-quarter to $10.70 psf a month in Q3.
    Raffles Place and Shenton Way/ Robinson Rd/Tanjong Pagar Grade B offices
    were less impacted by easing office rentals and dipped by 1.8 per cent and 2
    per cent quarter-on-quarter respectively. As a whole, offices in non-CBD locations
    also mirrored the general slowdown in rental in Q3. Rentals continued to
    weaken for the Beach Road/Middle Road area, with a 3.4 per cent
    quarter-on-quarter drop. Suburban areas too met a similar fate with
    quarter-on-quarter rental decreases ranging from 1-8 per cent. Looking ahead, Knight Frank said that in
    the short term, the beleaguered financial markets are expected to lead to
    many firms either postponing their expansion plans or consolidating their
    space usage. Restructuring at some organisations could lead to sub-letting
    of excess space to ease cashflow problems.   
    - 2008 September 30   BUSINESS
    TIMES  Prime and Grade A office rents
    nearly doubled in 2007 but the pace of increase has since eased with gains
    of around 7 to 10 per cent in the first-half of this year from end-2007
    levels. Morgan Stanley said last week it expects
    Singapore office rents to peak earlier, by end-2008 instead of end-2009, due
    to lower expectations for office demand, which will be below upcoming office
    supply (including business parks). CBRE data shows that some 645,000 sq ft
    net lettable area of offices would be coming on stream in 2008-2009 from the
    five transitional sites awarded so far. Market watchers say that any further
    projects on transitional office sites sold today will be completed closer
    and closer to 2010, from which point several major office developments are
    slated for completion, including Marina Bay Financial Centre (MBFC) and
    Mapletree Business City. About 10.1 million square feet of new
    office space will be completed between Q3 2008 and 2012, inclusive of the
    645,000 sq ft of transitional offices, CBRE's numbers show.  Office rents to rise 10%: RREEFBut
    no hike next year as new supply from key projects starts coming in
  Office rents here are expected to rise a
    further 10 per cent or more this year - before growth all but disappears in
    2009. 
      
        
          |   |  
        | Upcoming bay views: Artist's
          impression of the Marina Bay Financial Centre |  According to a report by Deutsche Bank's
    property arm RREEF, rental growth is expected to 'evaporate' by 2009 as
    extensive new supply starts to come onstream from projects such as the
    Marina Bay Financial Centre (MBFC), Ocean Building and Marina View. From 2010 to 2012 - when the market adds
    570,000 square metres of new Grade A office space - Grade A stock is
    expected to increase 25 per cent, the report says. 'The vacancy rate, currently near one per
    cent, will shoot up to 2005 levels by the time this new wave of supply is
    all brought on line,' it adds. RREEF expects rent momentum - the
    'general momentum behind the potential changes in rent, not an absolute
    variation in rates' - to decrease in 2010 and 2011, then stabilise in 2012. In its report, Asia Pacific Property
    Cycle Monitor, it says each property sector has a clearly identifiable cycle
    with four main phases: 
      recovery (high but declining vacancy
        rates - stable to rising rents);growth (low and declining vacancy
        rates - rising rents supportive of construction);post-growth (low but increasing
        vacancy rates - rising/flattening rents); andcontraction (high or increasing
        vacancy rates - falling rents). 'The office market has the
    greatest volatility of the three main commercial sectors,' says RREEF. 'The
    retail and industrial sectors are less volatile due to the relatively high
    levels of owner-occupation, with less investment activity and limited modern
    supply, particularly in the industrial sector.' While the office sector is currently
    still in the growth stage, a post-growth stage is expected in 2009, followed
    by two years of contraction, and finally recovery in 2012. On the upside, the retail property sector
    is expected to remain in the growth stage until at least 2012. RREEF attributes this to a 'broad
    construction boom' and 'robust economy'. 'Two new malls in the Orchard Road
    area will join the island's existing stock of dated retail space in 2008,
    which could spur structural change in the market,' it says. 'Extensive
    pre-leasing of this space will keep Singapore's retail vacancy rate steady
    in the one per cent range.' RREEF expects retail rental growth to
    average 3 per cent per annum between now and 2012. It also sees the industrial property
    market booming - especially business parks. It projects growth until 2010,
    when a post- growth stage will kick in until at least 2012. Rents, which
    grew at double-digit levels in 2006 and 2007, should continue to rise this
    year, before the rate of increase tapers off to single digits. While the spillover effect from the
    office sector has led some companies to turn to business-park space for
    their back-office operations, RREEF reckons that this effect will 'diminish'
    when the large supply of new office space comes onstream from 2010. It also adds a note of caution: 'While it
    poses no immediate competitive threat to Singapore, Malaysia's long-term
    plan to develop the Iskandar Development Region in Johor will be a project
    with structural implications for Singapore, and its progress should be
    monitored over the long-term.'  
    - 2008 June 24  THE
    BUSINESS TIMES   CBD offices still available at $6-9 psf a month Small pockets of space can be
    found in older buildings in the central district
 The average Grade A office monthly rental
    in Singapore touched $18.80 psf in Q2, while the vacancy rate for such
    premium space stands at a mere 0.6 per cent. 
      
