Singapore Property News This Week #44

Residential

Freehold Westvale Condominium up for collective sale

The 32-unit strata walk-up development located along 334 Pasir Panjang Road is asking for $85.5 million or $974 psf ppr based on a 1.4 gross plot ratio. The building sits on a 62,710 sq ft site zoned ‘residential’ that can be redeveloped up to a maximum of five storeys. If the additional 10% GFA allowed for balcony area is taken into account, the new potential 96,574 sq ft GFA would mean a price of $892 psf ppr and a potential development of 115 800 sq ft-units. However, the additional balcony space would also mean a development charge of $625,000. The site is expected to be popular given its proximity to NUS and the Haw Par Villa MRT Station and the scarcity of freehold sites in the area. The tender will close on April 19.

Commercial

Rents for prime office space to slow

With most deals concluded since the beginning of 2012 being less than 25,000 sq ft, we can see the decline in demand for such spaces fromthe banking and financial institutions that typically rent large prime spaces. Occupancy levels and rental rates are likely to continue their decline with the decreased demand coupled with increased supply from newly completed projects. Nevertheless, a sharp decline in the rent is not expected nor is the decline expected to last, especially with only two Grade A office projects to be completed in the next two years. In the meantime, firms in other industries have begun taking up large spaces. Some MNCs are also planning to set up regional headquarters here, which will contribute to the overall occupancy rates even if the deals tend to be for small or medium spaces.

JLL’s average gross effective monthly rental value for Raffles Place Grade A office space (excluding Marina Bay) has fallen by 4-5% in Q1 2012 from $9.75 psf in Q4 2011 and it also predicted a 9-11%fall to $8.70-8.80 psf by end-2012. CBRE’s estimates reflected a 3-4% decline from 2011’s year-end figures and a 15% year-on-year decline is expected for the whole market, including Grade A spaces which includes Marina Bay, Raffles Place and Marina Centre, leading toa rate of $9.35 psf at end-2012 from $11 psf at end-2011. Vacancy rate for Grade A Raffles Place (including Marina Bay) office space is also expected to increase from 8.7% in Q4 2011 to 12.5-13% by end-2012.

Supply-wise, 1.35 million sq ft net lettable area of office space is expected to be completed this year, with another 2.4 million sq ft in 2013 and 1.5 million sq ft in 2014.

Rents of retail spaces to plateau in 2012

Average retail rents are expected to plateau in 2012, and increases, if any, would probably be between 1-2%. This is probably a result of new policies that will lower the proportion of foreign workers companies in the service sector can employ to 45% from 50% in July, which meant that productivity costs will increase, and in turn affect the rental rates.The average prime retail rate for all locations remained unchanged at $29.90 psf in Q1 2012. In particular, the average prime rents for the central Orchard Road belt, Orchard Road fringe and Marina Centre, City Hall and Bugis rentals remained unchanged at $41.60 psf, $24.10 psf and $29.40 psf respectively in Q1 2012, while the rents for such spaces at the city fringe and suburban regions experienced some minor changes at$22.50 psf and $32.10 psf respectively in the same period. While prime retail spaces will continue to see demand and increases in rental rates by 2-3% given its scarcity, more retailers are considering retail spaces located in the city fringe and suburban areas,especially those situated in residential or new growth areas with high-income residents who can afford to spend more. This has led to an increase in supply of retail space in these areas; 55% and 21% of the upcoming 2.7 million sq ft net lettable retail space are from suburban areas and fringe areas respectively.

Competitive bidding for Serangoon industrial plot

The 0.8 hectare 58-year leasehold industrial plot located at Serangoon North Avenue 4 attracted a top bid of $47.1 million or $216.68 psf ppr from Soon Hock Property Development, just 0.4% above the next highest bid.  The high bids from these two developers might be due to the developers’ confidence in increasing the saleable floor area of the site or their inexperience in industrial property market.The competitive bidding could also be attributed to the general lack of industrial sites in the region. The site with a 2.5 maximum gross plot ratio is zoned Business 1, and its expected breakeven price and selling price are $340-380 psf and $450-$500 psf respectively.

Expression of interest exercise for Macpherson freehold industrial building

The seven-storey freehold industrial building located 37 Mactaggart Road in Macpherson is asking for$26 million or $612 psfbased on its total GFA of 42,480 sq ft or $1,532 psf basedon the 16,968 sq ft land area. Zoned for Business 1 industrial use, the2.5 gross plot ratio site could potentially fetch $800-880 psf based on saleable floor area once a new freehold industrial development is built. The site is likely to be popular since such properties with cold room facilities are rare in this area. Furthermore, with the ABSD, investors have been turning from the residential sector to the industrial sector. The site could potentially be refurbished or redeveloped for strata sale, if the approval from relevant authorities is granted. The building is currently leased out to a single tenant whose tenancy expires in 2014. The exercise will close on April 18 at 3pm.

New mall in Orchard in H2 2013 – Orchardgateway

The mall is part of Orchardgateway, an integrated development consisting of two towers – 20-storey hotel-retail development located next to Somerset MRT station and an 11-storey office-retail development named orchardgateway@emerald. The mall straddles the two towers, which are diagonally opposite and linked by both an overhead bridge and an underpass, with 150,000 sq ft of retail space on 277 Orchard Road and another 30,000 sq ft on 218 Orchard Road. Tenants will include library@orchard and the Singapore Visitors Centre@Orchard as well as several other fashion and lifestyle retail and food-and-beverage establishments.

Buona Vista’s new mall – The Star Vista

The Star Vista which will open in September is located next to Buona Vista MRT interchange station. It will consist of over a 100 shops in its three-storey 163,000 square feet of net lettable area (NLA), over half of which is occupied by food and beverage establishments. Other offerings include a 7,000 sq ft Cold Storage supermarket at the basement and a fully equipped, 5,000-seat theatre located above the mall – The Star Performing Arts Centre. Over 50% of the mall has been leased at $14-18 psf. The mall is expected to serve over 400,000 residents, students, and working population in the area, and has over 800 car parking spaces.

Compass Point Shopping Centre up for sale

Five-storey  269,546 sq ft Compass Point Shopping Centre has been put up for public tender to redeem the bonds secured against it, which are due in November this year. The 99-year leasehold mall (since 2000) is not setting any asking price, but expects to be offered morethan $645 million or $2,393 psf. The mall next to Sengkang MRT station and bus interchange is almost fully occupied with a gross rent of $11.71 psf per month and has 428 carpark spaces. The strata-titled mall with a strata floor area of 414,119 sq ft has 134 strata lots with a share value of about 74%. The tender will close on May 3.

Prices and rents for industrial property set to fall

While prices and rents of strata industrial properties reached a record high in 2011, having an increase of 30% and 15-20% respectively, they may have reached their peak and are expected to fall this year by 5-10% and up to 8% respectively.  The increase in land supply to 24 ha for the Industrial Government Land Sales Programme, and the new conditions on strata subdivision of industrial development might be one contributing factor.

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