Marina One, Duo set to make big impact on property scene


The two eye-catching developments that have been built on sites that were part of a landmark pact between Singapore and Malaysia look poised to make a major impact on the commercial and residential property markets.

Blue-chip tenants, including Facebook and Prudential, have already signed up for office space at the integrated developments, while many of the apartments have been snapped up.

The two projects - Marina One and Duo - were opened in tandem last night by Singapore Prime Minister Lee Hsien Loong and his Malaysian counterpart Najib Razak at a ceremony attended by ministers from both countries and about 300 guests.

The joint opening reflects the essence of the project, which was triggered in 2011 when the Points of Agreement between Malaysia and Singapore tackled the long-running issue of land that had been controlled by Malayan Railway.

Singapore broke the impasse by offering four parcels of land in Marina South and two in Ophir-Rochor for development.

That led to the formation of the joint venture developer M+S, which is 60 per cent owned by Malaysian sovereign wealth fund Khazanah Nasional, with Temasek Holdings accounting for 40 per cent.

The joint opening reflects the essence of the project, which was triggered in 2011 when the Points of Agreement between Malaysia and Singapore tackled the long-running issue of land that had been controlled by Malayan Railway.

Singapore broke the impasse by offering four parcels of land in Marina South and two in Ophir-Rochor for development.

That led to the formation of the joint venture developer M+S, which is 60 per cent owned by Malaysian sovereign wealth fund Khazanah Nasional, with Temasek Holdings accounting for 40 per cent.

Marina One, near Shenton Way, received its temporary occupation permit in November.

It has already attracted a list of blue-chip tenants, including Swiss private bank Julius Baer, PwC Singapore, insurer Prudential, ride-hailing firm Grab, agri-business Olam International, oil giant BP Global and financial institutions Daiwa Capital and Mitsubishi UFJ Financial Group.

Mr Azman pointed out that one unique aspect of Marina One is that two floors - levels 28 and 29 - of the office tower span 100,000 sq ft each, making them the largest prime Grade A office floor plates in Asia. Facebook occupies one floor, and Julius Baer the other.

Duo, which obtained its temporary occupation permit in June, has attracted Abbott Laboratories, Mastercard, Regus Serviced Offices, Amcor and energy firm Chevron.

The office occupancy at each of the developments is more than 70 per cent.

M+S has also sold more than 80 per cent of the 521 residential units in the first tower of Marina One Residences, and about 96 per cent of its 660 units at Duo Residences, which is in Fraser Street.

The second unlaunched tower of Marina One Residences will be released for sale this year.

Temasek International chief executive Lee Theng Kiat said last night that he is very pleased with the completion of the two projects, adding that the collaboration between the Khazanah and Temasek teams was smooth throughout the process.

Mr Azman said Duo is "personally his favourite", citing the design by German architect Ole Scheeren of two towers standing side by side seamlessly, looking as though they are dancing or embracing each other. To him, this symbolises the close relationship between Malaysia and Singapore.

Government-linked companies were also involved in both projects. UEM Sunrise was the appointed project manager marketing both Marina One and Duo, and Mapletree was the project manager overseeing development and construction for Marina One, while CapitaLand fulfilled the same role at Duo.

Mr Moray Armstrong, managing director of advisory and transactions at property consultants CBRE, said: "What a tremendous milestone for the Singapore office market today, with the topping out of Frasers Tower and Paya Lebar Quarter as well as the official opening of Marina One and Duo.

"These events tell a bigger story about Singapore's strong fundamentals and its growth as a major international business destination."

He added that all indicators are pointing to stronger leasing activity as both existing and pipeline projects are recording significant increases in commitment levels.

"Optimism in the landlord community is gathering strength off the back of the stronger pre-commitment levels in new office developments, but also in response to the growing awareness that there will be a reduced array of new options available to occupiers over the next two to three years."

This has led bargaining power to tip away from the occupiers to the landlords, with some landlords asking for rents that are higher than what may be supportable, he said.

In Marina One's case, M+S, while declining to disclose the rental rates, said that they are in line with current market rents.

CBRE data shows that Grade A core Central Business District rents were averaging $9.40 per sq ft per month in the fourth quarter of last year.

Source: Straits Times, 16 Jan 2018

Paya Lebar Quarter signs up tenants for over half of office space


More than 40% of its retail space has also been pre-committed

PAYA Lebar Quarter (PLQ), a S$3.2 billion mixed-use development by Lendlease, has secured tenants for more than 50 per cent of its office space.

This includes some that are under final offer or in advanced negotiations, ahead of the offices' scheduled opening in the third quarter this year.

This was announced at the topping-out ceremony of one of the three office towers on Monday, which was attended by National Development Minister Lawrence Wong.

With approximately one million square feet of total office space, Lendlease expects some 10,000 employees to be working at PLQ's offices when they are fully occupied.

Prospective tenants include both local and multinational corporations in finance, technology, technology and real estate sectors. The company declined to disclose the names of the confirmed tenants.