        
          |   |  
          | Older but cheaper:  At Shenton House (foreground), asking
            rentals for units on the seventh and 25th floors are said to be in
            the $6.50 to $7.00 psf range |  However, small pockets of space ranging
    from a few hundred square feet to 3,000 sq ft are still available in older
    buildings in the Central Business District. For example, at Cecil Street,
    Shenton Way and Tanjong Pagar, monthly rents range from $6 psf to $9 psf. At International Plaza next to Tanjong
    Pagar MRT Station, a 400 sq ft unit without a window is going for a monthly
    rental of $6 psf, while a 1,500 sq ft unit on a higher floor has a $9 psf
    rental tag. Over at Octagon along Cecil Street, two
    units (of 1,300 sq ft and 2,000 sq ft) are being offered at $7.80 psf. At 146 Robinson Road, tenants are being
    sought for a few units of between 1,000 and 3,000 sq ft on various floors
    with an asking rental of $7.50 psf. At Shenton House, asking rentals for
    units on the seventh and 25th floors are said to be in the $6.50 to $7.00
    psf range. 'While there are many office buildings
    asking for double-digit monthly rents, users can still find office units at
    single-digit rents on the fringe of Raffles Place, such as Robinson Road and
    Cecil Street. 'These buildings are mainly older and
    have smaller floor plates. In addition, they are mostly sandwiched between
    other buildings and offer very limited or no car park lots in the building,'
    says Knight Frank director, business space (office) Agnes Tay. We would expect smaller companies
    providing professional services and non-financial companies to find such
    options attractive in terms of rental levels and at the same time without
    compromising on the convenience of location. These tenants could be in
    fields like auditing, accounting, consultancy, legal services, design,
    shipping and IT,' she added. Tenants willing to pay slightly higher
    rents but still shy of Grade A rates also have several options in the CBD. At UIC Building on Shenton Way, owner
    United Industrial Corporation has put on hold its development plans for the
    property and is said to have for leasing a total 43,000 sq ft comprising
    units of various sizes from 700 sq ft to 9,000 sq ft. The asking rental is said to be about $11
    psf. UIC is said to be offering tenants leases of three years but without
    options for renewal. In more prime buildings such as the
    Arcade near Raffles Place MRT Station and 8 Shenton Way (formerly Temasek
    Tower), asking rents are higher, around $10.50-14.50 psf and $12-14 psf
    respectively, BT understands. Bigger office spaces in the CBD are also
    becoming available, partly due to the government's initiative to move its
    agencies out of the CBD to ease the acute shortage of prime offices. Singapore Land Authority will be giving
    up seven floors or 92,569 sq ft at 8 Shenton Way when it moves to Revenue
    House in Novena in Q4 this year. InfoComm Development Authority is also
    expected to give up some space at Suntec City by the year-end. Swiss banking group UBS is also believed
    to be giving up about 47,000 sq ft of space it no longer needs on the 10th
    and 15th floors of Suntec City Tower. The space may be available for lease as
    early as September, BT understands. A UBS spokeswoman said: 'We are giving up
    some space at Suntec City because we've achieved more efficient space usage.
    But even after releasing this area, we'll still continue to occupy some
    200,000 sq ft at Suntec City alone. In addition, since last year we've
    leased 230,000 sq ft at One Raffles Quay. So we would still have grown our
    Singapore footprint from 250,000 sq ft in 2006 to 450,000 sq ft.' Industry observers are keeping their eye
    on other big office occupiers to see if they, too, would release excess
    space. DTZ noted last week that the government's
    efforts to create more immediate office space - such as releasing
    transitional office sites and awarding disused state properties to the
    private sector for conversion to offices - has helped to ease the supply
    crunch and pressure on rentals. This CBD office shortage will be eased
    from 2010 as new office projects are completed. 'Going forward, as companies and
    government agencies start to move out of the CBD and more new supply comes
    onstream, office occupancy is likely to ease and limit rental growth in the
    CBD for the rest of 2008,' DTZ said.  
    - 2008 July 7    THE
    BUSINESS TIMES   Flight to quality may cool office rents in places Spiralling rentals almost ground to a halt in Q2 with more cautious economic
    climate
 For office tenants in Singapore wearied by
  steep rental hikes in the past couple of years, some relief is at hand. The sharp escalation in office rents
  screeched almost to a halt in the second quarter of this year as a more
  cautious economic outlook became widespread. Average prime and Grade A office
  rents edged up just 0.8 and 0.6 per cent respectively in Q2 over the preceding
  three months, according to latest figures from CB Richard Ellis (CBRE). 'We may see on an average basis, marginal
  advancement in rentals in second-half 2008 beyond current levels. 2009 will
  probably be flat, and for 2010 and 2011, we may see office rents easing' as
  new supply is completed, says CBRE executive director (office services) Moray
  Armstrong. Last year, prime and Grade A office rents
  nearly doubled and that came on top of the 50-plus per cent gains they posted
  in 2006, on the back of tight office space and strong demand from occupiers
  including global financial institutions expanding their operations in
  Singapore. Alarmed that spikes in office rents in the
  past two years may threaten Singapore's business competitiveness, the
  government has been boosting supply. While new office developments being built
  are not expected to face difficulty pulling in tenants, vacancies created in
  older properties from a departure of tenants in a 'flight to quality' will
  create downward pressure on rents, market watchers say. A lot will also depend
  on how demand pans out. CBRE noted yesterday that 'it was evident
  that the volume of leasing transactions driven by expansion was lower in the
  past two quarters'. The pace of leasing pre-commitments in new prime office
  developments has slowed but negotiations are still progressing, the property
  consultancy said. 'A couple of large occupiers have
  identified excess space which can be made available for subletting, but at
  this stage, this has not become a notable trend,' it added. Mr Armstrong says that the significant
  number of new developments being built in the central business district (CBD)
  is likely to lead to a more competitive environment for pre-letting. 'Existing
  landlords can be expected to adopt more defensive positions, with tenant
  retention being given greater priority as the completion of new supply is now
  more imminent. 'Increasing competition from higher-quality
  new buildings should serve to cap rental appreciation from today's levels,' he
  adds. CBRE's figures show that about 10.2 million
  square feet of new office space will be completed between 2008 and 2012, the
  bulk of which (6.7 million sq ft) is targeted to be ready in 2010-2011. Key projects slated for completion in 2010
  include Marina Bay Financial Centre (MBFC) Phase 1 and 50 Collyer Quay. The
  following year will see the completion of MBFC Phase 2, Ocean Financial
  Centre, OUB Centre Phase 2, Marina View (North Tower) - all in the financial
  district - and Mapletree Business City in the Alexandra Road area. To redress the office shortage, the
  government has not only been selling more sites for development into Grade A
  projects in the CBD but is also seeking to resolve the short-term supply
  shortage by releasing 15-year leasehold 'transitional' office sites outside
  the financial district that can be developed into low-rise projects within a
  year. These will cater to tenants that don't need
  premium office space. As well, vacant state properties are being leased to the
  private sector for conversion into offices. Putting the supply numbers in perspective,
  CBRE says: 'At face value, potential confirmed supply seems abundant, but it
  should be viewed in context with strong take-up. Some 22 per cent of known
  supply from Q3 2008 to 2012 is pre-committed, with around 9 per cent under
  offer.' Jones Lang LaSalle (JLL) managing director
  (South-east Asia) Chris Fossick says: 'We expect very strong interest in the
  new office developments completing over the next few years from tenants
  wishing to relocate and expand into new high-quality office stock and to meet
  their corporate social responsibility goal of occupying 'Green Mark'
  buildings.' JLL expects prime and Grade A office rents
  to increase 18 per cent for full-year 2008 but to grow more moderately next
  year. 'We expect strong take-up of office space over the coming three years
  due to pent-up demand that has accumulated because of the tight supply over
  the past couple of years,' Mr Fossick adds. Office landlord Hongkong Land director
  (commercial property, South Asia) Robert Garman says that occupier demand for
  offices on the island has been holding up well against the backdrop of an
  uncertain global economic environment. 'Commitment levels for MBFC have
  exceeded our expectations and we feel confident moving forward,' he adds. CBRE data shows the average monthly prime
  office rental in Singapore as at Q2 this year was $16.10 psf, just 10 cents
  higher than the Q1 figure and reflecting a 7.3 per cent increase in the first
  half of this year (against the end-2007 level). For the whole of last year,
  the increase was 92.3 per cent. CBRE's data also showed that the average
  Grade A office rental stood at $18.80 psf a month in Q2 this year, up 15 cents
  from the preceding quarter and a 9.6 per cent appreciation for the first half.
  This is more moderate than the 96.4 per cent hike seen for the whole of 2007. 'Grade A vacancy also remained very tight
  at 0.6 per cent. No new development will be completed before H2 2009,' CBRE
  notes.   - 2008 June
  27   THE
  BUSINESS TIMES   High rentals don't worry some
    MNCs Rising office rents may have forced some
    businesses to adopt a wait-and-see approach on expansion here but others are
    expanding anyway.
     A report by Cushman & Wakefield
    (C&W) reveals that key leasing transactions in December 2007 include
    Swiss wealth manager Julius Baer taking up 26,000 sq ft of office space at
    HarbourFront Tower 1, US-based global engineering, construction and
    diversified services company Flour Daniel leasing 15,000 sq ft at 80
    Robinson Road, and US-based drug development services company PharmaNet
    relocating to 5,000 sq ft premises at Springleaf Tower.
        Standing tall: US-based drug development services company PharmaNet is 
relocating to 5,000 sq ft premises at Springleaf Tower
 Bank Julius Baer was the fastest growing
    company in the finance and banking services sector in 2007 and its
    spokeswoman Lim Li Koon said that leasing the HarbourFront premises is part
    of its 'business continuity plan' strategy. Ms Lim also said that it would
    continue to operate out of its office at One George Street. C&W managing director Donald Han said
    that the office market is experiencing a 'flight to availability of space
    for expansion' with tenants also hoping to take advantage of lower rents in
    the office sub-markets. According to C&W, latest data showed
    that prime office net effective rents were at an average of $14.30 psf per
    month in November 2007, an increase of 3.5 per cent over October 2007. Similarly net effective rents for the Top
    25 Grade A office buildings rents rose to an average of $16.02 psf per month
    in November 2007 from $15.54 psf per month in October 2007. Mr Han said many businesses in Grade A
    areas like Raffles Place, where occupancy is close to 100 per cent, are
    currently negotiating to renew their leases. 'Companies that need to be
    located close to their clients cannot move far from this comfort zone,' he
    said. Those that can are looking outside the
    CBD. Average rents for the office sub-market in areas like Beach Road and
    HarbourFront are around $10-$11 psf per month. 'The secondary (sub) market is becoming
    the primary target for tenants looking to relocate at the moment,' Mr Han
    said.   - 2008 January
    3  SINGAPORE
    BUSINESS TIMES Calm replaces frenzy, but office
    sector will still be buoyantSupply remains
    tight in short-term, prices may rise slower in 2008
 
      
   The tight supply of office space seen this year will spill over into
    2008, keeping rents buoyant and rising in the region of 20 per cent for
    Grade A space.
 However, the massive supply expected from
    2010 onwards, coupled with a growing resistance to rental hikes and the
    possibility of a slowdown in the US economy, will likely bring a sense of
    calm with the new year, replacing the manic price increases that dominated
    much of 2007, when rents in areas like Raffles Place increased by 100 per
    cent. Colliers International director for
    research and consultancy Tay Huey Ying says that based on the average annual
    office absorption rate in the last three years of about 2.3 million sq ft,
    islandwide occupancy could reach 95 per cent by 2010, but added that this
    was 'unlikely in view of the looming US recession'. Colliers estimates that potential supply
    is estimated to be 5.2 million sq ft, or about 1.7 million sq ft a year for
    the next three years. 'In the likely event of a moderation in
    annual office demand by some 25-30 per cent to an annual average of some 1.6
    million sq ft in the next three years, islandwide occupancy rate would still
    remain at a healthy level of above 92 per cent by 2010,' added Ms Tay. Cushman & Wakefield's (C&W)
    estimates for the shorter term reveal a more dire supply situation. C&W managing director Donald Han says
    that only 2.7 million sq ft of new office space will be completed for 2008
    and 2009, or an average of 1.35 million sq ft per annum. Projected take-up
    however, has historically been around 2 million sq ft. But while rents will continue to rise,
    tenants may simply up their tolerance thresholds and resist expansion by
    'hot-desking, working from home, or reconfiguring workstations', at least
    until rents stabilise, reckons Mr Han. Landlords' rental expectations will
    remain high but Mr Han believes that tenants are beginning to resist high
    rents and expects 'more corporates who are large users of space to continue
    adopting cost segregation strategy in 2008'. 'Assuming half of a front end office in
    the CBD pays $15 psf while the other half of backroom operations pays a $4
    psf industrial rate, the blended rate achieved is $9.50 psf, which makes
    businesses more agile and competitive in a high cost environment,' Mr Han
    said. He also noted that the Grade B office
    sector is enjoying high occupancy rates of 95-98 per cent with some fringe
    areas like the Tanjong Pagar, Beach Road and Chinatown micro markets seeing
    record rental transactions. Mr Han added: 'There has been a growing
    trend of companies buying premises for own use in lieu of renting. These
    have similarly led to the rise of rental and capital values for conservation
    shophouses and strata-titled offices.' Capital values rose rapidly in 2007.
    According to Savills Singapore, average Grade A capital values rose 33 per
    cent in Q2'07 and 23 per cent in Q3'07, quarter-on-quarter. For 2008, however, Savills is projecting
    a 20 per cent increase for the whole year. The sector will also continue to be
    bolstered by institutional buyers. Savills director of marketing and
    business development Ku Swee Yong said: 'They invest in Singapore for
    interest rate arbitrage, tax gains, forex gains or diversification, and
    portfolio diversification. The office investment market will continue to be
    filled with investor interest and we will see a constant supply of funds
    chasing after very few assets.' The lower price fetched for Marina View
    Parcel B recently does not alter his view either. 'Marina View Parcel B had
    restrictions due to the common services tunnel construction access. The
    price is not reflective of the market because you have to discount for the
    inconvenience. I don't believe one can draw any conclusions from the price,'
    he added. With good returns on capital values,
    Knight Frank director, research and consultancy Nicholas Mak believes that
    2008 will see investors continue to look for short term gains. 'A few have
    already been flipping commercial properties because the profit is too good
    to pass up,' he added. Better yields may persuade these
    investors to hold for longer term rental returns but Mr Mak only expects
    yields to rise in 2009 or 2010. For 2008, the tight supply will be
    mitigated by limited office space completion and new transitional office
    sites being developed. Interest in the transitional sites has
    been encouraging. CB Richard Ellis executive director
    (office services) Moray Armstrong said: 'The successful award of the first
    transitional office parcel at Scotts Road and the swift pre-commitment of
    the entire block by insurance giant Prudential provides a good gauge of
    strength of the leasing market in 2007.' CBRE estimates that Grade A rents will
    average $18.50 by end-2008 but Mr Armstrong expects the market to be, 'more
    friendly beyond 2010'. 'This is likely to be factored into
    property decisions by the corporates,' he added. By CBRE's analysis, more than 68 per cent
    (or about 6.2 million sq ft) of the on-coming supply from 2008-2012 is
    likely to be categorised as Grade A - almost doubling the current Grade A
    stock.   
    -   2007 December 21    SINGAPORE
    BUSINESS TIMES One year on, Anson House sold again at
    73% profit 
      
