Price Fall For S'pore Prime Homes 5th Largest Globally

Source : The Straits Times, March 24, 2009

Hong Kong sees biggest fall, then UK Home Counties and London

PRIME home prices in Singapore plunged nearly 15 per cent last year, registering the fifth largest fall in the world, according to the Knight Frank Prime International Residential Index (Piri).

Although a number of locations did see values rise last year - Bangkok had the highest growth of 22.5 per cent - growth had either stalled or fallen in three-quarters of locations, said Knight Frank. -- PHOTO: ASSOCIATED PRESS.

Hong Kong saw the largest decrease in 2008 of 24.5 per cent and was followed by UK Home Counties (-19.4 per cent), London (-16.9 per cent), and Marbella in Spain (-15 per cent).

Overall, Piri painted a gloomy picture for prime home prices around the world.

Although a number of locations did see values rise last year - Bangkok, for instance, had the highest growth of 22.5 per cent - growth had either stalled or fallen in three-quarters of locations, said Knight Frank's head of residential research, Mr Liam Bailey.

'It is now clear that not even the most desirable property around the world will remain immune to the global financial downturn,' he said.

'The fact that some locations did manage to show positive growth - even as much of the world slipped into recession - is more of a reflection that different regions are in different stages of the economic cycle, rather than any inherent ability to ride out the storm unscathed.'

Even markets that have seen spectacular growth have turned south very quickly - prices in Dubai rose by 10.8 per cent overall last year but fell 19 per cent during the fourth quarter as investors pulled out of an over-supplied market.

In prime Asian locations, performance has weakened noticeably in recent months and there is talk of steep price falls this year as wealth creation falters.

'The latest Piri results show that even the world's richest people have reined back their discretionary spending in light of the credit crunch and global recession,' said Mr Bailey.

With prime properties at US$1,550 (S$2,340) per square foot (psf), Singapore was ranked as the ninth most expensive city location in the world last year. It was down from eighth spot a year ago.

Monaco took the top spot at US$6,550 psf, followed by London at US$3,670 psf, and New York (Manhattan) at US$2,160 psf. Tokyo was in sixth position at US$2,080 psf and Hong Kong came a close seventh at US$2,070 psf.

Prices are falling in these locations, even though they remain the top 10 most expensive places. In Monaco, prime homes prices rose 2.1 per cent in the year but fell 10.7 per cent in the fourth quarter from the third.

On the upside, the Wealth Report's attitudes survey shows that the rich remain committed to property. The desire to own good property in the best markets remains an enormous driver for the prime residential sector.

'We believe the quality of the best prime locations will still continue to attract buyers and will recover the quickest,' said Mr Bailey.

Prime Office Rentals On Fast Slide Down

Source : The Business Times, March 24, 2009

18% drop in Q1 a precursor to further falls in the rest of the year, says CBRE

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.

Ion Orchard Offers Rent Rebates To Tenants

Source : The Business Times, March 24, 2009

The incentive, on top of tax rebate, to be offered from July mall opening till Oct

Tenants at upcoming Orchard Road mall Ion Orchard will get rebates of up to 30 per cent of base rentals - on top of the 40 per cent property tax rebate from the government that developer Orchard Turn Developments will pass on to all tenants - once the mall opens in July.

Getting ready for July: The mall has 80 per cent tenancy commitment and is in advanced negotiations for the remaining space

Citing the mall's opening in an 'unexpected economic climate', Orchard Turn Developments - which is owned by Singapore-listed CapitaLand and Hong Kong's Sun Hung Kai Properties - said that the rebates will be in place until the end of October.

Ion Orchard has to date secured 80 per cent tenancy commitment and is in advanced negotiations for the remaining space, it said in an update yesterday.

The amount of rebate each tenant gets will depend on a number of factors, such as when the tenant opens for business and whether he chooses to take part in certain Ion Orchard programmes.

BT understands that one of the aims of the financial incentive is to get as many tenants as possible to open for business on July 21 (when the mall will officially open) in order to up the 'wow' factor.

'As a committed long-term partner to our tenants we want to encourage them to work with us on our opening plans,' said Soon Su Lin, chief executive of Orchard Turn Developments.