Lendlease did say, however, that up to 15 per cent of available office space will also be used to house co-working facilities, which will allow smaller startups to network and work with established companies on special projects.

The average leasing price is S$7 to S$8 per square foot, said Lendlease Asia CEO Tony Lombardo.

According to fourth-quarter figures from commercial real estate services firm CBRE, the average leasing price for Central Business District (CBD) offices in Singapore is S$9.40 psf.

Ms Ng Hsueh Ling, managing director for Singapore at Lendlease, said that prices have bottomed, due to high economic growth and low supply. (see amendment note)

Industry watchers are generally bullish on PLQ's ability to attract companies.

CBRE managing director Moray Armstrong said: "There is much noise from corporates around themes such as attracting the best talent, focus on lifestyle and wellness, collaboration and alike. PLQ's office component delivers on all counts."

CBRE is the leasing agent for the office component of PLQ.

DBS analyst Derek Tan said that PLQ may pose some form of competition to CBD office space if Lendlease is able to position the property as a viable alternative.

It was also announced that more than 40 per cent of retail space of PLQ Mall has been pre-committed. 

Confirmed tenants are FairPrice Finest supermarket and Kopitiam food court. Other offerings include a multi-screen cinema, fashion and lifestyle stores, and restaurants with alfresco dining concepts.

Advocating alfresco dining, where meals are served outdoors, is one of the initiatives Lendlease hope will boost community engagement.

This in line with Mr Wong's speech at the ceremony. He said that he hopes that the developers will take the lead to engage with the community and inject "life" into the development.

Paya Lebar Central is one of several regional centres that the government is creating outside of the downtown area. The others include Tampines and Jurong Lake District.

"With the right programming, good infrastructure, coupled with its distinctive cultural and heritage offerings, I am confident that Paya Lebar Central will be an attractive destination to both Singaporeans and tourists," said Mr Wong.

Amendment note: An earlier version of this article incorrectly stated that the job title of Ms Ng Hsueh Ling was Lendlease Asia managing director. She is in fact the managing director for Singapore at Lendlease. Also, it was stated that more than 40 per cent of retail space of Paya Lebar Square has been pre-committed. It is in fact PLQ Mall. The article above has been revised to reflect these corrections.

Source: Business Times, 16 Jan 2018


French energy giant Total leases over 100,000 sq ft at Frasers Tower


This takes pre-commitment to over 70%; other recent signings include ABN Amro, Shiseido, Sumitomo

RIDING the current uptick in the office market, Frasers Centrepoint has received pre-commitments for more than 70 per cent of Frasers Tower in Cecil Street.

Tenants that have signed up recently include French energy giant Total, The Business Times understands. Total will be leasing six floors - adding up to around 125,000 sq ft - mostly in the mid-zone of the 38-storey development.

The French group will be relocating from Raffles City and Odeon Towers, where it leases about 80,000 sq ft in the two buildings.

Total is the fourth largest international oil and gas major, with sales of US$149.7 billion in 2016, according to its website.

Frasers Tower is expected to receive its Temporary Occupation Permit in the first half of this year.

Japanese cosmetics group Shiseido has also signed up for about 50,000 sq ft; it is expected to move out of Haw Par Centre in Clemenceau Avenue. Sumitomo Corporation has leased about 43,000 sq ft; it will relocate from Mapletree Anson.

Arup - which is involved in engineering, design, planning and built environment consultancy - is taking up close to 40,000 sq ft.

Microsoft, which signed up earlier, has leased about 125,000 sq ft.

More recent signings include ABN Amro - which will be moving out of One Raffles Quay - Fonterra and Pacific Life .

Frasers Tower will have about 664,000 sq ft net lettable area (NLA) of offices and 23,000 sq ft of retail space.

The development will have 32 office floors, starting from Level 5; all but one of the office floors range from around 19,400 sq ft to 21,800 sq ft.

The 38th floor will have about 10,000 sq ft of office space, which Frasers Centrepoint is expected to occupy.

Above that is a sky garden with a panoramic view of the city. There is also a terrace on the fourth floor of the tower.

Adjacent to the office tower is a three-storey retail podium with food and beverage spaces and a roof garden. The development will feature a 17,200 sq ft park at street level that will include an F&B establishment.

Gross effective office rents in Frasers Tower are understood to have appreciated by 10 to 15 per cent over the past year amid recovering Grade A rents in Singapore's central business district.

Market watchers believe that FCL will be aiming to reach high single-digit and if possible double-digit per square foot (psf) monthly rents for the remaining space, which is largely in the high zone of the building.

CBRE and JLL are the joint marketing agents for Frasers Tower.

Andrew Tangye, regional director of leasing at JLL, declined to comment on the identity of tenants and nature of leasing deals, but said: "FCL has timed the market well to commit tenants before the building is completed, capitalising on the fact that the office market has stabilised in 2017 and prime Grade A rents are now growing and supply tightening.

"This bodes well for Frasers Centrepoint in leasing out the remaining space in the tower."

