Category Archives: Industrial

Rolling over debt keeps Singapore REITS in shape

Trusts have been tightening their belts on expectations that interest rates could rise over the next few years, which would have major repercussions as borrowing costs are a major component of their expenses, said S&P credit analyst Craig Parker.

“Trusts with sizeable debt exposure to floating interest rates are likely to suffer most.

“The severity of the impact will depend on the buffer that each Reit has relative to its financial policy,” Mr Parker noted.

“Still, we expect that rated Asia-Pacific Reits can largely shoulder the higher interest burden. The Reits are attempting to cut their interest costs and extending their debt tenors.

“They are also refinancing expensive debt incurred during the height of the global financial crisis at reduced rates.

“Furthermore, Reit managers are still holding back even though they have room to borrow substantially more.”

S&P upgraded CapitaCommercial Trust to A-/Stable due to an improving business profile and a more favourable view of its credit metrics. The ratings service also upgraded HongKong Land Holdings and HongKong Land Co to A/Stable due to its reassessment of their financial risk policies.

Growth in rental demand and rates here have been flat or slightly sluggish this year for properties in Reits rated by S&P.

“Nevertheless, we project a stable credit outlook for the Reits we rate,” said Mr Parker.

“The Reits have amassed high-quality portfolios that can withstand economic headwinds better than lesser-quality properties held by their competitors, sustaining their credit quality despite sluggish rental growth.”

Limited new retail assets in the near term will sustain high occupancy at most suburban malls in Singapore.

But retail rental growth has been subdued due to slowing tourist arrivals, he noted.

Meanwhile, office and industrial rents here are approaching peak levels, Mr Parker said.

Industrial rents have been strong and capital values have increased, with vacancy rates falling from a peak of 14 per cent in 2006 to 9.5 per cent this year.

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Keppel Data Centre (DC) REIT set for Dec listing

The first real estate investment trust comprising data centres will be listed here next month and promises to be one of the largest and most highly anticipated initial public offerings of the year.

Keppel Telecommunications and Transportation (Keppel T&T) aims to list Keppel DC Reit on Dec 12 once it has won shareholder backing at an extraordinary general meeting on Nov 25. The offering is estimated at $811 million, according to a circular released yesterday to the bourse.

Keppel T&T has received a letter of eligibility to list.

It will also ask shareholders to support a proposal to divest its interests in Keppel Digihub, Keppel Datahub 1, Gore Hill Data Centre and Citadel 100 Data Centre, and inject them into the Reit.

The divestment of these four properties is expected to raise $505.4 million in gross proceeds.

About half of this amount – $244.1 million – will be used to subscribe for units in the new Reit, in which Keppel T&T, a logistics, data-centre services and investment firm, will hold a 30 per cent stake.

The Reit will start with eight data-centre properties in the Asia-Pacific and Europe: Keppel Digihub and Keppel Datahub 1 in Singapore; Gore Hill Data Centre in Sydney, Australia, and iseek Data Centre in Brisbane, Australia; Basis Bay Data Centre in Selangor, Malaysia; GV7 Data Centre in London, Britain; Almere Data Centre in Amsterdam, the Netherlands; and Citadel 100 Data Centre in Dublin, Ireland.

It will be managed by Keppel DC Reit Management, a wholly owned unit of Keppel T&T.

News about the listing galvanised the company’s stock to a six-year high of $1.87 in January when it was first announced.

A data centre is a facility that centralises an organisation’s IT operations and equipment, and where it stores, manages and disseminates its data.

There has been a surge in demand for data centres, driven by growth in e-commerce, cloud computing and big data, said Keppel T&T chief executive Thomas Pang. The proposed mainboard listing “is poised to capitalise on these trends”, he added.

Keppel T&T will continue to look out for opportunities to develop data-centre assets across its target markets of the Asia-Pacific and Europe after the transaction, the company stated yesterday.

Keppel T&T has had to rely on its parent, Keppel Corp, for funding up to now, so the Reit would allow it to finance more of its own expansion, said CIMB analysts Jessalynn Chen and Kenneth Ng in a September report.

