1 Finlayson Green: price in region of $2,650 psf, or $2,470 psf based on one tenant per floor

And over in the prime Raffles Place office belt, Hong Leong Group has sold 1 Finlayson Green for just under $231 million, or around $2,650 psf based on the freehold office building's existing net lettable area of about 86,500 square feet.

If the buyer, a unit of UK-based property fund group Develica, leases out the 19-storey building on the basis of one tenant per floor, the lettable area can be raised to about 93,500 sq ft, translating to a unit price of $2,470 psf.

Whichever per square foot price is used for 1 Finlayson Green, as well as the price achieved for the floor at Central, they have all surpassed the previous record of $2,200 psf for office space set in early 1996.

That was 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.

Industry observers expect even higher benchmarks to be achieved soon.

News of these fresh benchmarks will also lead to further upward revisions in sellers' asking prices for other office transactions under negotiations, market watchers reckon.

There could also be further upward revaluations of major Singapore office landlords like CapitaCommercial Trust, Keppel Land, City Developments, Singapore Land and Suntec Reit.

Market watchers are nevertheless unsurprised by the fresh record prices achieved, as they come at a time of strong rent escalation fuelled by a shortage of office space.

CB Richard Ellis data show that the average prime Grade A office rental value of $10.60 psf per month in the first quarter of the year is up 76.7 per cent from the same period last year and more than double the $4.48 psf at the bottom of the current cycle plumbed in the third quarter of 2003.

A DTZ Asia-Pacific office update issued yesterday showed that a 29.6 per cent increase in Grade A office occupancy costs in Singapore between the fourth quarter last year and the first quarter this year was the second highest rate of escalation in 19 markets surveyed. Only New Delhi posted a bigger gain - 36.33 per cent.

The latest annual occupancy cost of US$86.21 psf for Singapore was the fourth highest of the 19 markets. Only Hong Kong (US$167.56 psf), Tokyo (US$119.70 psf) and New Delhi (US$87.29 psf) surpassed Singapore.

The acquisition of 1 Finlayson Green will be the seed investment for Develica's Asia-Pacific fund.

'We view Singapore as a strong growth market and we are getting a lot of interest from (investors in) Europe, US and the Middle East,' Develica Asia-Pacific chief executive officer Chris Brown said when contacted by BT yesterday.

Mr Brown, who was formerly Jones Lang LaSalle's Asia-Pacific chairman, said that while 1 Finlayson Green's current rental income would translate to a 3.5 per cent net yield based on Develica's acquisition price, 'the reality is we have leases expiring this year and next year and it won't take too long to raise the yield to 5-plus per cent'.

Mr Brown said that four floors in the building had been deliberately left vacant by the vendors to offer the new investor the chance of yield appreciation.

One floor at 1 Finlayson Green was leased in February this year at a monthly rental of $10.50 psf, considerably higher than the average $6.50 psf contracted rent in the building. Market talk is that a unit at Republic Plaza nearby was recently leased at around $15 psf.

DTZ Debenham Tie Leung brokered the 1 Finlayson Green deal.

As for Central in the Clarke Quay area, the record $2,850 psf achieved for an office floor was for a high floor - believed to be above the 20th level of the development's 25-storey office tower.

The floor has a strata area of around 13,300 sq ft. Far East is now understood to be left with about eight more floors of offices to sell at Central with sizes of around 9,000 sq ft to 13,000 sq ft, mostly on the top floors.

Far East began selling offices at Central last year at prices starting from $1,300 psf.

Besides offices, Central also includes a mall, which has opened, and another block with small office, home office (Soho) units. The office and Soho towers are slated for completion by early next year.   - by Kalpana Rashiwala   SINGAPORE BUSINESS TIMES  2007 June 8

First major Raffles Place office sale this year at 10-yr low 
Teos buy floor at John Hancock Tower for $790 psf

The family of late hotelier Teo Lay Swee bought an office floor at the 25-storey John Hancock Tower recently for only $790 per square foot - probably the lowest in a decade for an entire floor of freehold office space in the Raffles Place area, say property consultants

The seller of the 14th floor is understood to be a unit of listed Tuan Sing, which bought it along with a several other floors in early 1996 - during the peak of the property market - for about $104.6 million or $1,895 psf.

The floor is about 10,129 sq ft, and is leased except for one unit of about 2,700 sq ft.

At the price of about $8 million, its current net yield works out to about 4.7 per cent factoring in the vacant unit, BT understands. If the Teos manage to lease the empty office space at, say, $3.50 psf a month, the net yield should rise to about 5.8 per cent.  

