Time For Some Retail-tainment

Source : The Business Times, September 27, 2007

DAISY LOO looks at today's malls - a careful mix of the right tenants, themes and well-planned layout to draw people in and keep them occupied longer

Lifestyle element: Junction 8 (left) was among the first to introduce cineplexes and games arcades in shopping centres. This is a far cry from shopping malls of old, which were just clusters of shops and food outlets.

RETAILING these days is more than just about the shopping, it's a total experience. That means both 'hardware' and 'software' have to work together to give shoppers that feel-good factor.

There was little thought given to tenant mix, themes or architectural designs. But with the growing sophistication of shoppers, malls had to improve their offerings. Efforts were made to cluster shops (tenant-mixing) to enhance synergy among different retailers and generate the best traffic flow within the complex to derive optimal rental returns.

Mall owners went into retail positioning, tenant-mix planning and theming to draw more shoppers and increase sales opportunity for retailers, which translates to better rental value per retail space.

Junction 8 was among the pioneers that introduced cineplexes and games arcades in shopping centres. Gradually, other services such as fitness, medical and educational centres found their way into malls.

All this was aimed at making shoppers stay longer at the malls. This is evident in the incorporation of libraries in malls, found at Compass Point, Hougang Mall, Lot 1 and Jurong Point. As these malls are located within the heartlands, the presence of libraries enhances their attractiveness to families and students, boosting traffic flow. Parkway Parade incorporated medical centres. The upmarket Paragon in Orchard Road has spas in its tenant mix that meld with its affluent shoppers' lifestyles.

Apart from attracting more shoppers, these service trades help mall owners fill the less prime locations.

Other malls such as United Square and Velocity@Novena managed by UOL Group have resorted to theming as their selling point. United Square, which was relaunched in 2002, themed itself as a 'kids' learning mall' since the mall owner saw an unmet demand for children's education/enrichment facilities. About 55 per cent of its tenant mix caters to kids with another 15 per cent for F&B. This proved to be a great success as rentals increased by 38 per cent after the revamp and shopper count rose considerably.

Themed malls such as the sports-centric Velocity@Novena (left) are also capturing niche markets

Velocity@Novena Square is Singapore's first sports and active lifestyle mall. Its anchor tenant is California Fitness Jacky Chan Sports, occupying three floors of about 27,000 sq ft. Sports mix takes up close to 40 per cent of the 170,000 sq ft mall, with F&B taking up another 30 per cent.

More than just a place for sports goods shopping, Velocity is becoming a favourite venue for sports events. The 2005 Sea Games flag-off, skating performances curling demonstration and the recent NBA Madness Asian Tour 2007 were just some of the events held at the mall. Since the revamp, rentals have jumped by more than 30 per cent.

Funan DigitaLife Mall started as a general shopping centre but it gradually attracted a critical mass of electronic and IT retailers as tenants. It has since established its niche as an IT mall, and was refurbished twice - in 1992 and 2005 - to meet shoppers' demand.

Themed malls came to Orchard Road in 1996 with the opening of The Heeren Shops. Tenanted by lifestyle shops with unique product offerings, it has HMV as its anchor tenant. In 1997, the movie-themed Cathay Cineleisure Orchard opened. Aside from movie halls, its tenants offer entertainment and leisure activities, social clubs and dining.

Of late, as consumers pay more attention to health and wellness, we saw fitness and wellness centres setting up at malls, such as True Yoga at Pacific Plaza, California Fitness Centre at Bugis Junction, and Planet Fitness at VivoCity.

Retail has evolved from its traditional role of buying and selling to a lifestyle event. As lifestyle is an experience, it is dynamic and ever-evolving. Mall owners not only update a mall's tenant mix, they likewise organise activities to enhance the shoppers' experience.

The latest trend seen is the integration of a retail mall with other land uses to enhance the entertainment and lifestyle portion of shopping. The Singapore Flyer is one such development. It comprises a retail building, a 400-seat theatre and the Giant Observation Wheel. The soon-to-be-developed Sports Hub is another project that incorporates multiple uses, namely, sports, entertainment and lifestyle. Aside from the sporting facilities, leisure and commercial developments will be incorporated to drive mall traffic on event and non-event days alike.