'As such, we are collaborating with them on various strategies and mall-opening incentives to support their store opening programmes, including offering financial incentives of up to 30 per cent of their contracted base rental, and specially designed recruitment and training programmes to facilitate their staffing needs. This will be on top of the 40 per cent property tax rebate from the government that we will pass on to all tenants.'

Structural work on the mall, which has 640,000 square feet of shopping space, has been completed. The mall has also achieved its planned target retail mix of up to 60 per cent of the space leased to flagship stores, new-to-market brands and new concept stores, it said.

Market watchers pointed out that retailers at Ion will miss most of this year's Great Singapore Sale, which will run from May 29 to July 26.

Some said that this could hurt retailers, who will miss out on one of the busiest shopping periods of the year. But on the other hand, opening during 'sale season' is not good for retailers either, a market observer pointed out.

At the other end of Orchard Road, Far East Organization recently told BT that its upcoming mall Orchard Central is about 65 per cent leased.

Ion Orchard and Orchard Central, together with 313@Somerset, are the first three malls to open along Orchard Road in more than a decade.

Malaysian Developer SP Setia Sets Up S'pore Office

Source : The Business Times, March 24, 2009

It aims to expand market share among Singaporeans

MALAYSIAN developer SP Setia has set up an office here to boost sales of its properties in Malaysia to Singaporeans.

'As neighbouring countries with close links, Malaysia and Singapore have always enjoyed a good flow of people and investments,' the company said.

'Our office in Singapore will put us in a better position to facilitate these activities.'

Setia also has a presence in Vietnam and plans to set up offices in Beijing and Dubai.

More than 800 Singaporeans have bought more than RM300 million (S$124.7 million) of Setia's Malaysian properties in the past two years, said chief executive Liew Kee Sin. But Singaporeans account for just 5 per cent of sales.

'We want to expand our market share, which is why we are setting up here,' Mr Liew said yesterday at the official opening of the Singapore office.

Setia hopes its new 5/95 loan package will drive demand for its homes. Under the scheme - which is offered to Singaporeans - buyers can make a 5 per cent downpayment and take a 95 per cent loan, with no interest payable during construction. Other offers include free legal fees and stamp duty.

Setia intends to showcase its 'prime good investment yield' properties here. Singaporeans have typically bought its properties in Johor, but the developer will soon launch here its Setia Sky Residences in Kuala Lumpur.

Japan's Land Prices Post First Decline In Three Years

Source : The Business Times, March 24, 2009

Commercial prices down 4.7% while residential land lost 3.2% last year

(TOKYO) Japanese land prices fell for the first time in three years in 2008, a government survey showed yesterday, highlighting the impact on the real estate market of the deepening global financial crisis.

Severe economic conditions have hurt housing demand, and tighter credit has made it hard for real estate developers to raise money, putting many firms out of business.

Prices of commercial property fell more sharply than for residential property, underlining the impact of the financial crisis.

Commercial land prices fell by an average 4.7 per cent last year while residential land lost 3.2 per cent in value.

'It has been hard for companies to raise money for a while, and the situation is getting even worse,' said Masayuki Kitamoto, director of land price research at the Ministry of Land, Infrastructure, Transport and Tourism.

Failures among real estate firms and operators of real estate investment trusts (Reits) have been on the rise since last year.

The number of bankruptcies in the real estate sector jumped 24 per cent to 575 cases in 2008 from 463 in 2007. The total debt involved rose to 2.08 trillion yen (S$32.8 billion) from 1.33 trillion yen, according to Tokyo Shoko Research.

The toll continues to rise. Real estate investor Pacific Holdings filed for bankruptcy protection earlier this month, in the country's third-biggest failure this year. The government has been trying to help real estate firms by providing loan guarantees via state-backed banks, while the Bank of Japan last month began accepting bonds issued by Reit operators as collateral.

A quarterly survey by the central bank showed in December that banks' lending attitude towards the real estate sector worsened in the final quarter of last year.

Nationwide land prices in Japan fell an average 3.5 per cent in 2008, compared with a 1.7 per cent rise in 2007. Prices had been rising for two years after 15 straight years of decline as the country grappled with the aftermath of the bursting of an asset bubble in the early 1990s.