 
 It's December and Anson House is changing
    hands again - for a much heftier price. GE Real Estate has sold it to a private
    property fund managed by Australia's Macquarie Bank for $129.5 million -
    about 73 per cent more than what it paid for the 13-storey office block last
    December. The price paid by the Macquarie-managed
    fund works out to $1,701 per square foot of the building's existing net
    lettable area (NLA) of 76,127 sq ft. This is slightly higher than the 72,122
    sq ft NLA reported earlier as the building's efficiency has been improved -
    for instance, by converting some of the common areas to lettable space. The latest sale was brokered by Jones
    Lang LaSalle's Asia Capital Markets Group and shows that office blocks
    continue to be traded by foreign institutional investors. Based on current leases in the building,
    the $129.5 million reflects an initial net yield of about 3.6 per cent, but
    this is set to increase with about half of the building's NLA coming up for
    lease renewals by end-2009. The 13-storey building, completed nine
    years ago, includes about 5,300 sq ft NLA of retail space on the ground
    floor. Anson House also has 98 carpark lots. It stands on a site with a
    remaining lease of about 89 years. Last year's sale of the building to GE
    Real Estate was by a company owned by former Singapore Land chairman SP Tao
    and his Indonesian partner, Mackmoor Pte Ltd. Nearby, 78 Shenton Way was sold recently
    for $650.78 million to Germany's Commerz Grundbesitz Investmentgesellschaft
    (CGI) group. This works out to $1,857 psf based on a total NLA of about
    350,000 sq ft, inclusive of six levels of new offices that are being built
    above the carpark podium by the seller, a joint venture between Credit
    Suisse and CLSA funds. The deal is said to include income
    support as well as a return on the new office extension while it is being
    built amounting to about $16 million in total to be paid by the seller to
    the buyer. Excluding this sum, the effective price
    being paid by CGI works out to about $635 million or around $1,814 psf. The
    property is on a site with a balance lease term of about 75 years.   
    -    2007 December
    20     SINGAPORE
    BUSINESS TIMES    Modest bidding for CBD office site as
    caution sinks inTop
    offer of $779.42 psf ppr half of next- door site's recent bid
 The new-found caution surrounding the Singapore office market is now
    spilling over to the Central Business District. Reflecting this, a site at Marina View diagonally behind One Shenton
    yesterday attracted a top bid from Macquarie Global Property Advisors (MGPA)
    of $779.42 psf per plot ratio - only about half of the group's winning bid
    in September for the site next door. Knight Frank managing director Tan Tiong Cheng acknowledged that office
    investors have turned cautious. 'The outcome of the sub-prime episode may
    have an impact on demand for office space in Singapore, while the government
    has expressly stated recently it will boost supply of office land in the
    next few years to alleviate the current shortage,' he said. Another reason for the lower bid for the latest site - Marina View Land
    Parcel B - is that it has a minimum hotel component of at least 25 per cent
    of the site's maximum gross floor area, property consultants said. 'Hotel
    land values are a lot lower than office values,' said Mr Tan. 'The latest tender outcome is also a knee jerk-reaction to what has been
    happening lately in the US - the sub-prime crisis being worse than initially
    thought and big banks being affected. Banks are prime users of office
    space.' The only other bid at yesterday's tender
    came from units of CapitaLand, at $898 million or $734.52 psf ppr. BT understands that CapitaLand was to
    team up with Thai tycoon Charoen Sirivadhanabhakdi's privately held vehicle
    Pacific Coast Assets, had its bid been successful. By most counts, the top bid at
    yesterday's tender by MGPA unit MGP Kimi of $952.89 million or $779 psf ppr
    was lower than had been predicted. CB Richard Ellis executive director Li
    Hiaw Ho had expected Marina View Land Parcel B to fetch about $1,200 to
    $1,300 psf ppr, lower than the $1,409 psf ppr that an MGPA unit paid in
    September for the next door Marina View Land Parcel A, considering the
    minimum hotel component for the latest plot. 'There is a chance that the
    state's reserve price may not have been met and that the latest site may not
    be awarded,' Mr Li suggests. However, other property consultants
    argued that the plot will be awarded. Mr Tan said his firm, Knight Frank,
    predicted in late July projected that the site would attract bids of $1.1
    billion to $1.3 billion, or $900-1,060 psf ppr. 'Taking the mid point of
    $1.2 billion, the top bid was about 20 per cent lower than our projection.
    To me that is within range, and I would expect the site to be awarded,' Mr
    Tan said. 'The price is still substantially higher
    than other sites sold in the Marina Bay area in recent years.' Jones Lang LaSalle's Asia Capital Markets
    head Stuart Crow said: 'The price seems fair going by recent land bids and
    taking into account the hotel component for this site.' MGPA's top bid at yesterday's tender also
    'reinforces the foreign investor interest in the Singapore property market
    fundamentals', he added. 'In my view, the site will be awarded.' Mr Crow estimates that MGPA's bid price
    for Parcel B yesterday reflects a break-even cost of about $2,200 to $2,300
    psf for the office component of a potential development on the site. As for
    the hotel component, market watchers estimate the break-even cost could be
    about $700,000 to $800,000 per room. Marina View Land Parcel B has a site area
    of about 0.9 hectare and can be developed into a maximum gross floor area (GFA)
    of about 1.22 million sq ft, of which at least 60 per cent must be for
    offices and at least another 25 per cent for hotel use. 
    -  2007 November 14   SINGAPORE
    BUSINESS TIMES Office demand spills out of CBD as
    rents soar      Office rents across Singapore have all
    breached historic highs, says real estate consultant DTZ Debenham Tie Leung,
    with Raffles Place now commanding average monthly rents of $14.50 per square
    foot (psf). This represents an increase of 11 per
    cent over the previous quarter. And despite the completion of the 81,460
    square feet of new office space at 135 Cecil Street during the quarter, the
    office market still suffered a net loss of 455,390 sq ft of stock due to the
    demolition of Asia Chambers Building and the addition and alteration works
    going on at two existing office blocks - OUB Building and Ocean Building. The authorities have been trying, among
    other measures, to address the crunch by making short-term lease office
    space available. DTZ executive director (consulting and
    research) Ong Choon Fah said: 'The rapid rise of office rents is likely to
    impel prospective tenants to source for lower-cost alternatives outside the
    CBD.' In its report, DTZ highlights that CBD
    fringe and decentralised areas like Alexandra and Novena have been
    attracting much of this spill-over demand. In particular, the Alexandra zone now
    enjoys full occupancy with average monthly gross rents at $6.80, an increase
    of 13 per cent quarter on quarter. In the Orchard Road zone, monthly rental
    increases are significantly higher at 25 per cent quarter on quarter and now
    the rents stand at $10.60 psf per month. Future supply can be expected from
    government land sales sites. In the third quarter, three sites were
    sold. Two were at Anson Road/Enggor Street,
    going to Mapletree Investments and LaSalle Investment Management, while one
    site was at Beach Road, which went to a consortium consisting of City
    Developments, Istithmar and El-Ad Group. DTZ believes the sites could generate an
    estimated 1.03 million sq ft of gross floor area of office space. It also noted that there is another 5.7
    million sq ft of commercial space from various government sources available
    in H2 2007. But with demand from the financial sector
    for office space not expected to decline anytime soon - DTZ cites a Bank for
    International Settlements report which ranks Singapore as its fifth-largest
    centre for foreign exchange trading - interim government initiatives have
    had to be introduced to alleviate some pressure. The Urban Redevelopment Authority
    launched two transitional office sites at Scotts Road and Tampines Concourse
    with 15-year leases in the quarter, with the site at Scotts Road drawing 11
    bidders. And DTZ also estimates that at the end of
    the third quarter, 663,766 sq ft of short-term lease office space has been
    made available through the Singapore Land Authority.
    - 2007 September 29  
    SINGAPORE BUSINESS TIMES The changing face of office space How
    the development of New Downtown at Marina Bay will shape new offerings in
    the current CBD
 With demand for office space in Singapore
    outpacing supply in the last three and a half years on the back of healthy
    economic growth, rents have been surging, with prime space seeing a rise of
    over 200 per cent since the lows of 2004. 
      
        
          |   |  
        | New look: The
          New Downtown (above) will not only bring a brand new skyline to the
          existing CBD (next), but also up the standards of design and
          facilities |  Monthly gross rents of Grade A space in
    Raffles Place grew by a phenomenal 222 per cent from an average $3.95 per sq
    ft at the trough in Q1 2004 to a record $12.69 psf as at end Q2 this year.
    Occupancy of office space island-wide hit 92 per cent as of Q2 2007 - the
    highest level since Q3 1996, with most prime office buildings enjoying near
    full occupancy. Against this backdrop of soaring rents
    and a dearth of supply, office tenants are eagerly awaiting new office stock
    coming to the market. This will largely comprise prime office developments
    in the New Downtown at Marina Bay. Assuming the two new white sites at
    Marina View currently on tender are developed by 2011, the New Downtown
    would yield some 5.4 million sq ft of prime office space. This is equivalent
    to 47 per cent of the current Grade A stock in Raffles Place and Shenton
    Way/Tanjong Pagar. The New Downtown at Marina Bay will not
    only give the Central Business District (CBD) a new skyline, but could also
    spur higher building standards in the existing CBD. When landlords of
    existing Grade A buildings in Raffles Place and Shenton Way/Tanjong Pagar
    redevelop or retrofit their properties in the coming years, they will have
    to raise their specifications to match those of offices in the New Downtown
    to stay competitive. Among other things, this new office space
    will offer specifications and services catering to the evolving needs of
    multinationals and match the top standards found in other regional markets
    such as Hong Kong and Shanghai. Examples of such specifications include: Larger floor plates in excess of 20,000
    sq ft, against the current average of 13,000 sq ft
     