CBRE executive director of advisory & transactions (office) Michael Tay, said: "We expect that the limited remaining floors at Frasers Tower will be swiftly taken up through this year noting the limited supply pipeline through the next two to three years."

Mr Tay said CBRE arranged a high volume of the pre-lease deals at Frasers Tower to date, but declined to name any specific parties.

"The impressive pre-commitment performance is another clear sign that the office market is fast recovering," he said. "It is really encouraging to see sectors such as energy, consumer products and financial institutions returning to the market."

Mr Tangye of JLL noted that the Tanjong Pagar, Robinson Road and Cecil Street stretch of the old CBD is being rejuvenated - first with the completion of Guoco Tower and soon Frasers Tower and upcoming redevelopments on the former CPF Building site and of the Afro-Asia Building.

AXA Tower is also undergoing a major refurbishment programme.

JLL's average monthly rental value for its CBD Grade A office basket bottomed in Q1 2017 at S$8.44 psf before recovering 9.4 per cent to S$9.23 psf in the fourth quarter.

JLL expects rents to increase over 10 per cent this year on the back of continued healthy demand, steady economic growth and sharply tapering supply in the next couple of years.

Source: Business Times, 12 Jan 2018

ARA's Q1 earnings up 6%

ARA Asset Management's net profit for the first quarter ended March rose 6 per cent to $17.8 million on the back of revenue rising 18 per cent to $38.2 million from $32.2 million a year ago.

Notably, its acquisition, divestment, and performance fees surged from $953,000 a year ago to $2.6 million. This was primarily due to acquisition fees received in relation to Prosperity Reit's acquisition of 9 Chong Yip Street in January this year, and Suntec Reit's progressive payments for its acquisition of 177 Pacific Highway.

Meanwhile, recurrent management fee for the quarter grew 11 per cent to $29.7 million due to higher Reit management fees and real estate management fees.

The group's assets under management (AUM) stood at about $25.4 billion as at March 31.

In April 2014, ARA completed the acquisition of Macquarie Real Estate Korea Limited (renamed ARA Korea Limited). With this, ARA currently manages two privately held Korean Real Estate Investment Trusts invested in office properties.

"South Korea is one of our target markets, and we are pleased to acquire this platform with a good local team in place and with one of the leading regional sovereign wealth funds as our partner. Over time, we look to grow the platform with the establishment of new Reits and private funds," said John Lim, chief executive officer of ARA Group.

Its counter dipped 1.5 cents to end trading at $1.805.

Source: Business Times, 8 May 2014

Is divestment of office assets on the cards for Alpha-CDL tie-up in '18?


THE earlier-than-anticipated recovery in Singapore office rents last year helped to fuel investment interest in office properties on the island. The string of office investment deals in 2017 included Asia Square Tower 2 in Marina View, PwC Building in Cross Street and Chevron House in Raffles Place.

This flurry of activity has led some market observers to wonder if a portfolio of less high-profile office assets transacted a short while ago, might come onto the market this year.

What they are thinking about is Manulife Centre in Bras Basah Road, Central Mall (Office Tower) in Magazine Road and 7 & 9 Tampines Grande (comprising a pair of eight-storey office buildings).

Property group City Developments sold the trio in December 2015 for about S$1.1 billion to a joint venture between Alpha Investment Partners and the group under a "profit participation securities" exercise.

Manulife Centre is a 999-year leasehold property and Central Mall (Office Tower) is a freehold asset. What CDL sold two years ago with regard to each of these two assets was a 99-year leasehold tenure, with CDL having reversionary interest of each property at the expiry of the 99 years. For 7 & 9 Tampines Grande, which CDL developed on land bought at a state tender, what the property group sold under the PPS exercise was the remainder of the 99-year leasehold interest that started on Aug 20, 2007.

Will Alpha, a seasoned player in the property fund management business and a part of Keppel Capital, want to cash in on the prevailing positive office market sentiment and divest these three assets - or at least a couple of them? Talk in the market is that Alpha is setting up a new property fund; divesting the properties in the PPS portfolio it acquired just two years ago at a profit would boost Alpha's track record and help gain traction for the new fund.

Let's revisit the key terms of the PPS deal as disclosed in late-2015.

The Alpha Asia Macro Trends Fund (AAMTF) II holds 60 per cent of the JV company that acquired the three assets, with CDL owning the balance 40 per cent. The PPS was structured with a five-year life span, although this can be extended. So at the outset, the plan was for the AAMTF II-CDL joint venture to sell the three assets by the fifth year.

From the proceeds of the asset disposal, the first priority would be to repay bank borrowings, followed by repaying AAMTF II its capital, then a preferred return to AAMTF II amounting to a total internal rate of return of up to 12.6 per cent per annum. Only after this will CDL be repaid its capital investment. Thereafter, whatever cash flows remain will be split between CDL and AAMTF II 60:40. This is the reverse of the ratio of their respective capital outlay and was aimed at incentivising CDL to maximise returns.