The land ministry official said the latest survey of 28,227 land lots showed that there were sharper declines in places where prices had previously risen rapidly, highlighting the impact of investment funds rushing into and out of the real estate market.

Commercial land prices in the Tokyo area fell an average 6.1 per cent in 2008, in a sharp contrast to a 12.2 per cent gain in 2007. The nationwide average price fell 4.7 per cent after rising 3.8 per cent the year before.

Residential area prices in the Tokyo area slipped an average 4.4 per cent in 2008, against a 5.5 per cent rise in 2007, while the national average fell 3.2 per cent after edging up 1.3 per cent the year before.

The land ministry official said demand for property fell as business conditions deteriorated rapidly in the manufacturing sector in the second half of last year.

In the Nagoya area, where Toyota Motor Corp and many other car-related manufacturers are based, commercial land prices fell an average 5.9 per cent after rising 8.4 per cent in 2007.

Japan's economy shrank 3.2 per cent in October-December, marking the biggest contraction since the first oil shock in 1974, and many economists expect a similar contraction in the current quarter. -- Reuters

Skyscrapers Fall Victim To Global Slowdown

Source : The Business Times, March 24, 2009

(CHICAGO) There is a gaping hole where one of the world's tallest buildings is supposed to go up. The planned 150-storey Chicago Spire would be 610 metres if it gets built atop its completed foundation, ranking the tower the tallest in the western hemisphere and the sixth-tallest among the world's planned skyscrapers.

Chicago's stalled Spire: Globally, work has been halted on 142 or 11% of 1,324 skyscraper projects, including 29 of 301 US projects

The Spire was supposed to be finished by 2012 and the Irish developer staged a global marketing campaign. Buyers snapped up a third of its 1,194 luxury condominiums priced between US$750,000 and US$40 million. Ty Warner, creator of the Beanie Baby toys, opted for the top-priced penthouse.

But after digging a 23-metre hole and sinking caissons, construction on the twisting Spire - inspired, its famed architect Santiago Calatrava said, by swirling smoke from a Native American campfire - was stalled in January by the credit crisis.

Chicago has long been a showcase for tall towers since the steel-framed skyscraper was invented, its history full of developers whose ambitions sometimes crashed on the rocks of economic slowdowns, said John Norquist, president of non-profit group The Congress for the New Urbanism.

For people living in the hundreds of new condominiums near the planned Spire, the unbuilt site 'starts to look like a blight', Mr Norquist said.

'When everybody's feeling buoyant and they all think they're going to be billionaires overnight, that's when these 'biggest' plans come about. If you get them going before the bust hits, they get built right away. Otherwise you've got to wait and sometimes they don't get built at all.'

Globally, work has been halted on 142, or 11 per cent, of 1,324 skyscraper projects, including 29 of 301 US projects, according to Emporis, a German company that tracks development. Work is stalled on the five tallest buildings on five continents, including the Spire.

Work was stopped on the kilometre-tall Nakheel Tower in Dubai, one of scores of construction projects idled in the former Gulf Arab boom town. A January HSBC report said US$75 billion worth of projects in the United Arab Emirates were suspended or cancelled. Contractors complain of not being paid.

Other tall towers on hold are Moscow's Russia Tower and the Gran Torre Costanera office building in Santiago, Chile.

The US downturn has probably been felt most acutely in the construction industry. Some two million American construction workers are unemployed and the industry's 21.4 per cent jobless rate is the highest of any sector.

'Every month we see massive job loss in the construction industry and every month it gets worse . . . The construction industry is in a near depression,' said Terry O'Sullivan, head of the Laborers' International Union of North America.

The recently passed US economic stimulus bill was expected to funnel US$150 billion into building and repairing infrastructure, which the union said would employ 700,000 workers, for a while. The stimulus funding is viewed as only a downpayment on the US$2.2 trillion engineers say is needed to rebuild the nation's infrastructure.