As its name suggests, Marina Bay Sands Integrated Resort integrates all types of uses, namely, hotel, convention centre, casino and theatre. They complement each other to derive optimal benefits, targetting mainly the conventions business.

In this highly competitive environment, change is a certainty. We may not have the world's largest nor tallest malls, but we can challenge ourselves to create the most innovative retail-lifestyle malls.

Why not have a retail-lifestyle mall amid nature? For instance, the Kranji countryside offers art galleries, pottery and woodwork. It also retails organically grown vegetables and plants. This amalgamation can be a new retail-lifestyle mall, except that all the tenants are not housed under one roof but linearly located amid nature. This venue is ideal for families and nature-lovers as it offers a different shopping ambience.

Instead of just having souvenir shops within zoos, bird parks and botanical gardens, why not turn them into retail-lifestyle malls? It is important, however, that such malls be aptly sized, with a critical mass of at least 50,000 sq ft to attract shoppers.

These malls will then become a destination for shopping, entertainment and interaction, with each 'retail-tainment' destination having its own distinct identity and selling point.

The writer is director and head of retail, Jones Lang LaSalle

How To Choose A Housing loan?

Source : The Business Times, September 27, 2007

DENNIS NG lists some criteria to look out for to ensure your package makes the most financial sense for you













Most consumers want to know which housing loan is the best in town. Unfortunately, that is the wrong question to ask.

There are more than 100 housing loan packages in the market and what is best for one person might not necessarily be the best for you. Each package has different features that are suitable for different needs.

Thus, a more appropriate question to ask is what are the factors that you should consider in choosing a housing loan? Here are some things you should note before signing on the dotted line for a home loan.

Pre-approval: Before you close a deal to buy a property, it is advisable for you to first get pre-approved for a bank loan.

With the setting up of the Credit Bureau in 2002, banks can now check your repayment history of loans and credit cards taken up with other banks. Were you late in paying instalments? Have you ever been sued? If the answer is yes, banks may not approve your loan application or they might approve a lower loan quantum. This could jeopardise your purchase of a property, and you might even have to forfeit the option money you paid.

Loan duration: A minimum loan duration is five years and the maximum 30 or 35 years, or till you are 65 or 70 years old, whichever is lower.

One way to decide on loan duration is to time the loan duration to match your intended retirement age. So, if you plan to retire by age 60, you should ensure the loan is fully paid up before you reach 60, rather than stretch it till you're 65.

Floating or fixed: If you think interest rates have peaked and are likely to go down, you might want a floating rather than a fixed rate package.

However, if you're worried about the possibility of banks revising interest rates upwards, you might want a package which fixes the interest rate for the next one to three years instead. It might not make sense to fix rates for more than three years since the lock-in period for most packages ends after three years. You can always shop around for a better package after that.

Flexibility of repayments: If you intend to make a lump sum repayment within the next one to three years, you should look for a package that offers you the flexibility to make such repayments without penalty. Some packages impose a penalty fee of up to 1.5 per cent of any lump sum repayment you make.

Transparency of rates: If you want to know the exact basis for the interest rates charged on the housing loan, you can consider loans pegged to interest rates that are publicly available, such as the three-month Singapore Inter-bank Offer rate (Sibor) or Swap Offer Rate (SOR) which move according to market conditions.

Basically, a home buyer pays an agreed percentage above the variable SOR for a specified period.

You might want to consider such a package if transparency is a key issue for you and you are of the view that Sibor or SOR rates are falling rather than rising.

Penalties: Ask if any penalty will be imposed if you make a full redemption of your loan and how long the penalty period is. Currently, there are some housing loan packages with zero penalty period, while most loans typically have a penalty period of one to three years.

Interest-only: If you are a high income earner and in high tax bracket, choosing an interest-only mortgage might make sense. You benefit through savings in income tax as the interest portion of loan instalments for investment properties is tax-deductible.

This package also works well for short-term investors. By paying back only the interest, investors would benefit from lower cash outflow until they sell the property. As a result, they may be able to invest in two properties instead of one.

Interest-offset: If you have substantial cash you might want to consider an interest-offset mortgage instead. This basically links your current account to your home loan. The interest earned in your current account is the same rate as that charged on your home loan. By offsetting the interest earned on your current account against your home loan interest, you can enjoy big savings - in time and money.