      Enhanced efficiencies with column-free
        regular floor plates
      Floor-to-ceiling heights in excess of
        2.7m
      More robust technical infrastructure,
        such as dual-feed power supply to overcome power failure, and dedicated
        emergency power feed.New-generation prime office stock in
        the existing CBD can also be expected to offer services such as regular
        tenant feedback meetings.
      An increasing number of companies are
        also looking to raise the quality of the work space, as an attractive
        office environment becomes key in recruiting and retaining the best
        talents, comprising largely the Generation X and Y workforce who drive
        change. Such an enviroment will also boost overall productivity. As
        such, we can expect future Grade A office supply in the existing CBD to
        feature the following:Maximum work space adjacent to natural
        light and view
      Good ventilation
      Minimal noise intrusion from building
        mechanical services
      Use of non-health hazardous building
        materials
      Dedicated higher capacity IT fibre
        connectivityUninterrupted power supply. With companies becoming more
    environmentally aware, tenants would also prefer to locate in an
    environmentally-friendly office building. This would include features such
    as efficient energy and water consumption and conservation systems, as well
    as measures on indoor pollutants against the corresponding green building
    maintenance and operational guidelines.  
 Hence, many redeveloped or retrofitted
    Grade A office buildings in the CBD can be expected to seek a Green Mark
    certification from the Building and Construction Authority. In fact, the gentrification of the
    current CBD had already begun with the redevelopment of buildings such as
    Crosby House, Ocean Building and Overseas Union House. By 2011, some 3.5
    million sq ft of redeveloped Grade A office space in the current CBD is
    expected to be completed. Landlords of other older buildings in
    Raffles Place could choose to retrofit instead. For example, the landlords
    of 6 Battery Road, Singapore Land Tower and UOB Plaza II have opted for
    retrofitting. This includes re-cladding the building façade, creating
    space for cafes, installing multi-media screens, and upgrading lifts,
    lobbies, toilets and carparks. With this, they can command top rents and
    occupancy rates. Second-tier buildings, such as those
    built on smaller footprints, could find a niche catering to tenants who do
    not require the most prime office locations or large floor plates. The
    answer is the boutique office, typically a high quality office building with
    a smaller footprint. These developments have small floor plates and target
    smaller space users such as fund managers, private banks, re-insurance
    firms, professional services firms and regional offices. They offer tenants
    the prestige and exclusivity of being a full-floor tenant. The live, work and play concept is taking
    root here so tenants would appreciate features such as shower and fitness
    facilities and common break-out areas with wireless computer access and
    flexible after-office hours air-conditioning arrangements. In this context, the clustering of
    eateries, convenience stores, laundries, mobile devices support centres, and
    covered walkways could just make buildings along a street collectively more
    attractive. Some might say the current CBD lacks
    character. But with the New Downtown as catalyst, the older part of the
    business district could see an innovative repositioning that would help
    Singapore's office market gain depth and breadth, catering to a broad range
    of tenants, from MNCs to boutique operations.   -
    2207 September 27    SINGAPORE
    BUSINESS TIMES 
 Prime office rents up 3.3% in August 
    Raffles Place buildings led rise, with average rents there climbing 5.6%
 Prime office rents in Singapore climbed
    some 3.3 per cent in August to hit an average of $12.21 per sq ft per month
    (psf pm), Cushman & Wakefield's new office report shows. The property firm used a basket of about
    50 buildings to calculate the average rent, managing director Donald Han
    said. The firm, which also tracks the office
    rents for the top 25 Grade A office buildings within the larger basket of
    properties, said that rents for the selected 25 buildings rose to an average
    of $12.28 psf pm as at end-August, from $12.07 psf pm in July - up 1.7 per
    cent. Last month's rise in prime office rents
    was led by buildings in Raffles Place, Cushman & Wakefield's data shows.
    Average rents in Raffles Place climbed 5.6 per cent in August to hit $13.68
    psf pm. Rents in the Orchard and Scotts area also rose some 2.2 per cent to
    $9.76 psf pm, while at City Hall/Marina Centre/Bugis, rents rose 0.3 per
    cent to $12.22 psf pm. Mr Han expects overall prime office
    rents to hit $13.50 psf pm by year-end. However, rents at the top tier of
    Raffles Place properties will hit $19 psf pm by end-2007, he said.    
    -  SINGAPORE
    BUSINESS TIMES   2007 September 18  
 Prime office rents in Singapore still
    competitive Occupancy cost in prime Singapore office
    locations has risen 54 per cent in the first six months of the year. Though
    the cost is still lower than in Hong Kong, the increase here is still the
    fastest in the Asia-Pacific region. DTZ Debenham Tie Leung defines occupancy
    cost as the average total cost of leasing prime net usable space of 10,000
    sq ft within a prime CBD location. It includes rent and outgoings, such as
    maintenance costs and property tax, if these are normally payable by the
    occupier. And according to DTZ, average occupancy
    cost has more than doubled from a year ago in the Raffles Place and Marina
    Centre zones where average rents are now S$13.10 psf per month and S$11.80
    psf per month respectively. However, DTZ's report does show that
    Grade A office rents in general are still competitive compared to other
    regional cities at S$10.89 psf per month. And although DTZ believes that
    'unrelenting office demand', will see occupancy cost keep rising, its
    executive director Ong Choon Fah said: 'A lot of corporates still see value
    in operating out of Singapore.' Demand for office space has been
    'extremely strong' from the financial sector but Mrs Ong notes that this has
    also begun to 'trickle down' to other support sectors, boosting demand
    further. Supporting this is DTZ's data which shows
    that Grade A vacancy rates in Singapore is the lowest at 2.6 per cent after
    Delhi at 0 per cent, followed by Shanghai (2.8 per cent), Tokyo (2.96 per
    cent) and Hong Kong (3 per cent). Asked to comment on the figures for
    occupancy cost in Singapore, a URA spokesman said that the statistics were
    computed based on DTZ's knowledge of rental transactions for a selected
    basket of prime office buildings as well as their estimates of 'achievable
    rentals' where there were no actual transactions done in certain buildings. URA, which had also consulted DTZ on its
    figures, added: 'The inclusion of pre-committed space may result in
    instances of double-counting of occupied office space, as the tenants may be
    vacating other office buildings when they shift to their new premises.' Noting that different methodologies may
    result in different statistics, URA also noted that DTZ estimates that
    office occupancy rates for prime office buildings in Raffles Place, Marina
    Centre and Orchard Road for Q2 2007 were 97.4 per cent, 98.9 per cent and
    96.9 per cent respectively. By comparison, URA's office occupancy
    rate figure for Category 1 office buildings in the Downtown Core - which
    includes Raffles Place and Marina Centre and Orchard Planning Area - was 95
    per cent for the same period, and computed based on the physical occupancy
    of space. URA also said that based on Iras' records
    of rental contracts signed in Q2 2007, the median rental for Category 1
    office buildings was S$10.33 psf per month. DTZ said that although the increase in
    occupancy cost was the greatest in Singapore, occupancy cost is still the
    highest in Hong Kong at US$180.27 psf per year where base Grade A rents in
    the Central and Admiralty areas is S$20.09 psf per month. This is followed by Tokyo at US$119.30
    psf per year with base rent at S$150.55 psf per month, and Singapore at
    US$102.61 psf per year with a base rent of S$10.89 psf per month.
    -   SINGAPORE
    BUSINESS TIMES     14 August
    2007   by Arthur Sim  
  
  
 Foreign buyers sink $2.4b into office
    propertyAmount invested so far this year
    outstrips the $1.9b for the whole of last year
 
      
    The shortage of office space on the
    island that has led to spiralling office rents and capital values has at the
    same time drawn more foreign investment into Singapore office blocks.   
So far this year, foreign investors, including
    private equity groups and non-listed funds, have picked up about $2.4
    billion worth of en bloc office buildings and sizeable strata office
    properties. This surpasses the $1.9 billion for the whole of
    last year, which in turn was more than double the $733 million in 2005,
    according to latest data from CB Richard Ellis. Also, the $2.4 billion of office buildings bought
    by foreign  investors gave them a 69 per cent share of the
    $3.5 billion total in major office deals so far this year. The latter
    figure, for the period Jan 1 to June 8, 2007, is higher than the $3 billion
    chalked up for the whole of last year. Big office acquisitions by overseas buyers this
    year include Macquarie Global Property Advisors' $1.04 billion purchase of
    Temasek Tower in March, the $525 million sale of SIA Building on Robinson
    Road to German Pension fund SEB, the $260 million purchase of Vision Crest's
    office block and The House of Tan Yeok Nee in the Penang Road/Clemenceau
    Avenue area by German fund manager Union Investment Real Estate AG (formerly
    known as Difa Deutsche Immobilien Fonds). Local buyers have bought around $1.1 billion of
    office space so far this year, with the biggest deal being the $600 million
    collective sale of UIC Building at Shenton Way to United Industrial Corp.
    The mainboard-listed company itself owns 78.8 per cent of the property. However, Singapore real estate investment trusts,
    or S-Reits, have not made any purchases of office blocks so far this year,
    after making acquisitions of over $700 million in each of the preceding
    three years. CBRE excluded the Raffles City transaction in 2006
    from its analysis as the apportionment of the value of the office space in
    the mixed development was not made public. The Raffles City complex also
    includes two hotels, convention facilities and a shopping centre, besides an
    office tower. Raffles City was purchased jointly by two Reits -
    CapitaCommercial Trust and CapitaMall Trust - for $2.1 billion. In its
    analysis, CBRE also excluded small strata office transactions. Commenting on the big jump in the acquisition of
    office blocks by foreign buyers and falling purchases by S-Reits, CBRE
    executive director Jeremy Lake observed that while S-Reits are still bidding
    for office blocks in Singapore, they have not had much luck clinching
    acquisitions as the prices they can offer are constrained by the need for
    the acquisitions to be immediately yield-accretive to unit holders.
    Otherwise, there is a risk of the unit price of the Reit falling on the
    stock market. On the other hand, foreign buyers, which
    are mostly private equity and unlisted funds, can bid more aggressively as
    they are looking at a total return story, Mr Lake said. For instance, foreign buyers can offer a
    higher price for an office building that may reflect an initial yield, based
    on the building's existing rental income of, say, only 2 or 3 per cent, with
    the knowledge that as leases come up for renewal at higher market rents, the
    yield may then go up to, say, 5 per cent. Also, these players may be looking
    at selling the assets and crystallising a capital appreciation a few years
    down the road, Mr Lake said. Looking ahead, Mr Lake expects foreign
    buyers will continue to remain dominant buyers of office blocks in
    Singapore. He also reckons that the office en bloc market on the whole will
    remain very active for the rest of the year. Asked if there is a sufficient
    stock of office buildings for sale, he said: 'When the market is strong,
    surprises come along the way. People whom you do not expect to sell their
    buildings will sell.' CBRE data show that the average Grade A
    office rental value in prime locations has shot up 82 per cent over the past
    12 months to $12.40 per square foot a month in Q2 this year. The average capital value of prime office
    space has more than doubled over the past year to $2,500 psf in Q2, from
    $1,150 psf in the same period last year. At the trough of the current cycle,
    which stretched from Q3 2003 to Q2 2005, the figure was $980 psf. DTZ Debenham Tie Leung data released
    yesterday evening also show that the average monthly prime rent in Raffles
    Place rose 20 per cent quarter-on-quarter to $13.10 psf in Q2. Average rents in the Raffles Place and
    Marina Centre areas have more than doubled from a year ago.  - 2007 June 22   by Kalpana Rashiwala  BUSINESS
    TIMES
    