Now let's look at how much the three properties were priced at in the PPS scheme. The 99-year leasehold interest which CDL carved out in Manulife Centre was sold for S$487.5 million, translating to S$2,018 per square foot on net lettable area (NLA). The price for the 99-year interest in Central Mall (Office Tower) was S$218 million or S$1,657 psf. The Tampines Grande property, which at the time had 91 years' remaining lease, was priced at S$366 million or S$1,273 psf.

An educated guess would be that if Alpha had to pick two of these assets for divestment, it would probably be the two bigger ones.

The 11-storey Manulife Centre has an attractive city-fringe location, flanked by two MRT stations: Bencoolen station on the Downtown Line and Bras Basah station on the Circle Line.

As for 7 & 9 Tampines Grande, well, they are in the heart of Tampines Regional Centre and a stone's throw from the recently opened Tampines Station on the Downtown Line.

One major drawback of Manulife Centre, from a typical investor's point of view, is the impending departure of anchor tenant Manulife, which occupies about 100,000 sq ft of the building's NLA of around 241,500 sq ft; the insurer will relocate to 8 Cross Street later this year.

That said, a well-located building, albeit not in a traditional office district, with a big vacancy coming up could suit a buyer looking for its own premises to house its corporate headquarters. It could potentially upgrade the building and plant its name on it.

Even an investor may be drawn to the building if it has in mind, say, a particular tenant profile - perhaps a company like US-based co-working giant WeWork, which has big expansion plans in Singapore.

While Alpha may be game to divest Manulife Centre and perhaps also 7 & 9 Tampines Grande, will its partner CDL be willing to go along with it?

The property group may stand to book a profit if the properties are sold at significantly higher prices than what the JV paid for them.

Let's just focus on Manulife Centre for a moment; some industry observers suggest it could fetch around S$2,300-2,400 psf - translating to S$556-580 million. They based this on the S$2,526 psf on existing NLA of 261,280 sq ft (or S$660 million in total) that Chevron House fetched last month. The thinking would be that Manulife Centre's longer balance leasehold tenure of about 97 years (against Chevron House's 71 years) would help offset the locational discount.

How much potential buyers are prepared to pay for the Bras Basah property would also depend on its net yield and other factors such as whether the transaction is a plain vanilla deal or structured, with things like a leaseback arrangement or rental guarantee.

Will the price be attractive enough for CDL to agree to a sale? Bear in mind it continues to retain the reversionary interest in the property after the expiry of the 99-year leasehold interest in the property carved out for the PPS deal.

Or will CDL take a longer term view, with an eye, for instance, on the potential to increase Manulife Centre's lettable area by scrapping excess car park lots? It could expand the retail space from just the ground floor currently to the second level or even the third level. Retail rents are typically higher than office rents, which means such a strategy would increase the value of the Bras Basah Road property.

If the price offers that Manulife Centre garners are not enticing for CDL, there is always the possibility it could match the highest offer and buy back the balance of the 99-year tenure it had carved out in the building - giving Alpha the exit it wants. Assuming it wants an exit.

Source: Business Times, 11 Jan 2018

Proptech is all the buzz, just not yet in Asia


Altus survey shows property firms in Asia are less optimistic than rest of the world about its potential

ARE VENTURE capital funds and commercial real estate companies jumping onto the property technology (proptech) bandwagon without real conviction about its benefits?

A recent survey by consultancy Altus Group reveals an incongruity between bullish proptech projections and commercial property companies' actual attitudes towards the potential of proptech to disrupt in the industry.

The survey found that respondents in Asia were less optimistic than the global average about the potential of proptech; the only exception where they showed more optimism than their global counterparts was in driverless vehicles.

ARE VENTURE capital funds and commercial real estate companies jumping onto the property technology (proptech) bandwagon without real conviction about its benefits?

A recent survey by consultancy Altus Group reveals an incongruity between bullish proptech projections and commercial property companies' actual attitudes towards the potential of proptech to disrupt in the industry.

The survey found that respondents in Asia were less optimistic than the global average about the potential of proptech; the only exception where they showed more optimism than their global counterparts was in driverless vehicles.

This compares to global percentages of 15 per cent for blockchain, and 18 per cent for AR and VR technologies. In all, 400 C-suite level and senior executives in commercial real estate companies participated in the survey globally.

Even in areas such as data analytics, artificial intelligence and smart building technologies, the number of respondents in Asia who believe that these will have a major impact on the sector ranged between 20 and 30 per cent - lower than the global percentage (see chart).

Robert Courteau, CEO of Altus Group, told The Business Times that the reason for the apathy of "non-believers" in proptech could be because the fusion of technology into the traditional real estate sector is still a fairly new phenomenon here, compared to the financial, manufacturing and even retail sectors which already have their own array of solutions to track data and perform predictive analytics.

While there has been a rapid emergence of new applications designed to address challenges and pain points in the commercial real estate industry in recent years, many of these solutions have not come to market in Asia, he said.

"The other reason is that people have implemented different applications (in the past), and integration is very complex between major management systems and applications."