Analysts, however, note the risk of this yield falling when leases expire and are renewed at lower rentals.

Prices in the building seem to have fallen about 34 per cent over the past two years. In July 2001, Tuan Sing sold the building's 13th floor to 2G Capital for $12.4 million or $1,223 psf.

In June 2001, a property fund managed by GRA Singapore - now known as Pricoa Real Estate Investors (Asia) Pte Ltd (PREI Asia) - bought the 23rd, 24th and 25th floors from Tuan Sing for nearly $1,200 psf. And last year, India International Insurance group bagged the 21st and 22nd floors for about $930 psf.

Property consultants told Singapore Business Times that the price drop at John Hancock Tower, next to Hong Leong Building, is in tandem with the fall in office capital values in Singapore estimated by valuers amid a glut and weak demand which have seen office rents sliding.

More importantly, the Teos' $790 psf acquisition exemplifies this drop, being the first sizeable freehold office transaction in the Raffles Place area this year.

Jones Lang LaSalle data show that average gross monthly rents of CBD Core prime Grade B buildings (the firm classifies John Hancock Tower in this category) have slipped 46 per cent from $6.90 psf during the most recent peak in Q1 2001 to $3.75 psf in Q3 this year. Capital values have fallen 42 per cent from $1,185 psf in Q4 2000 to $690 psf in Q3 2003.Mr Teo's family bought the floor in John Hancock Tower through Queens Hotel International, a unit of their Cockpit International group. The Teos are also said to be on the lookout for more investment opportunities for prime freehold commercial and residential properties in Singapore. Outside Singapore, Cockpit International group owns seven hotels - five in Australia and two in the United Kingdom - totalling about 1,800 rooms. Most were bought after the group sold Cockpit Hotel in Singapore in 1996 for $380 million to a Wing Tai-led consortium. The hotel has been pulled down and taking its place will be the 265-apartment Vision Crest.

Analysts say that although the office market outlook remains soft and there may be further downside in capital values, Cockpit's buy at John Hancock Tower should be a good long-term investment.

As well, it is just across the New Downtown, which should help cushion further declines in values in John Hancock Tower.  - by  Kalpana Rashiwala     Singapore Business Times     2 Oct 2003

Both locations have been traditional favourites among strata office investors.

However, it was Suntec City that fetched the highest per square foot average price of $1,595 psf between September last year and August this year, a recent analysis by SISV Services shows.

The range of psf prices for five deals at Suntec captured by REALink 21 ranged from $1,300 psf for a 4,833 sq ft spot on the 35th floor transacted in April this year to $1,874 psf for a 3,488 sq ft space on the 31st level sold in March.

Property consultants were not surprised that Suntec City had emerged as the area with the highest office prices given the strong positioning of the property by developer Suntec City Development - which still owns a significant chunk of the office space - as Asia's Vertical Silicon Valley.

Colliers International director (commercial) Calvin Yeo said most strata office buyers these days are owner occupiers rather than investors looking at rental income. 'While it may be a good time to buy now, potential investors may not be able to find tenants because of the glut of office space,' he added. The development, in the Marina Centre location, has 86 years left of its 99-year lease.

The number of caveats for strata office deals in Singapore has fallen from 351 in 1996 to 117 last year, and to 101 during the first eight months of this year.

The average price has also halved from $1,322.50 psf in 1996 to $632.20 psf in the first eight months, according to REALink 21's data.

The most popular building for strata office deals in the one year to August was International Plaza, with 18 transactions averaging $633 psf. The range of prices at the building, with 67 years left of its lease, varied from $458 psf for a 2,357 sq ft unit on the 10th floor to $750 psf for a 2,336 sq ft spot on the 25th floor.

In the High Street location near City Hall MRT Station, Peninsula Plaza, High Street Plaza, and High Street Centre accounted for a combined 16 deals during the one-year period. The first two are 999-year leasehold properties while the third has 66 years left of its lease.

The average psf prices transacted at the three buildings (Peninsula Plaza, High Street Plaza and High Street Centre) were $815, $752 and $441 respectively.

A recent entrant to the strata market in the location is The Adelphi whose owner, The Eureka Office Fund, began selling 999-year leasehold strata office and shop units last year.

The fund is owned by Singapore property giant CapitaLand and German insurance giant Ergo. Based on caveats captured by REALink 21, the average price for three office deals was $1,072 psf.

In all, about 129 strata office deals were struck on the island during the 12 months to August. Nearly half were in the city area.

Outside the city, Parkway Parade in Katong was a popular location, with six office deals done at an average price of $532 psf.     - By Kalpana Rashiwala             Singapore Business Times           18 November 2002