Many new office buildings pre-leased

A sense of strength is coming back into the property market this year, with the bottom of the cycle possibly closing in. And consumer interest, in both the residential and commercial fronts, are on the rise too.

FraserTOwersWith news of Facebook pre-leasing space at Marina One, the upcoming Frasers Tower in the heart of the Central Business District (CBD) has also received leasing proposals for 30 per cent of its 38-storey office building from various interest tenants. Most were from multi-national conglomerates, legal services, technology firms and a serviced-office provider, The Executive Centre who expressed interest in taking up an entire 20,000 sq ft floor space.

New office buildings are gradually filling up even before they are completed or ready for occupancy. There is however some movement from other existing buildings as tenants take the opportunity to relocate or upgrade, as seen in the mix of tenancy in Marina One and Guoco Tower. Frasers Tower has a 663,000 sq ft of total net leasable area. More new office spaces are currently being developed in the CBD, including UIC Building and the new property which will sit on the site of the previous CPF building. Though office rents have been falling, it may be a good sign after all as the market would have picked up by the time these new buildings are

Singapore gains traction as property investment safe haven

A little red dot, almost invisible in the huge map of the world. But as political and economic turmoil rock the majority, Singapore is increasingly considered by many global investors as a safe haven for foreign funds.

Asia SquareThe strength of the SingDollar, coupled with a relatively stable political climate has provided foreign investors with the assurance that their monies are well-protected. Thus far, $8.85 billion has reportedly been spent by foreign investment on Singapore property, a 62 per cent increase from last year, the highest in 9 years and making up 41.7 per cent of total property spending in 2016. In 2015, the total foreign monies invested in the local property market was $5.46 million and in 2014, $4.67 million. Qatar Investment Authority was a major foreign player this year, putting in $3.4 billion for Asia Square Tower One. Also in the Marina Bay area, a white site in Central Boulevard has been bid on and won by Wealthy Link of IOI properties at $2.57 billion. Projected to be up for sale next year are Jurong Point Mall and Asia Square Tower Two.

Though the commercial property rental market has dulled slightly, the lack of new office spaces being developed within the next 3 to 4 years might help the rental market eventually gain traction. 2020 might be the watershed year when the market is projected to rebound significantly and most investors are willing and able to financially wait out the next few years ahead.

marina-bay-suitesIn the residential market, a number of en bloc sales were successfully tendered this year, with Qingjian Realty’s $638 million for Shunfu Ville taking the spotlight. The sharp increase in interest this year could be the fact that other markets in Asia have been on the upturn in the past decade, and although Singapore has been priced out in terms of capital gains due to an economic slowdown during this time, she has more than made up for lost time with this year’s results.

 

Prime Marina Bay site expected to lure aggressive bids

The Urban Redevelopment Authority (URA) has recently released a 1.1 ha prime site at Marina Bay in Central Boulevard. Coupled with news that Asian banks are expected to strengthen their presence in Singapore, this could be an office development site developers hanker after.

Asia Square

Photo credit: www.thehumanbuilding.com

The last time a site at Marina Bay was put up for tender was in 2007 – Asia Square now stands on this site. With the Central Business District location and size of the site taken into consideration, it will no doubt yield a number of plum Grade A offices. Bids are expected to come from mid- to large-sized developers as well as real estate investment funds, at aggressively too, as the site holds the potential for an impressive building with a huge number of units.

Despite the softening commercial sales and rental market, the successful bidder will be likely to have the project completed by 2020, which allows sufficient time for a market upturn. The bid closes on 8 November and investment entities from China and the Middle East may show particular interest. In fact, China’s Nanshan Group is said to be the ones triggering the release of the site as it was originally on the Government’s reserve list and was said to have been released after a developer committed to bidding at least $1.536 billion. But as more buildings are seeing increased levels of commitment from companies looking to stake a presence in Southeast-Asia, developers may have more confidence taking on commercial projects.

Banking on Shophouses

Who would have knew half a century back that the humble shophouse would be worth millions today. As their numbers decreased and rarity grew, so did their value. If a few millions would have gotten you baulking a few years back, the most recent $10.8 million, approximately $3,750 psf, for an Ann Siang road shophouse would have you out of your seats by now.

AmoyStreet ShophouseForeigners and wealth funds are increasingly looking into investment opportunities in these rare commodities, especially those in the central business district (CBD). Shophouses’ popularity amongst the rich and affluent have leapfrogged in the past couple of decades despite rental prices having stayed stagnant. As some of these wealth funds are under pressure to utilise capital and expand portfolios, foreign purchases of shophouses in District 1 and 2 have picked up over the past couple of years. 99-year leasehold shophouses are now going for close to $3,000 psf.

Though the commercial leasing market has been on the downhill slide, tenants are still more willing to fork out say $18,000 for a renovated shophouse unit as compared to the higher rents in Grade A offices or shopping malls. It comes as no surprise then, that 2 shophouses in Pagoda street wold for $24.2 million at around $2,800 psf; and another 6 units in Amoy street went for $20.25 million or $2,411 psf to a Chinese and a Spanish investor respectively. The continued interest in this market segment will continue well into the year and next, as prices have risen by 10% despite a fall in transaction volume last year.

 

Quiet on the Office front

5-shenton-wayIn preparation of this year’s imminent economic turmoil, businesses and companies are finding all ways to downsize, from retrenchments to cutting down on their office spaces or even uprooting to another country entirely. This may pose a spot of trouble for commercial real estate, especially in the more upmarket and expensive Central Business District (CBD).

This plus competition from the soon-to-be-completed Marina One and more available office spaces at the new Marina Bay Financial District such as Asia Square. The Tanjong Pagar and Shenton Way area are also seeing future competition from new office developments such as 5 Shenton Way, Robinson Towers and Frasers Tower. Some tenants have gone into subletting their spaces for lesser, subsidising rents for their sublet tenants so they get better deals than if they were to go to the landlords directly.

Robinsons Towers

Photo: Robinsons Towers (photo by taunsing.com)

But not all of the movement is out of the country. As Singapore remains one of the more established bases for multinational companies (MNCs), international firms may still continue to relocate their regional headquarters here. Hong Kong is the other popular base for MNCs, where housing rentals and costs of living  are comparable.

Technology, media and telecommunication companies  are however beating the odds and growing in numbers and size. Airbnb is now taking up 30,000 sq ft on Cecil Street, expanding from their original 13,000 sq ft. And Uber has also taken up 20,000 sq ft in Mapletree Anson.

 

Lull in private home prices

Despite a projected lull in local private home prices this year, interest in Singapore’s property market remains steady as prime residential property prices are still 165 per cent and 92 per cent lower than those in Hong Kong and London respectively.

 Photo credit: Singapore Tourism Board

So despite property analysts predicting a 5 to 10 per cent fall in prime and mass market private property prices this year, the local property market’s core remains strong. 2010’s property cooling measures may have kept property prices 17 per cent lower than what it could have been. Private home prices have fallen 4 per cent last year, following a 3.7 per cent fall in 2014. In the luxury home market, prices have fallen 20 per cent since the Additional Buyers’ Stamp Duty (ABSD) was implemented in 2011.

China’s recent growth slump, plunging oil prices, the Federal Reserve interest rate hike and a general sense of a global recession looming, might consequently affect the property markets around the world. Businesses may reconsider their expansion plans, which could mean a fall in demand for office spaces and commercial properties. This in turn may affect the number of expatriates entering the country, which may also affect rental prices.

This year could prove tough for investors and property sellers, but not without glimpses of hope. 2016 may be the year to hang-in-there, but industry experts are expecting 2017 to take a turn for the better.