The listing would also allow the company to realise the full market value of its data centres. Still, the company “has been careful and measured in its expansion plans” so far, they noted.

Therefore, aggressive investments in the data-centre space are not expected even after the listing, though Keppel T&T may collaborate with other data-centre owners or managers to co-invest in new properties.

– See more at: http://business.asiaone.com/news/keppel-tts-data-centre-reit-set-dec-12-listing#sthash.UaIMRfpm.dpuf

JTC Chemicals Hub — a ready specialised premises for SMEs in the industry

SMALL and medium enterprises (SMEs) can soon access a suite of plug and play solutions at the JTC Chemicals Hub @ Tuas View, Singapore’s first multi-user and high-rise specialised development designed to house chemical companies involved in the manufacturing, blending and distribution of chemicals, including chemicals classified as dangerous goods.

The JTC Chemicals Hub, which is estimated to cost S$67 million, is designed with safety-compliant features, such as enhanced fire protection systems to facilitate safe handling of chemicals, and shared facilities such as fire-water retention tanks and a centralised foam system.

Strategically located near Jurong Island, Tuas Biomedical Park, Tuas Industrial Estate, Lube Park and the upcoming Tuas Port, the Chemicals Hub will bring chemical companies closer to their customers and will allow them to distribute their products and raw materials efficiently, said JTC.

The hub is situated on a 1.6 hectare site, and consists of 14 modular units of 1,200 square metres each.

The development comprises a three-storey production block and a five-storey annex block to cater to R&D activities. The annex block will also house light industrial and ancillary offices. By clustering the companies in a single development, companies can achieve land savings of up to 50 per cent, said JTC.

“We understand that a chemical company taking up just one unit of 1,200sqm of space in a normal factory for their manufacturing and storage operations would have to incur at least half a million dollars in capital investments to install such safety measures, and that will also increase the set-up time of about three more months. If they were to set up in JTC Chemicals Hub, they would be able to save this amount and shorten the set-up time correspondingly,” noted JTC chief executive officer Png Cheong Boon in his welcome address at the groundbreaking event on Friday.

Today, the chemical sector is the largest contributor to Singapore’s manufacturing output, accounting for about one third, according to 2013 figures.

The hub joins other infrastructure solutions such as the Jurong Island and the recently opened Jurong Rock Caverns. Separately, private sector players such as Vopak and SK Gas will be jointly developing the first LPG facility in Singapore, which will provide an alternative feedstock for companies on Jurong Island.

The construction of JTC Chemicals Hub @ Tuas View is slated for completion by the second quarter of 2016.

Amendment note: Quote has been amended to better reflect that SMEs enjoy these savings if they take up space in the chemical hub. 

http://www.businesstimes.com.sg/real-estate/plug-play-ahead-for-smes-in-chemical-sector

Prices, rents of industrial space taper off

Prices and rentals of industrial space kept moderating in tandem with occupancy rates in the third quarter after a rise in supply of industrial land and space by the Government in recent years.

Tender prices for industrial government land sale sites targeting multiple-user developments have also declined, said state industrial landlord JTC yesterday.

Indicies for industrial space and multiple-user rental fell by 1.8 per cent and 2.2 per cent respectively, quarter on quarter.

Year on year, those two indices declined by 1.3 per cent and 2.3 per cent respectively.

This is the first year-on-year drop in rentals since early 2010, in contrast to the average increase of about 8 per cent a year over the past four years, said JTC.

Prices of industrial space also kept stabilising, with the industrial space and multiple-user factory space price indices falling by 0.9 per cent and 1.8 per cent respectively, quarter on quarter.

These falls reverse their respective gains of 0.7 per cent and 2.5 per cent in the previous quarter.

Colliers International director of research and advisory Chia Siew Chuin said the fall in multiple-user factory prices is not surprising, given the subdued state of strata-titled industrial property sales amid a price standoff between buyers and sellers.

Year on year, the industrial space and multiple-user factory space price indices rose by 0.2 per cent and 3.4 per cent respectively, significantly slower than their average rises of about 16 per cent per year over the past four years.

After a 0.9 percentage point decline in the second quarter, the occupancy rate of the overall industrial property market edged up by 0.2 percentage point quarter on quarter to 90.9 per cent in the third quarter.