To overcome this, programmes need to allow for export and translation in order to integrate and match data coming in from various sources.

Or they can have an application programming interface (API) developing platform which allows for data sharing with third-party players, he said.

Based on the survey, more than half the companies globally are using significantly more applications now than they were three years ago.

Ironically, this can actually move the industry backwards through the addition of data silos, which consequently leads to problems in data management and keeping data in a consistent format, it said.

Some respondents were also resistant to the automation of processes, not just merely out of fear of losing their jobs, but also due to a lack of available technology and shortage of IT staff who know how to work these applications. This explains why big consultancies have been hiring people from outside the real estate sector to set up these technologies within their organisations.

But Mr Courteau is surprised that for some "older" proptech like smart building technologies, there is still quite a large percentage that does not believe it will make an impactful change on the sector despite the rising adoption rate. Already, early movers have been able to develop more efficient buildings at lower costs.

Perhaps property companies in Asia still need time to overcome their uncertainty and become convinced of the practical benefits of adopting such technologies, he said.

Proptech firms BT spoke to agreed that even in Singapore, there are developers who are wary of proptech, and the low adoption rate here could be because the sales and lease markets are still doing well without it.

51VR's Singapore managing director Andrew Hu said that while there are developers that want to take advantage of the infancy of the market to establish themselves as being at the forefront of proptech, there are also others who are cautious and feel that the market is not ready for such new technologies such as VR.

However, he believes the trend may shift as more millennials make up the pool of new home buyers. His company uses VR and AR technology to promote property sales.

Tan Kok Keong, co-founder of FundPlaces, a company that operates a blockchain-based online platform where investors can invest in real estate projects, said it is precisely because the traditional models of sales and leasing are still working well in Singapore that developers do not feel the urgency to adopt new ways of marketing, even with the prospect of substantial savings in commission and time.

What the industry needs is a leader, even possibly from the government, to take the bold step forward.

The Housing and Development Board is a good example of this when it recently launched its new online resale portal that prompted industry concerns that it could render the jobs of buy-side agents and valuers redundant, even though the portal can also save homebuyers time and bother in their transactions.

"As for blockchain technology, it is not well understood and remains under-explored. That is why the potential applications are not well conceived in Singapore at this point. Collectively, probably, the people who operate these platforms should be given more airtime to present ideas to developers."

Comparing it to more advanced markets like the US where massive funding for blockchain-based technologies drive its rapid adoption, he said that in Singapore, there is no real leader pushing for it in the real estate industry.

According to CB Insights, a venture capital database, the volume of proptech financing globally has been on a steady increase, rising about 36 per cent year-on-year to US$2.7 billion in 2016, and projected to increase another 10 per cent in 2017 to US$3 billion. The final 2017 investment figure is not released yet.

Source: Business Times, 8 Jan 2018

Big property deals surge to 10-year high in 2017

Deals worth at least S$10m reach S$35.6b last year, up 57% from 2016, but tough act to follow, say observers


SALES of big-ticket property transactions of S$10 million and above in 2017 surged to their highest level in a decade. This, however, was short of the record achieved in 2007, show latest figures from Savills Singapore and CBRE released separately to The Business Times.

According to Savills Singapore's preliminary tally as at Dec 27, investment sales of property reached S$35.64 billion, up 57.3 per cent from the S$22.66 billion in 2016. This was the best since the record S$41.1 billion during the 2007 property boom.

Based on JLL's figures, the surge in 2017 was supported by a strong revival in collective sales to S$8.6 billion from just over S$1 billion in 2016.

There were also large deals in the office, retail and industrial segments.

Also boosting last year's investment sales tally were state land sales in choice locations. These included a coveted commercial and residential site in the new Bidadari Estate that went to a tie-up between Singapore Press Holdings and Kajima Development; and a residential site in Stirling Road clinched by a partnership between Logan Property from China's Guangdong province and Chinese conglomerate Nanshan Group.

However, property consultants think that 2017's stellar figures will be a tough act to follow.

For one thing, collective sale transactions are expected to ease amid an expected widening in price gap between owners and developers, said JLL Singapore's head of research and consultancy Tay Huey Ying.

She said: "Many developers are still trying to secure land for fresh private housing development. However, there is a risk that collective sale owners will become more optimistic in their price expectations while demand becomes increasingly satisfied as more sites are sold... "

Desmond Sim, CBRE Research head of Singapore and South-East Asia, said that in the commercial (office and retail) segment, a strong year of sales - which included Asia Square Tower 2's office and retail space; PwC Building in Cross Street; Jurong Point mall; and a half stake in One George Street - has reduced investible stock.

"So what we are likely to see in 2018 may be smaller deals."

Agreeing, Savills Singapore research head Alan Cheong said: "The prime office and retail assets that have been sold in the past couple of years are not likely to return to the market anytime soon because they have been acquired by long-term investors."

He predicted investment sales to ease to around S$25-27 billion this year - above the 2016 level of S$22.7 billion.

Mr Sim said that he would not be surprised if 2018's total investment sales tally returned to 2015-2016 levels of S$18-23 billion going by CBRE data.