'If there's no buildings going up, what do you do?' said James Connolly, a Laborers' union manager. 'Prepare yourself because it's going to get worse before it gets better.' Construction workers are accustomed to boom-and-bust cycles but this downturn appears deeper and longer. The impact of lost wages of US$35 to US$40 an hour ripples through the economy.

'People out of work, people lose their homes, people lose their hospitalisation, people lose all their benefits,' said Tom Villanova at the Chicago and Cook County Building Trades, which covers 100,000 construction workers.

Dublin-based Shelbourne Development Group has so far failed to get financing for the US$1 billion Chicago Spire. Now, construction unions are negotiating to invest their pension funds to kickstart the project. The Spire would provide one million paydays for ironworkers, carpenters and others.

But construction loans are hard to come by. Delinquency rates in Chicago on such loans have risen for 10 consecutive quarters to 15 per cent in the fourth quarter of 2008.

Many projects never got off the ground, while other developers have scaled back or suspended work. The residential market has a glut of unsold and foreclosed homes - at least 7,000 in the Chicago area alone, Mr Villanova said.

In downtown Chicago, cancelled contracts on condominiums in the latest quarter outnumbered meagre sales, which were off sharply from nearly 3,800 sales in all of 2007, according to Appraisal Research Counsellors, a real estate firm. Prospective buyers surrendered downpayments of US$10,000 or more, scared off by falling prices and the bleak job market.

Locally, all eyes are on whether Chicago wins the 2016 Olympics, which would be a huge construction project. 'Maybe if every town, every city, in the US had an Olympics, that would be the only thing that would save us,' said sprinkler system installer Jeff Switalski. -- Reuters

全球豪宅价格 去年末季开始下滑

Source : 《联合早报》March 24, 2009

在全球金融大海啸的冲击下，全世界的房地产市场被吹得东歪西倒，富人的房地产资产总值也明显缩水。

去年，全世界仍有大约半数主要城市的豪宅价格能够保持年比增长，但是这些涨幅主要来自首两三个季度，因为到了2008年末季，全球已有四分之三城市的豪宅价格停止上涨，甚至显著下滑。

房地产顾问公司莱坊(Knight Frank)和花旗私人银行(Citi Private Banking)昨天发表的财富报告书显示，这场全球楼市的风向扭转来得非常突然，原本旺热的楼市可以瞬间冷却。

例如迪拜的豪宅价格在2008年全年攀升大约11％，但是单单第四季就下滑了19％。

这份报告书也显示，去年第四季，有“富人天堂”之称的摩纳哥(Monaco)，豪宅价格下滑了10.7％。尽管如此，它仍然是全球最楼价昂贵的城市，最顶级的豪宅价格高达每平方公尺5万欧元(约合每平方英尺9600新元)。

报告书说：“很明显的，即使是全世界最受欢迎的房地产市场，也无法逃脱全球金融大海啸铺天盖地的冲击力。”

英国的伦敦和美国纽约的曼哈顿是全世界豪宅价格第二和第三高的城市。去年全年，伦敦的豪宅价格下滑了16.9％，第四季跌幅就达9.4％。

原本一枝独秀的曼哈顿也因为华尔街的裁员浪潮不断，而终于守不住防线。去年全年，曼哈顿的豪宅价格下滑了4.1％，单单第四季的跌幅为3.2％。

新加坡的豪宅价格则在全世界各大城市排名第九，是继日本东京和香港之后最昂贵的亚洲城市。去年，新加坡的豪宅价格下滑了14.6％，这每平方公尺价格滑落至1万1850欧元(约合每平方英尺2277新元)。

该报告指出，目前全世界正陷入经济不景气，一些城市仍然出现楼价上涨，“主要是反映了不同地区所处的不同经济周期，而不是说它们丝毫不受这场风暴影响。”

曼谷与雅加达豪宅 去年价格仍飙升

一些东南亚经济体并没有因为银根的收紧而迅速受影响，例如曼谷和雅加达去年的豪宅价格仍飙升了22.5％和17.7％，是去年全世界豪宅价格最快速增长的城市。

由于全世界有四分之三的城市的豪宅价格插水，难怪莱坊和花旗的调查显示，超过九成的富人去年的房地产资产总值下跌，不过，只有5％的富人对跌势“非常关注”。

“根据我们的2009年财富态度调查报告，最新的国际黄金住宅价格指数显示，即使是全世界最有钱的人们也因为信贷紧缩和全球经济不景气而减少了非必要的开支。”