Every dollar you put into this current account would have same effect as making a partial repayment of your loan, but give you the added flexibility of drawing down the cash in the current account if you need to. Whereas if you do a lump sum prepayment, the cash is 'locked' in the property and you lose liquidity. Thus, an interest offset package enables you to pay a lower effective rate of interest on your housing loan so that a bigger portion of your monthly instalment goes toward reducing the principal. This allows you to pay off your loan sooner and pay less in interest.

Promotions: Sometimes, banks might offer special promotional packages. If you engage the services of a mortgage broker, he would be able to provide you updated information on such promotions which could translate to additional interest savings for you.

In the past, when consumers shopped for home loans, they had to contact each bank individually to gather information. This a tedious process that takes up a lot of time. In the last few years, with the emergence of independent mortgage brokers in Singapore, home loan shopping and comparison have been made easier.

Basically, an independent mortgage broker who knows your requirements can help you zoom in on the most attractive home loan packages. You typically do not have to pay for the service of a mortgage broker as banks pay them a fee as they also help banks save on staff costs and resources.
In more advanced countries such as the US and Australia, people usually apply for home loans through a mortgage broker rather than go to the bank directly. In Singapore, many people are still unaware of the services and benefits of engaging a mortgage broker, but things are likely to change with public education and increasing awareness.

The writer is a spokesman for mortgage consultancy portal www.HousingLoanSG.com

Will The En Bloc Fever Start Cooling?

Source : The Business Times, September 27, 2007

Activity may slow down with tighter regulation, higher costs and longer sales periods, say KU SWEE YONG and YONG YUNG SHIN























THE past two years have been stellar for en bloc sales which saw some 160 redevelopment sites being sold across the island. From 2006 till 2008, more than 11,000 units would have been withdrawn, to be redeveloped into 16,000 to 19,000 new units. The final number could be lower if developers opt to build larger and more luxurious units.

The bulk of these redevelopment sites (about 95 in all) are located in the highly sought after Districts 9, 10 and 11. This has resulted in a possible shortage of high-end residential homes in the short to medium term as units are being torn down and redeveloped into new luxury condominiums.

For the first seven months of this year alone, we estimate that 61 en bloc sites have been sold for a total value of almost $11 billion. This surpasses last year's record of $7.75 billion. For the rest of the year, we can expect a new record, both in terms of total value and number of sites sold. (See Table 1)

Going forward, we believe that en bloc activity will continue well into the next year, albeit at a much slower pace than in the past 12 months. There are several reasons for this.

Firstly, we will see larger en bloc sites in terms of size, number of units and value coming to the market. These large sites would require a little more time to obtain consensus among the sellers, as well as to find buyers with the financial muscle to acquire them.

Secondly, developers who needed to replenish their land bank have already done so and will be more selective going forward. The en bloc market could become a buyers' market with developers possibly looking to acquire only prime redevelopment sites - sites which already have 100 per cent owner consensus or even those with negligible development charges (DC) rates.
Additionally, the recent proposed amendments relating to en bloc sales under the Land Titles (Strata) Act, which could come into force in October, will reset the collective sales process for those developments yet to garner the 80 per cent consensus.

A higher level of regulation and transparency is being introduced with stricter guidelines on the setting up of an en bloc sales committee. This will slow the pace in getting the whole process started.

Besides the changes to the Land Titles (Strata) Act, the latest revision in DC rates, which were announced on Aug 31, could potentially dampen the en bloc market further.

Going forward, whilst the location of the redevelopment sites remains paramount, we could expect developers' interests to be channelled towards sites with minimal or no DC.

Whether the en bloc sale fever will actually cool is anyone's guess at this point. The rising cost of land acquisition, higher DC rates, rising construction costs and the global economic climate all have a part to play in order for the market to thrive.

What's the impact?
The wave of over 60 en bloc transactions between January to July this year could give rise to several thousand millionaires. Just taking the three months of April, May and June, we tabulated that there were some 34 sites with a total of 2,796 units sold, where the owners are expected to receive an average $3 million a unit.

Taking into account the need to apply to the Strata Titles Board for approval to proceed with the sale, all 2,796 displaced families could receive 95 per cent of their money by H1 2008. Assuming at least 2,000 of these owners are looking to buy another home, this would inadvertently create a surge in demand for homes both in the primary and more so in the secondary market, especially for those who need a place to stay.