He envisaged a trend of some property investors - local and foreign - looking for niche assets to seek higher returns.

For instance, if investors' area of interest is logistics, they could zoom in on a specialised segment such as cold-store. Similarly one stands to reap a higher return from investing in a data centre, which requires greater technical expertise, than a typical industrial property.

He cited rising interest rates among the risk factors for investment sales this year. "If the new Fed chair's reading of the US economy is more bullish than Janet Yellen's, then there will be more upward pressure on interest rates in the US, which will have a domino effect on Singapore mortgage and lending rates.

"This will have a greater impact on private home purchases as well as the investment sales market. We should also take heed of the Singapore government's warnings about rising private residential land bids by developers, and the market heating up."

On prospects in the en bloc sale market, JLL's Ms Tay said: "With the spike in potential supply of new homes arising from 2017's robust collective sales activity, developers might start to become more selective and exercise greater caution when evaluating large sites."

In any case, fewer large sites are likely to be transacted in 2018, given that many of the big ex-HUDC plots have already been sold.

CBRE director of capital markets Galven Tan said that as most en bloc sites transacted last year were in the suburbs, there may be more focus in the prime areas or Core Central Region in 2018.

Savills' Mr Cheong said that given the hoops that developers now have to jump through to secure big en bloc sale sites - including traffic impact studies and prospects of rising development charges payable to the state for some sites - large developers may be more willing to trigger the release of sites on the state's reserve list.

Savills' analysis shows that last year, the residential sector accounted for the biggest share - 48.7 per cent - of the total S$35.64 billion investment sales pie. The S$17.34 billion of big-ticket residential property transactions in 2017 was a jump of 134.2 per cent from S$7.41 billion in 2016.

The commercial property segment, comprising offices and retail space, had a 34 per cent share. The transaction value rose 30.4 per cent to S$12.1 billion from S$9.28 billion in 2016.

Said Mr Cheong: "The coincidental availability of rare and good-quality investible grade assets such as Jurong Point, Asia Square Tower 2 and One George Street made investors pounce on the opportunity."

The industrial property segment's contribution to investment sales rose 43.8 per cent to S$3.78 billion in 2017, giving it a 10.6 per cent share.

The mixed development segment had a 6 per cent share at S$2.14 billion, down from S$3.1 billion in 2016.

Source: Business Times, 2 Jan 2018

Gaw Capital keen on more S'pore properties

HK property group also plans to revamp PoMo, with focus on retail area


Hong Kong private equity property group Gaw Capital Partners (GCP) is keen to expand its presence here after investing around $500 million in Singapore in recent years.

It made its intentions clear last month when it completed the $342 million acquisition of PoMo, a nine-storey office and retail block in Selegie Road.

It intends to revamp the block, particularly its retail component, to tap the student population from the many educational institutions in the area.

President and co-founder Kenneth Gaw said: "Singapore's property sector is one of the very few major markets in Asia which suffered a downturn in the past few years.

"It is now on the cusp of recovery and we are confident about buying into a recovery."

The group also owns Hotel G in Middle Road. It is a revamp of the former Big Hotel that GCP picked up for $203 million in late 2015 before forking out a further $10 million to refurbish and rebrand the asset.

Both properties are in the Bugis arts and cultural district.

"Other than Hotel G and PoMo, we are interested in acquiring other assets in the commercial office and residential sectors in Singapore," said Mr Gaw.

He and his elder brother Goodwin set up GCP in 2005.

Since its inception, the group has raised equity of US$8.7 billion (S$11.6 billion) and has US$13.4 billion in assets under management.

It specialises in adding strategic value to underutilised real estate through redesign and repositioning.

Mr Gaw noted that in Singapore, with the successful official launch of Hotel G last year, the group's asset management team has become familiar with the neighbourhood and its traffic flow.

"We're confident that we can add value to PoMo," he said.

GCP senior investment director Imelda Tham noted PoMo's strategic location in a vibrant arts and educational neighbourhood and its close proximity to several large educational institutions, which provide access to about 17,000 captive students and teaching staff in the area.

The Singapore Management University, Nanyang Academy of Fine Arts, LaSalle College of the Arts (McNally Campus), School Of the Arts and Kaplan are among the educational institutions in the area.

Ms Tham said: "PoMo itself is anchored by Kaplan, which has a substantial student enrolment.

"We believe we can harness this potential by creating a more comprehensive retail tenant mix that engages the student population and draws higher foot traffic into the mall.

"The mall has a mix of food and beverage (F&B), fitness, and health and beauty tenants, and we are looking to introduce more experiential aspects by introducing an entertainment zone."

PoMo's net lettable area of about 180,000 sq ft comprises 110,000 sq ft of offices - levels four to nine - and 70,000 sq ft of retail space that goes from basement one to level three.

Its offices are fully leased, with education service provider Kaplan the biggest tenant. Almost the whole of level five is designated for the Community/Sports Facilities Scheme, with The Little Arts Academy occupying it now.