不过，由于高达55％的有钱人有意趁着楼价低潮而在未来两年内进场购买房地产，因此莱坊相信，地点最好的豪宅还是能够吸引买家，而且价格会最快复苏。不过，那些被炒家和投资者炒起来的市场，却可能很多年都无法恢复高之前的巅峰水平。

Ion Orchard Over 80% Occupied

Source : The Straits Times, March 24, 2009

Eight-storey mall opens in July with new top-end names; tenants get reductions in rent

ION Orchard hopes for a positively charged opening in July, having filled more than 80 per cent of its 300 stores.

Set for a soft opening in July, Ion will introduce new brands like jeweller Harry Winston to Singapore. -- ST PHOTO: WANG HUI FEN

Among them, and occupying a shopfront in Singapore for the first time, will be brands like high-end jeweller Harry Winston and luxury fashion label Dsquared.

The eight-storey mall will also provide designer labels like Diane von Furstenberg and Marc Jacobs and watch brand Patek Philippe their first stand-alone boutiques in Singapore.

Familiar names like Cartier, Dior, Louis Vuitton and Prada will take up double-storey flagship stores at the 640,000 sq ft shopping centre, which is about two-thirds the size of Vivocity.

To coax as many tenants as possible to open at the same time, the management has offered up to 30 per cent in rent cuts for three months until October.

Orchard Turn Developments' chief executive officer Soon Su Lin said yesterday that over 60 per cent of the space has been leased to flagship stores, new-to-market brands and new concept stores.

The last includes new concepts by Burger King and a gourmet supermarket from Hong Kong called ThreeSixty, which sells organic food and cleaning products. Shoppers can also look forward to new Japanese restaurants like Watami and Sho Teppan at the soft opening on July 21.

The rental cut is a welcome boon for RSH Limited, which will take up six shops for its brands like Zara, Mango and Massimo Dutti.

Said chief operating officer Kesri Singh: 'It's a good thing that Ion Orchard realise that times are tough now and we committed our shops at a financially better time.'

The company had approached Ion Orchard to reconsider rents. Any kind of help is good, even for just three months, he said.

Banding together to press landlords to ease rentals recently were the Singapore Retailers Association, Restaurant Association of Singapore, Singapore Jewellers Association, and the Textile and Fashion Federation.

Government-linked landlords like the Singapore Land Authority, Housing Board and Sentosa Development Corporation have given 15 per cent reductions on rent for the entire year, but commercial landlords have resisted blanket cuts. Ion Orchard is the first to offer any.

Two other malls are slated to open this year - Orchard Central at mid-year and 313@Somerset in November - but there are no indications that the developers intend to follow suit.

Ms Soon said they understood the challenges of opening in such an 'unexpected economic climate', hence the 'opening incentives'. She said she had promised tenants to monitor sales for the rest of the year to see if any other help is needed later.

Ion Orchard was leased out last September at prices of up to $80 per sq ft, compared with rents of $40 to $50 for the main Orchard Road stretch.

A grand opening is planned for October.

Rents In Prime Areas Head South

Source : The Straits Times, March 22, 2009

Rentals of apartments falling by 15% as new units become available and expats move out

Tenants looking for apartments in prime districts are having it good as rents there head south.

Right now, rentals of these units are falling faster than those in the mass market.

Luxury condos like St Regis and Grange Residences now have units available for rent from as low as $5 psf a month. -- PHOTOS: ALAN LIM, BTAmong the reasons: New supplies have entered the market. A number of new condominiums have sprung up in prime districts - many of which have been bought by investors planning to rent out their units - in the past year.

Also given the economic downturn, some expatriates are leaving while others have their housing budgets cut. So landlords in prime districts 9, 10 and 11 face the need to bring down their rents come renewal time so as to keep their tenants.

Prime rents are now halfway through heading south, said Cushman & Wakefield Singapore managing director Donald Han.

'We expect the rents in districts 9, 10 and 11 to come down by close to 15 per cent this year,' he said.