Going forward, we expect a lull as the number of en bloc sites sold could slow down in the second half due to uncertainty, the possible introduction of new en bloc laws and rising DC rates. This would remove the additional demand from owners displaced by an en bloc sale.

Ku Swee Yong is director of marketing and business development, Savills Singapore; Yong Yung Shin is analyst, research & consultancy, Savills Singapore

The Ascent Of Landed Housing

Source : The Business Times, September 27, 2007

Solid gains await with double-digit price growth and Singapore's scarcity of land, says LEONARD TAY

THE private residential market has been hogging the headlines in the past 18 months. Overall prices recovered in 2004 and 2005 by 0.9 per cent and 3.9 per cent respectively, and home prices shot up by 10.2 per cent in 2006 and another 13.5 per cent in the first half of 2007, led mostly by the condominium segment of the market.

It has been pretty obvious that non-landed homes have been leading the way in the strengthening residential market, with prices growing from a marginal 1.1 per cent in 2004 to 4.5 per cent in 2005, 11.1 per cent in 2006 and 14.2 per cent in the first six months of 2007 alone, according to numbers from the Urban Redevelopment Authority (URA).

What of landed properties then? Will landed properties match their high-rise counterparts in the price spiral?

Prices of landed homes have risen in line with the rest of the market. (See Table 1) From a marginal 0.6 per cent rise in 2004, prices of landed homes grew by 2.4 per cent in 2005, 6.7 per cent in 2006 and 10.1 per cent in the first half of 2007.

A breakdown in price of the different landed property types shows that detached houses have made the most headway over the past year. According to URA numbers, prices of detached houses rose by 12.3 per cent in H1 07, after increasing by 8.1 per cent in 2006.

As for semi-detached and terrace houses, their indices rose by 7.6 per cent and 9.3 per cent respectively in the first half of 2007, from 5.3 per cent and 5.2 per cent respectively in 2006. As detached houses comprise Good Class Bungalows (GCB), the price increases have been more pronounced given the demand for high-end homes.

Based on caveats for GCBs, the average price has risen by an estimated 30 per cent in 2006 and a further 25 per cent in the first half of 2007. Not only are prices registering double-digit growth, it has also been observed that certain GCBs have been sold and resold within 12 to 18 months.
















An example of this trend is a GCB at Queen Astrid Park that was sold for $12.5 million in April 2006, only to be resold at $16 million in May and then again in December 2006 for $18 million. This is an increase of 44 per cent in seven months. Another GCB at Nassim Road was first sold for $9.8 million in February 2005 only to be sold another three times for $15 million in August 2006, $18.4 million in December 2006 and $24.2 million in June 2007, an increase of 147 per cent over some 28 months.

Overall, it appears that there are several solid reasons for optimism in the landed housing market, especially in the next 12 months.

As prices of landed property in Singapore have not risen as steeply as their non-landed counterparts, there would generally be some better bargains in the landed market compared with luxury condominiums that have already attained very high benchmarks.

Aside from the GCB market, the comparatively slower rise in prices for landed properties could be viewed more favourably vis-a-vis upper and middle-upper income local home buyers who might have been priced out of the luxury condominium market, especially in the very prime locations.
Secondly, landed housing will always be considered a scarce commodity in the Singaporean landscape. With limited land, landed housing at present comprises 29 per cent of all housing stock throughout the island as at June 2007, or 68,360 units out of 233,143 private homes. Due to its inherent scarcity, landed housing would always be the ultimate goal of Singaporeans, especially since foreigners are not ordinarily allowed to purchase these properties.

With regard to scarcity, landed housing can be an attractive investment property in the near future as a source of regular income. As Singapore welcomes more foreign professionals to its shores, houses for rent could prove to be valuable assets for rental income, especially so for foreign professionals who might be used to living in landed properties back home and are not allowed to purchase similar types of accommodation while working in Singapore.

In the first six months of 2007, URA's rental indices for all the landed property types improved significantly. (See Table 2) During this period, rents of detached houses increased by 13 per cent followed by a 11.4 per cent rise for semi-detached houses and a extraordinary 17.3 per cent jump in rents for terrace houses. Compared with capital values of landed residences, rents have increased much faster.