 Govt
    moves to deal with CBD office space crunch 
    The government will move to tackle the
    office space crunch in the Central Business District, National Development
    Minister Mah Bow Tan said yesterday. Acknowledging an 'imbalance' between supply and demand, he said the
    authorities will likely step up the pace of government land sales (GLS) in
    the CBD. 'I think the quantum will have to be stepped up as we see a
    tightening up of supply,' Mr Mah said. The government has also set an ambitious target for further development
    of Marina Bay and the new downtown, which Mr Mah said could begin from as
    early as 2009. To deal with the immediate office space crunch, the government is
    considering releasing state land for short-term use, he said. The Urban Redevelopment Authority confirmed later that it is exploring
    whether vacant sites can be used for 'transient offices'. 'They would be basic but proper office accommodation that can be
    constructed quickly - for example, one year - and would be on land on short
    tenures,' a spokesman said. 'This is still under study and we have not
    firmed up the details yet.' Mr Mah, speaking yesterday at the ground-breaking ceremony for a new
    bridge that will span the mouth of Marina Bay, painted broad strokes of how
    the rest of Marina Bay will take shape. The first site to be released - a white site with an office space
    requirement, on Central Boulevard - will be launched for sale in May, he
    said. Another key site is the stretch between the upcoming Marina Bay Sands and
    Marina Bay Financial Centre. Mr Mah said this choice plot will complete the
    loop of developments around Marina Bay when completed, but it will only be
    available when other construction work ends around 2009. Other sites that will then come on stream will extend from Marina Bay and
    wrap around the Garden at Marina South. The existing CBD will also be extended southwards into what is being
    called the Central sub-zone. The as-yet-unnamed bridge, which will cost $82.9 million, will provide
    direct road access between Marina Centre and the new Bayfront at Marina
    South. Mr Mah said that the bridge is part of $2 billion to be spent on
    infrastructure developments there, including the critical common services
    tunnel. 'In turn, we have attracted about $10 billion of investments to
    date,' he said. Land likely to be released for development this year includes a boutique
    hotel site next to the Marina Bay Sands, the international cruise terminal
    site and the central promontory site. All are likely to go through a Request
    for Concept stage. Mr Mah said he wants to reassure the business community that office space
    will be made available. State buildings vacated by the government could be
    an immediate source, he said. 'It may not be used for MNC head offices, but
    it can certainly be used for back-end office for financial institutions.' The government has moved some of its offices out of the CBD but Mr Mah
    said there are 'one or two' left. He also said the authorities will 'encourage' users to make better use of
    existing sites, but did not elaborate on whether the government will make it
    more attractive for owners of old office buildings to redevelop them. With the pace of construction likely to be maintained or stepped-up, Mr
    Mah reiterated that sand supplies are not a concern because the authorities
    are finding new sources. He said the supply and price of sand will not affect the building of the
    integrated resorts, and he does not expect any delay to the opening dates. Mr Mah did, however, say the government is close to finalising details on
    how it will help contractors involved with government contracts who face
    cash flow problems because of higher construction costs. The government said
    earlier it would pay for 75 per cent of the additional costs for
    public-sector contractors. Details are expected within the month, Mr Mah said. 'In principle, we
    will make progress payments. If we can help contractors with cash flow
    payments, we will do so.'   -  
    31 March
    2007     SINGAPORE
    BUSINESS TIMES    Imbalance in CBD Office - Supply &
    Demand The redevelopment and regeneration of the Central Business District (CBD)
    is well under way, but it may not be happening fast enough. According to a report by DTZ Debenham Tie Leung, average annual take-up
    of office space has been 1.8 million square feet for the last 10 years. Yet,
    the property firm notes that potential supply for 2007 is estimated at
    612,000 sq ft. In 2008 and 2009, supply will dip below 500,000 sq ft and will only pick
    up in 2010 to 2.15 million sq ft. And already, the repercussions are being felt. In its Global Office Occupancy Costs Survey 2007, DTZ shows that rents in
    Singapore rose 65 per cent year on year, the highest increase across all 134
    locations surveyed, to US$7,860 per workstation per year. As a result, Singapore climbed 41 places on DTZ's survey list to 55th
    spot globally, and was up six places to ninth position in the Asia-Pacific
    region. There does appear to be an imbalance of supply and demand, and as DTZ
    executive director Ong Choon Fah says: 'The government can programme
    development.' For Mrs Ong, the pace of redevelopment in the CBD could have been faster
    but as she also points out: 'Crystal ball-gazing is not easy.' 'It's a combination of planning and market forces,' she added. Perhaps one of the best examples of this paradox is One Raffles Quay
    (ORQ). A consortium of Keppel Land, Cheung Kong Holdings and Hongkong Land
    bought the site in March 2001 for $462 million, or $290 per square foot per
    plot ratio (psf ppr), at a time when, as Mrs Ong remembers, the property
    market was 'very bad'. Indeed, the site had previously been offered for sale
    in 1997 and there were no takers. The expected price of between $600 million
    and $800 million was also not achieved. Mrs Ong says that the acquisition was seen as 'contrarian' at the time.
    But ORQ is now fully leased and achieving top rents, spurring redevelopment
    and a rash of acquisitions by foreign funds of buildings, most recently
    Temasek Tower. Also contrarian was City Developments Ltd (CDL), which in 2002 bought the
    site for its hugely successful The Sail @ Marina
    Bay for $227.10 psf ppr - 22 per cent lower than the price paid for
    neighbouring ORQ. Looking back, CDL group general manager Chia Ngiang Hong said: 'CDL
    purchased the white site which is now being developed into The Sail at a
    time when no other developer was willing to venture into building a
    residential development at Marina Bay.' CDL is now redeveloping One Shenton (the former Robina House) into a
    high-end condominium with a retail component, and has also expressed
    interest in the UIC Building next door, which is for sale at about $830
    million or $1,150 psf ppr (inclusive of development charge and lease
    top-up). Developers now appear to be making up for lost time, and demand for
    development sites is high. 'Older buildings are often strategically located in prime areas that
    render them ideal for redevelopment. As such, although the older buildings
    purchased via en bloc acquisitions are not immediately available due to
    longer lead time required for planning process, their conversion may yield
    better returns,' Mr Chia said. The spate of current redevelopments, including the government land sales
    site at Collyer Quay and Overseas Union House, can be attributed to the
    'programming of development' by the Urban Redevelopment Authority (URA). Some, like the redevelopment of Natwest Centre into a condominium called
    The Clift by Far East Organization, was prompted by a URA initiative to
    bring more critical mass into an otherwise quiet downtown at night. Plot ratio incentives are also important. A spokesman for the URA said: 'A number of existing office buildings in
    the CBD, in particular in the Shenton Way and Cecil Street areas, have not
    yet maximised their full development potential under the current Master Plan
    2003.' The pace of redevelopment has certainly picked up since 2003. Keppel Land
    is the latest to take advantage of the Master Plan and will soon announce
    plans for the redevelopment of Ocean Building. 'There are merits in redeveloping Ocean Building and these include the
    opportunity to add about 100,000 sq ft of gross floor area which has not
    been utilised,' a spokesman for Keppel Land said. 'Furthermore, it will become increasingly challenging for the building,
    which is about 33 years old, to attract and retain top-quality tenants. By
    redeveloping Ocean Building we will be able to effectively maximise the
    potential of the site.' Mrs Ong for one welcomes the government's initiatives to address the
    issue of supply in the CBD, including the release of more development sites.
    She says that it is important to maintain the current 'momentum of
    development', not least because it allows the older parts of the CBD to
    regenerate. She notes: 'In the 1970s, when the government started releasing sites in
    Shenton Way, it stimulated the regeneration of the old Raffles Place.' 
    