'From the middle of last year till now, they would have fallen by 15 per cent to 20 per cent. We are seeing an outflow (of expat tenants), not an inflow. It's a net exodus.'

Rents in non-prime and suburban areas have also fallen by 15 per cent to 20 per cent and are set to slip by another 10 per cent this year, said Mr Han.

It will be a comparatively smaller fall because there are not as many units available for rent in these areas compared with prime areas, he said.

Another property consultancy, Jones Lang LaSalle, said residential rents have fallen by about 10 per cent to 30 per cent across the island so far this quarter, compared with last year's fourth quarter.











Rents of prime properties have dipped by an average of 15 per cent quarter-on-quarter, it said.

There was additional pressure on rents at The Sail, a huge 1,111-unit condominium in downtown Marina Bay, as more and more units entered the leasing market, said Jones Lang LaSalle's head of residential, Singapore, Ms Jacqueline Wong.

Unit owners started collecting their keys from the middle of last year.

For instance, the transacted rents for one-bedroom units of 690sq ft in size now stand at $3,200 a month, down from $4,500 in June last year, said MsWong.

Other recently completed condos include Domain 21 in Delta Road, The Beacon in Cantonment Road, The Azure in Sentosa Cove and St Regis Residences in Tanglin.

Condos like Rivergate in Robertson Quay have just joined the list, offering plenty of new units for lease.

There is increasing rental pressure on the still vacant units in recently completed prime projects, such as the super-luxurious, 173-unit St Regis, where a lot of units, including large penthouses, are up for rent.

Anecdotal evidence suggests the St Regis rents start at $7,500 for the smallest three-bedroom, 1,507 sq ft unit and $20,000 for the 3,757 sq ft, four-bedroom unit, which will put the starting rents for such sizes at just between $5 per sq ft (psf) and $5.30 psf a month.

Jones Lang LaSalle Research's average rent record for Grange Residences, a prime but slightly older condo, is at $6.20 psf per month at the end of last year.

'There are now too many apartments chasing too few tenants,' said Chesterton Suntec International's head of research and consultancy, Mr Colin Tan.

In particular, the older prime condos that developers bought collectively and are now keeping for lease are suffering more, as their conditions may not warrant market rents, experts say.

The rental market for private homes is in 'a state of flux' at the moment, said Mr Tan.

'The rental you are quoted this month can and does change, so much so that some tenants whose leases are expiring soon are seeking temporary extensions - three to six months - to their current lease before settling on something more permanent. The savings can be substantial,' Mr Tan said.

Given this situation, Mr Han advised landlords to be flexible.

'Sometimes, it is better to find a tenant who is willing to take up the property early at a slightly reduced rental than to keep it empty.'

Property consultants say that, for now, high-end homes are still able to secure tenants as falling rents have attracted new tenants.

'We are seeing some movements of tenants from outside the central area coming in,' said Mr Han.

But the falling rents of such flats may result in more owners dipping into their own pockets to help foot their monthly mortgage payments instead of relying on just the rent.

Currently, with mortgage rates still reasonably attractive, landlords should still be able to cover much of their instalment payment at today's rentals, said Mr Han.

'However, for the high-end properties completing in the second half of this year, the potential rental income may not be sufficient to cover mortgage payments,' he said.

Orchard Prime Rents May Fall 20%

Source : The Straits Times, March 21, 2009

Challenging retail sector is forcing landlords to look at making cuts

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Hotels Cut Room Rates As Occupancies Slide

Source : The Business Times, March 23, 2009

Room rates fall up to 20%; corporate demand slows as companies cut cost

IT'S known that what goes up must come down, but in this case, the inevitable may be coming a little quicker and sharper than expected as lower occupancies force hotels to cut room rates.

At the Rendezvous Hotel for example, corporate rates have gone down 20 per cent to $190++ and walk-in rates have dropped 20 per cent to $220++. Average occupancy is hovering at 70 per cent, versus last year's 80 per cent. The hotel aims to beef up occupancy through a lower room rate so as to reclaim its 80 per cent occupancy level.