Examples of recent rental transactions where the increases were evident include a detached house at Woodgrove Estate which was renewed at $15,000 a month, a 25 per cent increase from the previous rent of $12,000 a month. A detached house at Chancery Lane was rented at $16,500 a month, while a semi-detached house at Lim Tai See Walk was rented at $11,000 a month.

From a supply standpoint in the next five years, 1,872 landed units are under construction with another 2,579 landed units planned. Compared with the 28,082 non-landed units under construction and the 35,077 non-landed units that have not started, new supply of landed homes only account for 6.6 per cent of all new supply expected from the second half of 2007 to 2011, making it fairly certain that landed residential homes are going to remain a scarce product for the foreseeable future.

An increase in landed prices of some 20 per cent for the whole of 2007 might very well be on the cards, given an accumulation of the above factors. Demand for landed housing should increase, and prices would follow suit once the home-buying public realises that there are investment, as well as rental income opportunities in landed houses, and that prices have also not risen as much compared with condominiums in the prime areas.

Ultimately though, it will be the fundamental reality that landed housing will always be a scarce product in Singapore's urban landscape that bodes well for this type of housing in the medium to long term.

The writer is director, CBRE Research

Talking Dollars And Sense

Source : The Business Times, September 27, 2007

Effective deployment of funds can boost the capital appreciation and rental yield of an estate, says JORDAN NEO

IT IS an important mandate of the management council to keep watch over the expenditure of their estate, ensuring that funds are sensibly ploughed into areas which best meet the estate's needs.

For example, should the money in your sinking fund for the year be used for lobby upgrading, or should it be used to build a state-of-the-art swimming pool? When the council is clear about long-term plans and its objectives (ie, functional over aesthetic), as well as the impact of certain major works on the estate's value, decision-making becomes much more painless and effective. The situation whereby too much money is spent on some areas with not enough left over for others can then be avoided.

Clearly-defined plan
The council, with help from the managing agent (MA), also has the responsibility of devising a well-planned budget for the year, phasing various works by importance and collecting appropriate amounts for the maintenance and sinking funds to carry out these works.

Defects management is one area where council members must learn how to discern appropriate professional advice, knowing their likely orientation. An inexperienced council serving their first term often feels pressured to go all out. Over time, such actions can often do more harm than good. From our experience, the hefty amounts spent on futile lawsuits could have been better used to enhance the estate's ambience and facilities.

Having said that, council members must be careful not to save money at the expense of the well-being of the estate. It is unwise to keep appointing different MAs in favour of the cheapest one, sacrificing the familiarity of the estate gained by the previous MA. Saving a few hundred dollars each month might look like a lot, but it is a negligible savings in the context of a budget for larger estates.

Similarly, experience tells us that it is often a short-sighted move to be stingy about the condominium manager's salary, when he has the right skills to contribute to the estate. The returns of managing your estate effectively can outweigh the few hundred dollars saved per year many times over.

Council members would also do well by working with better established MAs who, by virtue of their portfolio size, are in the position to negotiate for better value through initiatives such as contractor accreditation, bulk purchase and so on. For example, Knight Frank Estate Management (KFEM) has in place panels of carefully selected and accredited contractors, subject to reassessment every year. Such value-added support for the council could help prevent instances where certain contractors are awarded jobs by certain council members 'by default', even if their pricing and workmanship are not necessarily above par.

Sinking fund for en bloc estates
We would caution owners not to stop maintaining their sinking fund unless they are certain that their collective sales is likely to go through and that there are sufficient funds for essential works before vacating the estate.
Even for estates which have just secured a collective sale, money from the sinking fund should still be spent on repair works pertaining to the safety, health and convenience of the residents, where necessary.

As there are usually one to two more years to go before the estate would be vacated, it would be unwise to ignore issues such as loose window grilles, faulty water tanks etc, in the hope that nothing major will happen before the developer takes over. On the other hand, it would certainly be pointless to spend money on further enhancing the estate aesthetically.

Under current rules, owners should not expect to collect back the sinking fund, though there have been some instances of developers redistributing the remaining sinking fund to subsidiary proprietors according to their share value. However, that would depend on the agreement between the buyers and the sellers before the closure of the deal. However, amendments to the law, which have yet to come into effect, would have money from the sinking fund returned to owners.