    
      
    -   31 March 2007  SINGAPORE
    BUSINESS TIMES Lack of Office Space Pushes Rents Up 
      
    
    The shortage
    of new office space is exerting increased pressure on rents, resulting in
    their rising by almost 30 per cent in some areas. New benchmarks were also achieved in the Marina Centre, Orchard Road,
    River Valley/Singapore River, Novena and HarbourFront areas. An analysis of market data in DTZ Debenham Tie Leung's quarterly property
    market report for Q1 2007 revealed that office space slated to be demolished
    for redevelopment will exceed the supply scheduled for completion in 2007. In addition, average annual new supply in the next four years - 928,700
    square feet - will fall short of the 1.7 million sq ft average annual
    take-up seen in the last 10 years. DTZ noted that financial and business services sectors have continued to
    expand here. DTZ executive director and regional head of consulting and research Ong
    Choon Fah added: 'The clustering of global businesses has resulted in
    across-the-board multiplier effects, for example, increased demand for
    supporting businesses.' This has led to an increase in rents. In Raffles Place, prime rents escalated by 28 per cent in Q1 2007 to
    average $10.90 per square foot (psf), higher than the previous peak of
    $10.50 psf in 1996. The highest quarter-on-quarter increase of 29 per
    cent was achieved in the Marina Centre area, which has reached a historic
    high of $10.30 psf. DTZ's report revealed that in microzones like
    Orchard Road and HarbourFront, rents similarly registered highs of $8 and
    $6.30 psf respectively. DTZ also noted that higher rents caused some
    occupiers to relocate from the CBD to most cost-effective premises. It also believes that more tenants will review
    workplace strategies or pre-commit earlier in future developments where
    possible, as rents are expected to top the highest peak in 1990 with prime
    rents in Raffles Place only 3 per cent shy of the $11.25 psf achieved 17
    years ago. Occupancies have also risen. DTZ highlighted
    increased occupancies at Samsung Hub in Raffles Place and at PSA Building in
    the Alexandra microzone in particular, where occupancies rose by 18
    percentage points each to 98 per cent and 85 per cent.- 29 March 2007    SINGAPORE
    BUSINESS TIMES Office costs up 65% in 2006 
      
    
    
    The cost of having an office in Singapore notched
    up the highest increase among all 134 locations covered in the latest DTZ
    Debenham Tie Leung annual Global Office Occupancy Costs survey. The 65 per cent jump to US$7,860 per work station
    per annum took the republic up to 55th position globally from 96th position
    last year, and put it among the top ten in the Asia Pacific. However it is
    still comfortably behind other top Asian locations like Hong Kong, which is
    the second most expensive in the world at US$19,730, and Tokyo's five
    central wards which take the eighth spot at US$13,470. Also more expensive
    than Singapore are Seoul (at 12th position), Mumbai (18th), Sydney (41st),
    and New Delhi (51st). 'Despite the hike, occupancy costs in Singapore
    remain less expensive compared to locations such as Hong Kong and Tokyo,'
    said Angela Tan, DTZ Southeast Asia's executive director and regional head,
    global corporate services. Within the Asia Pacific, Hong Kong retained its
    top ranking from last year for occupancy cost, while Tokyo, Seoul and Mumbai
    maintained second, third and fourth positions. Singapore's sharp rise
    however bumped it up to ninth position, ahead of China's Beijing and
    Shanghai. DTZ attributed the increase to the recent wave of
    financial institutions and other businesses setting up new global offices or
    expanding operations here. These have created higher demand and with new
    supply remaining insignificant till 2010, further rises in occupancy rates
    and cost can be expected, DTZ added in its report. 'With the very limited new supply until 2010,
    occupiers are finding it very difficult to secure office space, especially
    Grade A space in the CBD,' said Ms Tan. As a result, those not in the
    finance, insurance, real estate or business service sectors are increasingly
    exploring alternative locations outside the CBD, she added. The shortage of office space is reflected in much
    of the Asia-Pacific market as well. Strong demand continued to be seen from
    the banking, financial services, insurance and IT/IT-enabled services
    sectors, the report said. It added that some companies faced with the
    prospect of higher costs are considering relocating to secondary buildings
    in good locations or on the fringe of central areas with good access to
    major transport routes. The report also suggested that rising occupancy
    cost is a global phenomenon with 102 locations - or about three quarters of
    the markets surveyed - posting rises. Prime office locations in the US in
    particular accounted for the greatest number of cost increases, including
    those which in the previous year had stayed flat like Denver. At the opposite end of the spectrum, the least
    expensive locations were also found mostly in Asia, with Surabaya and Manila
    at the bottom of the global list.   - by Vincent
    Wee   SINGAPORE
    BUSINESS TIMES    3 January 2007 Pick-up in demand and little new supply
    The local local office property
    market has turned the corner and the outlook for the rest of year - be it
    rent, demand or investment - is positive. That's the buoyant sentiment
    expressed by property analysts who spoke to  Business
    Times 
     yesterday.
 
      
      
    'In late 2004, we already began to notice a
    turnaround, both in terms of the pick-up as well as rental rates. So I think
    that's likely to carry forward,' said Tay Kah Poh, Knight Frank's executive
    director of consultancy & research. 'The office property segment is looking good.
    We're clearly seeing demand picking up. More importantly, in terms of
    supply, especially in the CBD, there's no new supply coming into the
    market,' said Leslie Chua, head of real estate intelligence services Asia at
    Jones Lang Lasalle. Analysts say the pick-up will be led by prime
    office space in the Raffles Place area. Mr Chua expects Prime Grade A office rents to go
    up between 5 and 10 per cent this year. That means tenants should be
    prepared to pay above the current rates of $4.80 per square foot a month to
    put a prime Raffles Place address on their stationery. CBRE Richard Ellis said prime office rents are
    likely to grow 10-12 per cent from the current $4.40 psf. Knight Frank's Mr
    Tay is equally optimistic. He believes prime office rents could increase an
    average of 10 per cent or even more. Rental rates for Prime Grades B and C office
    buildings will also rise, albeit at a slower rate of up to about 5 per cent,
    said Mr Tay. One reason driving rents up is the improved
    business sentiment. 'The office market behaves in a very rational
    way,' explained Mr Tay. 'When companies expand, it is because there's
    business opportunities. And as a result of that, they will demand more
    office space.' He said it also helps that interest in South-east
    Asia as a whole has picked up lately. This ties in with the Economic
    Development Board's aggressive efforts to promote Singapore and get
    companies in the services and financial sectors to relocate here, boosting
    office property demand. Echoing that point of view, CBRE's executive
    director Moray Armstrong said: 'Take-up is most likely to be led by
    expansions of existing tenants, as the business outlook remains favourable.' Jones Lang's Mr Chua noted that with the changing
    demands of financial institutions, relocations and renewals will become
    increasingly common and contribute to much activity in the leasing market.
    'Financial institutions, for example, are looking for larger floorplates,'
    said Mr Chua. Supporting that view is DTZ Research. In its
    latest quarterly report on the local property market, it said that the boost
    in demand for office space will come 'predominantly from the financial
    services sector'. But more importantly, analysts say the limited new
    supply of prime office space in the next two years will push up rents in
    desirable areas. Only three major projects are scheduled to be completed in
    the next two years - 1 George Street, 3 Church Street and One Raffles Quay. CBRE said the new supply of office space in the
    next four years will also be limited to 2.67 million square feet, working
    out to be about 0.67 million square feet of new supply each year. This, CBRE
    said, 'should help to underpin the overall recovery of the office market'. Given the improved investment market sentiment in
    the local office property market, CBRE's Mr Armstrong expects a continuation
    of that trajectory. 'The low interest rate environment and the
    continued healthy office demand would lead to more opportunistic buying of
    quality office properties with yield-accretive potential,' Mr Armstrong
    predicted. Major transactions last year included 78 Shenton
    Way for $151 million or $506 per square foot, Sinsov Building at $34 million
    or $641 per square foot, and The Globe at $19 million or $487 per square
    foot. 'We're seeing renewed interest in the commercial
    market. Singapore is after all still a piece of safe haven, and so in
    balancing their portfolios, people will seriously consider and Singapore
    would be among one of their picks,' said Jones Lang's Mr Chua. 'In terms of
    pricing of assets, I think we are much lower than what Hong Kong is. And in
    term of yields, it's comparable.' Knight Frank's Mr Tay also sees the investment
    market expanding. 'There should be further interest from funds,
    institutional investors and people who think that the market has bottomed
    and rents will head upwards further and therefore it's a good time to go and
    buy.' - 
    by Alexandra Ho     SINGAPORE
    BUSINESS TIEMS    27  Jan 05 Singapore Office Market:  Flight to Quality
    
    
    
   Prime office rents expected to rise further
    
    
    Prime office rentals look set to rise further after
    posting their second consecutive quarter of gains, says CB Richard Ellis.
 
    The firm cited Singapore's economic recovery and a strong take-up as
    tenants move from lower-quality buildings to prime buildings for its
    optimism. Rival firm Jones Lang LaSalle also noted this 'flight-to-quality' trend
    among office tenants, which has resulted in better-quality buildings leading
    the rental upturn. However, it said a full recovery in office rents on the
    island may not materialise in the near term given that there are still over
    7 million sq ft of empty offices. JLL did, nonetheless, predict a 'full recovery' in the next 15 months as
    the space gets absorbed gradually, as demand for offices is boosted,
    assuming the economy continues to recover. Figures released yesterday by both JLL and CBRE painted the same trend -
    the second straight quarter of rental gains for Singapore's office market,
    which has been reeling from a glut in the past few years. CBRE said the average prime office rent has risen 3.7 per cent in Q3 over
    Q2, bringing the gain over the past year to 5 per cent. The average monthly
    rent currently is $4.20 per square foot, up from $4.05 psf in Q2. The figure
    had stagnated at $4 psf in the few quarters prior to that.  
 JLL said that for small office units of 2,000 to 5,000 sq ft, the average
    gross effective rent in the Central Business District inched up 1.4 per cent
    in Q3 to $3.60 psf a month. For large office areas of 10,000 to 20,000 sq
    ft, the average rental in the Raffles Place and adjacent sub-market posted a
    2.7 per cent quarter-on-quarter improvement in Q3. CBRE's figures showed that with the flight to quality, the average
    occupancy rate for Grade A office space in the Raffles Place and Marina
    Centre locations is currently around 93 per cent, up from 92 per cent three
    months ago and 88 per cent at the start of the year. However, the islandwide occupancy remained relatively flat at around 83
    per cent. CBRE said that the upward pressure on prime rents will remain in Q4, on
    the back of strong take-up for prime office space and lower vacancy. Rental growth in 2005 is expected to be sustainable assuming the economy
    continues to grow. 'We anticipate a strong performance of Grade A space and, as the
    availability of such space tightens up, there will be a gradual improvement
    of occupancy in the wider office market. Without doubt, the recovery in the
    office market is underway,' said CBRE executive director Moray Armstrong. He reiterated his prediction, made a couple of months ago, that prime
    Grade A office rentals will increase up to 50 per cent - over the next two
    to three years. -  by Kalpana Rashiwala   
    SINGAPORE
    BUSINESS TIMES     29 Sept 2004 Prime Grade A office rent could rise
    by up to 50% 
    