The Royal Plaza on Scotts has adjusted average room rates downward by 12 per cent, due to weakening demand for high end products such as club rooms and suites, says Patrick Fiat, general manager. Its room rates currently start from $198++.

At the Marina Mandarin, rates are down year on year but the hotel declined to give figures. Occupancies for Q1'09 were as expected, but rates are 'under pressure.'

One of the reasons for this is a drop in business travel as companies try to keep expenses down.

'Since the last quarter of last year, we observed that there has been a slowdown in the corporate sector. Currently, the business trend is still on the slow side, hence we have adjusted the rates to further suit our client spending power,' said a spokesperson from the Marina Mandarin.

Over at the St Regis Hotel, room rates for both frequent individual travellers (FIT) and corporates have been lower for the first two months of the year compared to the corresponding period in 2008, according to Cheryl Ong, its director of marketing communications. 'Occupancy is under pressure with lesser in-bound travel into Singapore,' she added, but declined to comment on actual figures.

Hotels are also offering value-added packages. The Novotel Clarke Quay, for instance, has tweaked rates by between 5-10 per cent for key corporate clients. Those that forego the discount can look forward to other perks such as transportation and Internet service, said general manager Heinz Colby.

And as some consumers trade in their five-star hotel stays for value-for-money accommodation, hotels in the three and four star range are expecting to reap the benefits, although such establishments won't escape unscathed either.

'There are clients who are looking for cheaper accommodation. Hence, we are also affected. For leisure, we see a decline in visitor arrival especially for long haul travel,' said Kellvin Ong, general manager of the four star Rendezvous Hotel.

'There are also other factors which may affect occupancy. New kids on the block are sprouting, which may shrink the pie,' he added.

Indeed, another hurdle facing the industry, aside from the slump in visitor arrivals, is the injection of supply that the market will see this year as new hotels come onstream.

The recently launched Ibis Singapore - a no-frills, three star hotel by the Accor group - offers rooms starting from $138 per night. Other hotels that are expected to open their doors this year include the 336-room Park Hotel Clarke Quay.

According to a Kim Eng report, an estimated 2,000 hotel rooms from the Marina Bay Sands and a further 1,640 rooms from other hotels are slated for completion in 2009. This would raise the total available room-nights by 12 per cent to 11.7 million for 2009. There are currently 39,000 hotel rooms in Singapore, said the Singapore Tourism Board (STB).

If the integrated resorts (IR) fail to draw the crowds, Kim Eng estimates that average occupancy rate (AOR) could fall to 55 per cent by year end, and to 50 per cent by end 2010 - not far from the lows plumbed at the height of the Sars outbreak in May 2003, when AOR fell to 34 per cent.

On the flip side, a successful showing by the IRs coupled with the positive impact of the various global stimulus packages and the efforts of STB's $90 million BOOST scheme could stabilise AOR at 60-65 per cent for 2009 and 2010, Kim Eng reckons.

Meanwhile, hotels are banking on recent efforts by STB and tie-ups with airlines such as Singapore Airlines to bring the tourists back.

'We are expecting last minute bookings from the region as the various airlines have come up with promotions to stimulate travel. We are optimistic that there will be business out there although the numbers have not yet shown it,' said Mr Ong.

STB's figures for January 2009 saw average room rate (ARR) sliding 11.7 per cent year on year to $209, while AOR dropped 17.7 percentage points to 67 per cent, well below last year's overall AOR of 81 per cent. Revpar (revenue per available room) fell 30.2 per cent year on year to $140. Hotels pulled in $124 million in room revenue, a staggering 29.9 per cent less than the corresponding month in 2008.

In contrast, for 2008 as a whole, ARR was $246, an increase of 21.9 per cent over 2007. For the first time since 2003, AOR was down by six percentage points to 81 per cent while Revpar for the year reached $199, up 13.5 per cent from 2007.

For January 2009, luxury and upscale hotels suffered larger drops in ARR and Revpar, while hotels in the economy tier - budget hotels in outlying areas - emerged in a better position.

However, economy hotels still saw a 3.4 per cent year on year dip in ARR to $101 for January, and a 26.8 per cent fall in Revpar to $66.