This was on the back of a 1 per cent rise in demand, outstripping a 0.8 per cent increase in supply.

The better occupancy rate was driven by the warehouse segment, mainly due to the take-up of a few new single-user warehouses.

For multiple-user factory space, the occupancy rate fell by 0.5 percentage point to 86.8 per cent, the lowest level since late 2007, as a 1.5 per cent increase in supply outstripped the 1 per cent increase in demand.

Year on year, the occupancy rate of the overall industrial property market slid 1.8 percentage points to 90.9 per cent.

For multiple-user factories, the occupancy rate fell by 3.3 percentage points to 86.8 per cent.

Looking ahead, about 1.2 million sq m of industrial space, including 167,000 sq m of multiple- user factory space, is set to come onstream this quarter, bringing the full year supply of industrial space to 3.1 million sq m.

A further 2.6 million sq m and 1.9 million sq m of industrial space is tipped to come onstream in 2015 and 2016 respectively.

This is significantly higher than the average annual supply and demand of about 1.4 million sq m and 900,000 sq m respectively in the past three years, and is likely to exert further downward pressure on occupancy rates, JTC noted.

The Government will keep monitoring the industrial property market closely to ensure that the diverse needs of industrialists are met, it added.

“Appropriate measures will also be introduced where necessary to promote a stable and sustainable industrial property market.

“JTC will also continue to develop more specialised and innovative facilities with productivity- enabling features such as shared facilities and services, to support the growth of key industry clusters and catalyse new ones in the coming years.”

Ms Chia reckons sentiment is expected to remain mixed in the final quarter, given the uncertainties surrounding the global economic recovery.

– See more at: http://business.asiaone.com/news/prices-rents-industrial-space-taper#sthash.hzcNEEzf.dpuf

Kallang-Lavender area sees more interest in commercial properties

The Lavender-Kallang area is gentrifying with a blend of the old and new: shophouses under conservation alongside new commercial developments, including City Square and Kallang Leisure Park.

The mixed-use developments ARC 380 and City Gate will add to the eclectic mix. Rents and prices of commercial and industrial properties have also been given a lift by the two projects and the completion of mixed-use Aperia.

Aperia has two towers zoned for Business 1 (B1) use – meaning it is suitable for light and clean industrial use – with a gross floor area of 72,290sqm, and a three-storey retail podium of gross floor area 14,406sqm. The project is available only for lease and it has already secured commitment for over 50 per cent of its space. It will be home to tenants including Intel, Audi, McDonald’s, Cold Storage and Tim Ho Wan, said a spokesman for Ascendas Reit, which bought Aperia in August.

Another recent entrant is mixed-use CT Hub 2, set for completion next year. It offers about 310 strata B1 units and 41 retail units, with about 186 units sold overall. A further 77 office units have not yet been released.

“Those who bought strata units at CT Hub and CT Hub 2 during 2011 and 2012 are likely to be investors that switched over from the residential sector, when it was slapped with several rounds of cooling measures,” said Ms Elaine Chow, executive director and head of research at Chestertons Singapore.

But given patchy manufacturing growth, end-users and small and medium-sized enterprises are not likely to fork out high rentals for a smallish industrial unit, she said. “Investors may need to review their rental and yield expectations for these newly completed strata industrial units,” she added.

Still, demand has been healthy enough in the Kallang planning area for rents to rise from $5.50 to $6.50 per sq ft per month for new B1 industrial spaces, said Mr Nicholas Mak, executive director at SLP International.

Demand for CT Hub 2 could also have contributed to the profitable subsale deals at the project in 2012 and 2013, which had about 18 to 22 per cent per annum annualised profit margin, he added.

“Industrial real-estate prices are likely to remain steady in the area, with no new supply of industrial land site for sale here in the second-half 2014 industrial government land sales programme.”

Over the past year, the median price of shop units in the Kallang planning area had declined steadily until City Gate, launched in the third quarter this year, pushed the quarterly median price up from $1,084 in the second quarter to $3,824 in the third, he said.

“Prices of retail space are likely to remain healthy due to limited supply and steady demand.”