The retail space is 75 per cent leased, achieving an average rent of about $9 psf a month. Tenants include Evolve Mixed Martial Arts, Cosmoprof Academy, Mos Burger, Ya Kun Kaya Toast and other F&B outlets. Major tenancies will be expiring in about two years.

PoMo, which has 143 carpark spaces, is on a site with 99-year leasehold tenure starting on March 17, 1983. The 43,027 sq ft plot is zoned for commercial use.

The existing gross floor area of 234,996 sq ft has maximised the site's development potential.

Revamp work is likely to begin progressively this year, Ms Tham said. She could not estimate the cost of the project as it is still in the planning phase.

It will be focused mainly on the retail area to improve the circulation and enhance visibility of the shops, with light touch-ups of the common areas and the facade.

Mr Gaw said: "We will harness our numerous experiences in other parts of the world when we renovate PoMo."

The firm's renovations include work at Pacific Century Place in Beijing, Plaza 353 in Shanghai, Metropolitan Plaza in Guangzhou and West 9 Zone retail podium in Hong Kong.

GCP manages four opportunistic property funds targeting assets in the Greater China and Asia-Pacific regions, and a fund that specialises in hospitality assets in Asia-Pacific.

It also manages two funds that invest in United States properties, as well as various separate account investments in Britain.

Its activities include investing, value-adding renovations and development in residential, commercial offices, retail malls, serviced apartments, hotels and logistics.

Source: Straits Times, 2 Jan 2018

Office market starts shifting in landlords' favour again


Take-up rate for new Grade A space in the CBD was better than expected this year amid a rosier economic outlook

IT TOOK a while, but the high end of Singapore's office rentals finally hit the bottom this year - earlier than expected.

This was because the take-up rate for Grade A office space in new developments in the Central Business District (CBD) was more robust than anticipated. Another reason was the rosier economic outlook.

Most property consultants expect the upward rental momentum to continue next year, citing expectations of continued healthy demand for office space from the likes of tech companies and co-working operators.

Some agents are also pinning their hopes on a recovery in demand from financial institutions, traditionally the major occupiers of CBD offices.

However, at least one office-leasing veteran is being more cautious.

Moray Armstrong, CBRE's managing director for advisory and transaction services, said: "Rental growth in the office sector is expected in the near term, but will likely be at modest rates, while the market absorbs the remaining space from the supply surge over the last two years."

The tightening availability of quality space in 2019-2020 means that the market is likely to start delivering slightly stronger rental growth in 2019.

He added: "Most indicators are positive for the Singapore office sector, but the underlying strength of occupier demand remains patchy and limited to a select group of sectors - including technology and co-working and, to a lesser extent, insurance.

"A more broad-based demand recovery will be needed to lend support to an overall stronger rental growth story."

That said, the Grade A segment is expected to outperform, given favourable supply dynamics and the fact that it had experienced a deeper correction through 2015/2016, he added.

Ashley Swan, senior director of commercial at Savills Singapore, said that from a tenant's perspective, the biggest challenge in the office leasing market this year has been the acceleration of rents. This caught many by surprise, as it does not represent the general business sentiment, which is seeing some green shoots - but not robust growth.

"Some sectors like technology continue to grow quickly; others like financial institutions, and oil and gas remain challenging."

In late June this year , JLL was the first property consulting group to point out that Grade A office rents in Singapore's CBD may have bottomed in Q1. The average monthly rental value for its basket of such office space inched up 0.7 per cent to S$8.50 per square foot in Q2, from a low of S$8.44 psf in Q1 - making for the first quarter-on-quarter uptick after two years of declines.

JLL's head of Singapore research and consultancy Tay Huey Ying estimates that the Q4 2017 rental figure will come in at about 8 to 10 per cent higher than Q4 2016.

She predicts a further hike of more than 10 per cent in 2018, citing expected steady economic growth and sharply tapering pipeline supply over the next two years.

JLL's head of markets Chris Archibold estimates that the average rental value of JLL's prime CBD Grade A office basket - capturing the choicest office buildings, mostly in Marina Bay - will end this year with an 8-9 per cent year-on-year gain, and then climb a further 12 to 16 per cent next year.

Savills Singapore envisages a similar pattern, forecasting a nearly 15 per cent gain in 2018 for the average monthly rental value of its AAA office basket, comprising the creme de la creme of CBD office stock; this outpaces the 10 per cent predicted rental rise for its overall CBD Grade A basket and follows hikes of 4.4 per cent and 1.9 per cent respectively this year.

Alan Cheong, research head at the firm, said: "In 2017, landlords were emboldened when they saw the high take-up for newly completed CBD Grade A office buildings. With these properties sustantially leased, landlords feel less pressure and have upped their rents."

Mr Swan added: "When news of Facebook's lease of around 300,000 sq ft in Marina One broke earlier this year, office landlords became more optimistic."