KepLand To Defer Luxury Project

Source : The Straits Times, March 21, 2009

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

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

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

The project has not been launched.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

KepLand Defers Construction Of Marina Bay Suites

Source : The Business Times, March 21, 2009

Building of Madison Residences also delayed by current market conditions

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

DELAYED
Worsening sentiment in the high-end residential sector

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

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

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

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

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

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

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

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

Funds, Banks Start Shopping For Real Estate Assets

Source : The Business Times, March 20, 2009

Players laying groundwork to snap up regional assets on the cheap

Institutional funds and private banks are scouting for property assets in the Asia-Pacific, industry players say.

The funds and banks - armed with billions of dollars in cash - are laying the groundwork so they can snap up assets on the cheap later in the year.

Interest on the rise: SG Private Banking hopes to invest US$500m in Asian property by end-2010 while Korea's Woori Investment plans to punp in US$300-500m. S'pore-based ARA Asia Dragon Fund has a US$1b warchest

SG Private Banking, which just set up a centre in Singapore to focus on real estate, hopes to invest another US$500 million in Asian property by end-2010.

Other firms here have similar plans. For example, Woori Investment & Securities (Woori I & S), part of Korea's Woori Financial Group, is looking at arranging and investing about US$300-500 million in Asian property over the next two years. And Singapore-based ARA Asia Dragon Fund aims to invest another US$1 billion in Asia over the next two to three years.

Investment sales across Asia fell sharply in 2008 amid financial market turmoil, tight credit and higher funding costs. In Singapore, for example, investment sales last year were $17.8 billion - a 70 per cent drop from $54.02 billion in 2007, according to CB Richard Ellis.

But buying interest is slowly coming back as asset prices fall from their 2007 peaks. 'The near- term weakness creates a favourable entry point,' said John Lim, chief executive of ARA Asset Management, which manages the ARA Asia Dragon Fund.

Keiichi Hirano, SG Private Banking's Singapore-based global real estate head, told BT that asset prices generally are already about 30-35 per cent off their peak. Others put the drop anywhere between 20-40 per cent.

Market players say there is still a difference between asking prices and what buyers are willing to pay.

But Sung Heun Do, director and head of real estate investment and finance at Woori I & S, said: 'We believe this year will present very good opportunities to acquire key assets, though a lot will depend on other factors like the credit market.'

The amount the firm will invest will 'depend heavily on whether we are able to secure the right assets at the right risk-adjusted returns', Mr Sung said.

Others echo this view, saying returns are crucial as they shop around. SG Private Banking's Mr Hirano said his team will look for physical assets and property-related paper assets that yield about 10 per cent per annum.

He wants to increase SG Private Banking's exposure to real estate through its new Global Centre of Expertise in Real Estate in Singapore. SG Private Banking had 66.9 billion euros (S$138 billion) of assets under management at end-2008. The bank did not say how much of this was in the Asia-Pacific region, or in real estate. But right now, less than 5 per cent of SG Private Banking's investments are in real estate. By contrast, most high net worth individuals have 18-25 per cent of their portfolios in real estate, Mr Hirano said.

ARA's Mr Lim said that for the next six to nine months there will be a continued downward pressure on rents across most sectors and markets. But taking a medium-term view of three to five years, now is a good time to go in, he said: 'You must be able to take the medium-term view to make serious money.'

Established markets are proving more popular, with firms looking hard at Hong Kong, Tokyo, Singapore and Australia. Woori I & S is also bullish on Korea and said it is seeing a lot of interest from non-Korean associates to partner it in acquiring prime assets in Seoul.

China, on the other hand, is proving more controversial. Some funds BT spoke to said they will stay away from China as the real estate markets there are not well-established. ARA's Mr Lim, however, is upbeat about the country. 'We are most confident in China. We still think that the fundamentals are strong,' he said.

Another development is that many funds are looking at physical real estate, rather than just paper assets. In the past four or five years, clients were more interested in property-linked paper assets such as equities and funds, as these were cheaper and easier to invest in. But interest in physical assets is increasing as their prices slump in the current economic downturn. 'We will offer our clients the opportunity to invest into any country, and any type of property,' said SG Private Banking's Mr Hirano.