    2-tier
    market: office buildings in prime areas are enjoying strong demand and
    benefiting from a flight of tenants from non-prime areas
 
    
    Richard Ellis is predicting a recovery of
    up to 50 per cent in office rentals over the next two to three years for
    prime Grade A buildings in Singapore, assuming the economy continues to
    improve and there are no external shocks. But in making the forecast, the firm's executive
    director Moray Armstrong stressed that 'this projection on rental
    performance is highly selective and is relevant only for better-quality
    grade A buildings'. 'The overall office market, while improving, will
    still remain weak because of the oversupply and high island-wide vacancy
    rate of about 18 per cent,' he said yesterday. 'For the overall market to
    perform strongly will take time and a substantial reduction in overall
    vacancies for significant rental growth that can be enjoyed across the whole
    market.' Mr Armstrong also stressed that while he is
    predicting a hike of up to 50 per cent over a two to three-year period, this
    will be from a current low base of about $4 per square foot in average
    monthly rent. 'In absolute terms, an increase from $4 psf to $6 psf isn't
    that sensational.' Mr Armstrong reiterated that a two-tier office
    market is developing in Singapore, with Grade A buildings in prime locations
    like Raffles Place enjoying strong demand and benefiting from a flight of
    tenants from less choice blocks in non-prime areas. 'The non-prime office
    segment is likely to see lower demand and the current low occupancy rates
    will persist. Rents for such space can be expected to remain fairly flat,'
    CBRE said yesterday. On the other hand, it said: 'Prime office rents
    will almost certainly see upward pressure developing by the end of the year.
    An average of 5 to 10 per cent increase for the whole of this year could be
    sustainable.' The property consultancy cited a continued
    improvement in demand for office space in the second half of the year on the
    back of strong economic growth. The highly anticipated Business and
    Financial Centre (BFC) site, which is now available for application by
    developers, is 'not expected to have any significant dampening impact on the
    market in the next two to three years as the completion of the first phase,
    at the earliest, will be in late 2008 or early 2009, assuming the successful
    sale of the site in second half of this year', CBRE said in its Q2 Singapore
    Market Review released recently. At end-Q2 the average prime office rental rate was
    $4.05 psf a month, up 1.25 per cent from the preceding quarter and marking a
    turnaround after 13 quarters, the firm noted. (CBRE's definition of prime
    office locations includes Raffles Place, the New Downtown and Marina
    Centre.) In line with this rise, Singapore rose a notch in
    CBRE's latest global ranking of office occupation costs in 158 locations.
    The Republic was the 60th most expensive office place in June this year in
    which to rent office space, compared with its 61st position six months
    earlier. CBRE's latest ranking of office occupation costs
    measured in US-dollar terms, released yesterday, shows that globally the
    trend in prime office occupation costs remains down. Two-thirds or 105 of
    the 158 locations surveyed saw a decline. But 43 markets experienced an
    increase, with the biggest rise of 19 per cent registered in London's West
    End. This increase maintains the West End's position as the world's most
    expensive office location at US$177.39 per square foot per annum - with a
    much increased margin. 'Not only has there been a slight increase in the
    value of sterling against the dollar, but the West End has experienced a
    sharp rise in prime office rents over the last six months. There is now a 48
    per cent difference between the total occupation cost in the West End and
    the second most expensive location, which is London's 'City' area at
    US$119.49 per square foot per annum,' CBRE noted. -  SINGAPORE
    BUSINESS TIMES     23
    July 2004  
 The drop in office rents continued to become
    smaller in Q4, leading Jones Lang LaSalle to forecast that they will
    stabilise further or even begin to firm next year. But with an oversupply of about eight million sq
    ft of offices, the property consultancy does not expect any sudden upward
    movement in rents over the next six to nine months. As well, JLL noted that in spite of expectations
    of an economic recovery next year in Singapore, this would translate into
    better office demand only in the second half of 2004 given that demand for
    offices lags GDP movements by six to nine months. 'Occupancy rates have to improve closer to 88 to
    89 per cent - from current levels of around 85 per cent - before there is
    any likely upside pressure on rents,' noted JLL's head of research
    (Singapore) Teresa Khoo. Rival agency Cushman & Wakefield's Singapore
    managing director Donald Han says that office rents on the island could well
    stabilise next year, but only in the second half. He estimates Prime Grade A
    rents in the city area may ease by 5 per cent at most over the next six
    months, after sliding about 12 per cent this year. 'The balance of power
    will still be with tenants, at least for the first half of 2004,' he added. Although JLL expects stable rentals next year,
    rates in some better quality and newer buildings in choice locations may see
    some potential upside next year, at the expense of older buildings that have
    not been upgraded as tenants make a 'flight to quality', said Ms Khoo. JLL estimates that new office supply for next year
    will be about 1.15 million sq ft, followed by 1.47 million sq ft in 2005. In
    contrast, the figure for this year will be only about 382,500 sq ft - a
    historic low for the past 10 years as the market continued to reel from the
    existing glut. Demand continued to be weak over the past 12
    months, with a negative net take-up of about 275,000 sq ft. For Q4, the rate of rental decline, which had
    started to slow down in Q3, moderated further. Islandwide, the average gross monthly rental for
    spaces of 2,000 to 5,000 sq ft posted a 1.5 per cent quarter-on-quarter
    decline in Q4 to $3.30 per square foot, compared with the previous quarter's
    5.6 per cent slide. 'This is the second consecutive quarter that the rate of
    rental decline has slowed down and is also the smallest quarter-on-quarter
    decline registered since rentals started heading south in Q2 2001,' said JLL. The drop over the past 12 months has been about
    18.5 per cent. Within the CBD Core area, which includes Raffles
    Place, Cecil Street, Robinson Road, Shenton Way and Anson Road, the average
    monthly rental fell by 1.4 per cent from $3.60 psf in Q3 to $3.55 in Q4. Giving a finer breakdown, JLL said that the Prime
    Grade A average rent in the CBD Core dipped 1.1 per cent from $4.60 in Q3 to
    $4.55 in Q4. The drop over the past year has been 16.5 per cent, while the
    decline from the recent market peak of $7.90 in Q1 2001 has been more than
    40 per cent. As for larger office spaces ranging from 10,000 to
    20,000 sq ft in the Marina Centre area (excluding strata space) and Orchard
    Road belt, average Q4 rents were unchanged from a quarter earlier at $4.25
    psf and $3.85 psf respectively, according to JLL. However, rents continued
    to ease for similar space in Raffles Place and the surrounding vicinity to
    $3.70 psf, down 2.6 per cent from Q3. During October to December, lease renewal and
    allocation deals continued to dominate market activity. Similar to the
    previous quarter, some corporates took advantage of attractive rental rates
    to lock in better-value-for-money deals. The key financial/banking sector
    appeared to be on the mend, with investment banks like Deutsche Bank and
    Credit Suisse First Boston reportedly looking to hire selectively again, JLL
    noted. Most property consultants expect demand to improve
    next year depending on how the economic recovery pans out. Also expected to
    boost demand for office space will be the US-Singapore Free Trade Agreement,
    which kicks in from Jan 1 and which could lead to more demand from US firms
    in the professional and service-related industries, suggested JLL's Ms Khoo.
    'However, these are unlikely to be big-space users,' she acknowledged.    
    - by Kalpana Rashiwala&nnbsp;    Singapore
    Business Times    24 Dec 2003 Long time ago in Singapore, owning an office building
    was a symbol of success and a reliable source of income. Today it's a major
    headache.
 The woes of office landlords are well known. But
    just how bad the situation has become was made clear last Friday when the
    Urban Redevelopment Authority released its latest quarterly update on the
    property market. Office sector occupancy suffered a net shrinkage
    of half a million sq ft in the first quarter. Add the previous quarter, and
    some 800,000 sq ft of space have been vacated by businesses that either
    shrank, relocated or folded. Singapore is trying to shift away from its
    reliance on manufacturing to become a 'knowledge economy'. While a drop in
    demand for factories and perhaps warehouses is expected, there should be an
    uptick in demand for offices. Knowledge workers, after all, work in offices.
    But this doesn't yet show through in the URA figures. For perspective, however, Singapore has a total of
    68.5 million sq ft of office space. The loss of half a million sq ft
    represents a mere 0.7 per cent of stock. By itself, that's nothing to lose
    sleep over (though the owners of these half a million sq ft would disagree).
    But unless the trend of shrinking demand for offices is reversed, it will be
    a major worry for landlords. Already, some 13.6 per cent of all offices are
    unoccupied. And that's 9.3 million sq ft of vacant space - generating no
    income. Assuming average rentals of $4 per sq ft per month, it's an annual
    $446 million lost to office owners. Even those with tenants are not faring that well.
    The URA rental index shows office rents fell 5.3 per cent in the first
    quarter, after a 7.5 per cent fall in the final quarter of last year. The
    office rent index stood at 93.6 at the end of March, down from 100 in Q4
    1998. Put ano ther way, a landlord collecting $4 psf a
    month from his office space in December 1998 will now, on average, be taking
    $3.74, according to the URA figures. But the actual collection could be less than $3,
    as landlords have resorted to the old trick of maintaining high rental rates
    on the surface while giving ever-larger discounts on the side. Taken together, discounts, rate cuts and plain
    vacancy are costing landlords probably more than $1 billion a year in
    income. Of course, the other side of the coin is that
    businesses that rent their office space have seen significant cost
    reductions - which is no bad thing. Many of them will argue that it's high
    time rents came down. For landlords, however, the situation isn't going
    to improve soon. The global economy may be recovering, but Singapore,
    unfortunately, is at the wrong end of Asia. North Asia is booming and office
    rents are soaring in Shanghai and Beijing, but it's the opposite story in
    South-east Asia. Furthermore, a significant segment of Singapore
    companies service regional clients and their fortunes are tied to this
    region. Until South-east Asia pulls itself out of the doldrums, it's hard to
    see a quick turnaround for these companies and, by extension, demand for
    office space. Is the worse yet to come for Singapore landlords?
    Their Hongkong counterparts are lamenting the prospect of 24-hour free
    travel between Hongkong and the cheaper Shenzhen, which they fear may
    encourage an exodus of businesses across the border and leave gaping holes
    in HK's Central and other business areas. Singapore office owners must be praying they don't
    suffer such a fate.    -  By Lee Han Shih  
    Singapore
    Business Times    December 2002 11m sq ft of office space lying idle
    