Mr Cheong noted that the upbeat office leasing mood applies not only to new developments but also in some cases to secondary stock that has arisen in older buildings from tenants relocating to new projects. "Such space has, in many instances, been backfilled by smaller tenants and co-working operators who need a CBD presence for image purposes."

An example is Distrii, a Chinese co-working space operator which has leased over 60,000 sq ft on the lower levels at Republic Plaza; this was part of the space that Japanese bank MUFG vacated in the building when it moved to Marina One.

Mr Cheong said: "Landlords believe that these positive office leasing trends will continue in 2018 and are thus prepared to ask for higher rents."

The upbeat pronouncements on office rents come despite a rise in vacancy rates.

With the completions of Guoco Tower in Tanjong Pagar and Duo Tower in Bugis in 2016, followed by Marina One's East and West Towers and UIC Building in Shenton Way this year, the Urban Redevelopment Authority put the island-wide office vacancy rate at 13.3 per cent as at end-Q3 2017. (The rate was 9.5 per cent at the end of 2015 and 11.1 per cent at end-2016.)

The rising vacancy rate this year may seem incongruous with the recovery in CBD Grade A office rents, but property consultants say that this comes from the lumpiness in new project completions.

For example, Marina One's two office towers added about 1.9 million sq ft; they were completed this year but most tenants have yet to move in, either because they are fitting out their new premises or staying on at their existing premises, pending the end of their current leases.

JLL's Ms Tay said: "As more occupiers move into their new premises, and against a backdrop of continued improvement in office demand and lower new completions in 2018, we can look forward to vacancies abating. This will fuel rental growth."

CBRE estimates that office completions will ease by 35 per cent to around 1.78 million sq ft next year (with the major completions being Frasers Tower and Paya Lebar Quarter) from 2.73 million sq ft this year.

Over the past 12 to 18 months, many of the relocations have involved businesses moving from older, smaller floor-plate buildings to newer buildings with larger, more efficient floor plates, noted Mr Archibold of JLL.

"This has been spurred by the increasing global trend for companies to look at the way they occupy their space and put in place more flexibility around how their staff use it (by incorporating different types of shared work space).

"This has a positive effect on both the efficiency of the space and the desirability from a user's point of view."

Agreeing, Mr Swan said he expects tenants to continue focusing on an agile office strategy next year. The resulting space saving will come in handy in the face of rising rents.

Some observers are upbeat that there is still room for co-working operators to grow next year, but others predict a slowdown, with a possibility of some mergers and acquisitions in the sector.

On a more positive note, there are some bright spots for office demand on the horizon.

Mr Archibold said: "We have seen the cessation of the reduction in space by many of the regional and global financial institutions. While this trend has not completely ceased, it is far reduced from 2016 and in some sporadic cases, we have seen growth in this industry."

Agreeing, Mr Armstrong said: "The banking sector looks set to navigate its way towards better times." A stable and stronger global economic recovery will drive demand for complementary business services - for example, financial, professional services, legal, advertising, he added.

The tech sector is expected to be bolstered by The Smart Nation initiative. "And there is still a large amount of venture capital funding for new and existing tech firms that will help drive their expansion globally; Singapore continues to stand out as an attractive gateway to South-east Asia for such tech firms, said Mr Armstrong.

Some agents predict that with the balance of power gradually shifting towards landlords, they would be inclined to delay commencement of lease-renewal discussions to around six months before lease expiry - to try and lock in higher rents.

An agent who declined to be named quipped: "When the market is going up, landlords tend to stick closer to the terms of the lease agreement, which typically states that renewal negotiations begin six to nine months prior to expiry. But when rents are going down, landlords are happy to engage tenants 12 to 18 months ahead of lease expiry."

Giving his take, Mr Armstrong said: "Tenants will be best positioned by taking early action on future office decisions."

Source: Business Times, 28 Dec 2017

Co-working space startup WeWork calls Funan home

SINGAPORE - The manager of CapitaLand Mall Trust, Capitaland Mall Trust Management Limited, announced it has secured its first office tenant in Funan. Co-working start-up WeWork is leasing 40,000 sq ft of space in the integrated development.

WeWork's space will be located across two floors at Funan's North Office block, which is linked to the retail section of the development.

WeWork's co-working space will feature a smart office with facial recognition turnstiles and optional card-less entry into the office, said Tony Tan, chief executive of the trust manager.

Among other facilities at Funan, workers will also have access to "video-based smart car parking facilities, a 24-hour drive-through click-and-collect, hands-free shopping service using robotics and app-based booking of all the facilities within the development", added Mr Tan.

The upcoming Funan development features 500,000 sq ft of retail space, two Grade A office blocks, and The Ascott Limited's lyf brand of co-living serviced residence, all linked via a direct underpass to City Hall MRT interchange.

Amenities will include a Golden Village cineplex, a gym, a futsal court, a swimming pool and a 55-lane rock-climbing facility. According to CapitaLand, it will also be the first commercial building to allow cycling through the building with a dedicated indoor cycling path.

The site is slated for completion in the fourth quarter of 2019.

Source: Straits Times, 14 Dec 2017