    16% vacancy rate sees Raffles Place rents ease 23% this year to
    $5 psf - below Q1 2000 low
 
    
    Mega office leasing dealA total of about 11 million sq ft of office space
    - representing 16 per cent of the total stock in Singapore - is currently
    vacant, latest figures from CB Richard Ellis show. The vacant space is enough to fill 12 Republic
    Plazas and is a jump of 47 per cent from the figure a year ago, when the
    vacancy rate was about 11 per cent. This amount of empty offices has been brought
    about by a huge supply of newly completed office developments and negative
    net new demand - a phenomenon seen for the first time in over 20 years. CBRE estimates net demand contracted by about one
    million sq ft this year due to companies downsizing or exiting the market
    altogether. It also caused office rents to slide this year. Going by Colliers International's figures, the
    average monthly rental for premium grade Raffles Place offices slid 23 per
    cent this year to $5 psf a month, which is even below the $5.68 psf plumbed
    during the previous trough in Q1 2000. Current rents are also only about half the $10.26
    psf at the office market peak in Q2/Q3 1996. Property consultants say things will get worse
    before they get better. One positive factor is that new office completions
    will ease significantly next year - estimates range from Jones Lang
    LaSalle's 590,000 sq ft to Colliers' 1.2 million sq ft, against about 3.7
    million sq ft this year (the highest in five years). However, as JLL said in a report issued yesterday:
    'Demand for office space is unlikely to improve over the next three to six
    months in view of the uncertain regional and domestic economic environment.' CBRE executive director Chris Fossick said the
    downward pressure on rents is likely to persist in the short-term given the
    high vacancy but forecast that rents should bottom out in the second half of
    next year on expectations of improved economic conditions. 'We expect greater leasing activity in the office
    market in 2003, driven in part by highly competitive rents. However, more
    market activity will not necessarily translate to an early rebound of office
    rents, as new demand is likely to remain subdued in the early part of 2003
    and the supply overhang will take time to shrink,' he added. 'Office rents can only improve when demand
    increases, occupancy rates start to go up and there are more tangible signs
    of economic growth in 2003,' he cautioned. Colliers International director (commercial)
    Calvin Yeo said he expects vacancy rates to rise further next year. 'It will
    take time for the excess supply to be soaked due to the time-lag between
    recovery in businesses and their expanding their office-space requirements.
    Things still hinge largely on the economy and world events,' he said. Colliers data shows that vacancy rates in the
    prime Raffles Place area are currently at an all-time high of 22 per cent. Some two million sq ft out of a total stock of 9.6
    million sq ft is empty and this includes 262,800 sq ft of 'shadow space' -
    which refers to space currently leased by tenants but which they don't use
    because of shrinking operations and which they are willing to sublet, very
    often at lower rents than what they themselves are paying. Property consultants declined to name buildings in
    the Raffles Place area which are substantially empty but, within property
    and financial circles, it is widely known that these include The Exchange
    (due to the Singapore Exchange's move to SGX Centre in Shenton Way), 63
    Market Street (the former KeppelTatLee building) and the recently completed
    Marsh & Mclennan Centre in China Square. OUB Centre is soon expected to
    join their ranks when Exxon Mobil moves to the HarbourFront office park. In all, Colliers estimates that there is about
    875,000 sq ft of shadow space in Singapore, up from 380,000 sq ft a year
    ago. The phenomenon of vacant office buildings is not
    limited to buildings owned by the private sector. Media reports this week
    said The Estimates Committee had highlighted a list of 19 buildings owned by
    the government with a total of 1.9 million sq ft of vacant office space.
    These include the former Housing & Development Board HQ in Bukit Merah
    and JTC Corp's HQ. Property consultants said the overall high vacancy
    rates on the island are the result of the high supply of 3.78 million sq ft
    of new offices completed this year and dwindling demand. Besides shrinking businesses, an important
    dampener on office demand this year was the decision by big companies like
    IBM and Sony to relocate out of the CBD to business parks in Changi and
    Jurong respectively. Looking ahead, analysts observed that while the
    government's recent decision to defer the sale of the New Downtown site for
    the mega Business & Financial Centre to the second half of next year
    sounds like good news, the size of the project (4.3 million sq ft gross
    floor area) may still prove a drag on the market's recovery as larger
    occupiers hold off decisions on office premises strategy in expectation of
    this project coming on stream. Figures from Colliers show that the average gross
    rental rate for premium grade space in Raffles Place for Q4 fell 9.7 per
    cent over the previous quarter to $5 psf a month. For the whole of this
    year, the decline has been 22.7 per cent. The average rent in Shenton Way/Robinson Road is
    currently at $3.96 psf a month, down 2.5 per cent over Q3. Marina Centre
    area's average rent is currently $5.20, a 4.6 per cent decline from Q3.  
    - By Kalpana Rashiwala  SINGAPORE
    BUISNESS TIMES  20 Dec 2002 Raffles Place rentals fall 5%
    in Q3 Prime  Grade A average office rental values
    in the traditional Raffles Place financial hub continue to head south,
    falling 5 per cent quarter-on-quarter in Q3 to $5.70 psf a month, plumbing
    near decade lows. Latest figures from property consultancy Jones
    Lang LaSalle showed that the average monthly rental value in the area has
    fallen by a total of 30 per cent over six consecutive quarters since the
    recent market peak of $8.15 psf reached in the first quarter of last year.
    JLL does not see a recovery in the office market in the next three to six
    months. The bleak outlook for the office market
    underscores concerns among many landlords about the government's plans,
    announced last month, to release next year a site for tender in the New
    Downtown for a mega financial hub that can yield 4.3 million sq ft gross
    floor area. This is equal to four Republic Plazas. Although the development will be built in phases,
    the project worries existing office heavyweights who fear a drain of tenants
    from CBD buildings to the new development, lured by cheaper rents and other
    attractions. Pre-lease commitments for the development are
    being sought by Temasek Holdings unit Mapletree Investments, which is
    helping the government market the site to potential developers. 'The project has prompted some major office
    landlords to review their business strategies for buildings located in the
    Raffles Place, Shenton Way, and Marina Centre areas,' said JLL. Its head of research (South Asia), Cynthia Wong,
    said these landlords would be looking at ways to retain key tenants by
    restructuring leases with lower rentals and longer terms. 'Another strategy some office landlords might
    consider is to shed some of their current exposure in the existing CBD to
    free up some resources to participate in some of the action in the new
    Downtown,' she added. In its Q3 office report, JLL said the average
    prime Grade A office rental rate in Raffles Place is now the second lowest
    in the past decade, slightly above the $5.60 psf a month seen in the second
    half of 1993. JLL also noted the trend by MNCs like IBM, Sony
    and ExxonMobil to relocate out of the CBD. It identified insurance
    companies, back-office operations of financial institutions, trading firms
    and manufacturing companies as possible office occupants that may not need a
    full CBD presence. 'However, some of these companies may still choose
    to have part of their operations in the CBD for strategic business reasons,
    for instance, a rep or sales office in order to be centrally located close
    to their customer base,' added JLL.   -  By
    Kalpana Rashiwala     Singapore
    Business Times    25 Sept 2002 Unusable column measure ExxonMobil
    is poised to take up 160,000 sq ft of space at the office park next to WTC.
 
      
    
    Oil giant ExxonMobil is inking a
    lease for about 160,000 sq ft at one of the twin towers at the HarbourFront
    office park being developed next to the World Trade Centre. The deal, when sealed, will be the
    biggest office leasing contract this year. Sources told BT the gross monthly
    rental rate is slightly over $5 per square foot. The deal, however, probably
    includes a few months' rent-free period on top of the normal fitting-out
    period. As a result, the effective gross rent is likely to be below $5 psf. ExxonMobil is expected to have
    naming rights for the 18-storey building as it will occupy about half of the
    tower (the lower half), which is the closer of the twin blocks to the WTC
    building. It is part of an office park
    project being developed by The HarbourFront Pte Ltd (an 80:20 tie-up between
    Temasek Holdings and PSA Corporation) and Keppel Group. HarbourFront holds a
    61 per cent stake in the project, with Keppel holding the other 39 per cent.
    Keppel's headquarters will be located in the second 18-storey tower and it
    will eventually raise its stake in the company owning this particular block
    to 70 per cent. Besides building the two new twin
    towers, the project includes retrofitting the existing Cable Car Towers. The
    twin towers are slated to be completed in Q3 next year and the refurbishment
    of the Cable Car Towers in Q1 2003.  The location is outside the
    Central Business District but close to the planned Harbour Front MRT
    Station. ExxonMobil, formed from the merger
    and Exxon and Mobil in November 1999, is currently working on an 'office
    consolidation project' in Singapore, said a spokeswoman for the group. 'But
    we do not have additional details we can release at the moment.' The group's current office
    premises are located at OUB Centre (the former Exxon office), Winsland House
    and United Square (the last two are the former Mobil's offices). Besides the office park, Harbour
    Front Pte Ltd and Keppel Group are also partners in a condominium
    development next to King's Dock, adjacent to Keppel's sprawling residential
    project which includes Caribbean at Keppel Bay. The Urban Redevelopment
    Authority gave approval for a 204-unit condominium on the site in September
    this year. Analysts said the ExxonMobil
    leasing deal would be positive news for the sluggish office market. Another
    major deal this year was British insurance giant CGU's lease for 80,000 sq
    ft of offices spanning eight floors of Unity Tower 2 in Shenton Way. 
    -
    Kalpana Rashiwala,  Singapore
    Business Times  2001 
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