Ms Chow added that investor interest in commercial properties in the area is strong, evident when all strata office units at ARC 380 were sold out earlier this year.

– See more at: http://business.asiaone.com/news/kallang-lavender-area-sees-greater-commercial-interest#sthash.CXuRcPWX.dpuf

Industrial property in Q4 likely to stay mixed

SINGAPORE’S industrial property market is expected to remain mixed in the fourth-quarter of 2014, given the presence of persistent downside risks, which include uncertainties surrounding the global economic recovery and the traditional year-end holiday lull.

Colliers International on Thursday said in its report that replacement anchor sub-tenants will be harder to find when secondary industrial space becomes available from expiring sale and leaseback transactions.

Chia Siew Chuin, director of research and advisory at Colliers, said current anchor sub-tenants leasing space from third-party facility providers will enjoy stronger bargaining power in lease-renewal negotiations.

“This could hurt rents and yields achievable by the third-party facility providers in the medium term,” said Ms Chia, who added that rents for business parks and independent high-specs buildings are expected to hold steady in Q4, similar to Q3, mainly because of a tightening in supply.

But the prime conventional industrial segment, would probably have rents easing marginally further in Q4 on supply pressures, said Ms Chia.

Sale of strata-titled industrial properties is expected to remain slow, with the likelihood that the number of caveats lodged for the entire year will be below the 2,000-level.

The last time fewer-than-2,000 caveats were lodged for strata-titled industrial properties was in 2009 at about 1,500.

Ms Chia added that the average capital values of prime freehold conventional warehouse and factory space are expected to remain at their current levels in the next quarter.

The mixed outlook comes on the back of a muted industrial property market here in Q3, despite a stable stream of leasing activity.

Sale transactions of strata-titled industrial properties in Q3 fell by about 36 per cent quarter-on-quarter to 203, according to URA Realis caveats.

DTZ Research said this is way below the 672 strata-titled units that were sold in the same period last year. So far, there has been 842 transactions this year, much lower than the 1,986 in the same 2013 period.

DTZ said the decline in transactions was due to fewer new launches, seller’s stamp duty measures, as well as the implementation of the Total Debt Servicing Ratio (TDSR) framework last June.

Both average capital and rental values of conventional industrial space have also stagnated, while business park rents bucked the trend and continued to rise in Q3.

The average monthly gross rents for business parks continued to increase by 2 per cent quarter-on-quarter in Q3 to S$5.00 per sq ft, said DTZ.

Still, business park rents are lower than office rents and the former is drawing more office occupiers, said Cheng Siow Ying, DTZ’s executive director of business space.

“The difference in rents can be as high as 30 per cent, compared with the average office rents in the decentralised areas,” she said.

The downward pressure on rents for conventional industrial space might continue, said DTZ.

A total of 40.7 million sq ft of industrial space is expected to be completed by 2016, of which 27 per cent are multiple-user factories.

Lee Lay Keng, DTZ’s regional head (South-east Asia) research said the large supply in 2016 is “likely to restrain rental growth”.

“The older business parks may find it increasingly difficult to retain and attract tenants alongside these newer business parks,” said Ms Lee.

CBRE said in its report that the difference in rents between business parks located in the city fringe and those in the rest of the island has widened further in Q3 this year.

Michael Tay, executive director, office services at CBRE said: “Occupiers are more keen on higher specifications, quality developments which the city fringe has been able to provide. The location and connectivity are also important considerations which prompt occupiers to pay the premiums in rent. “

Low bids in Tuas site reflects cooling market

A TUAS Bay Close industrial plot for which the highest bid was shy of the consultants’ forecasts points to further signs of a cooling industrial property market, as the effects of the government’s anti-speculation measures kick in.

Mezzo Development beat two other bidders, Wee Hur Development and Soilbuild Group Holdings, to submit the top bid of S$25.5 million, JTC announced on Tuesday. This works out to S$51.28 per sq ft per plot ratio (psf ppr).

This land price is the lowest since a Yishun Street 23 plot sold in Oct 2010 for S$64 million (S$51.10 psf ppr), SLP International executive director Nicholas Mak noted.

Another B2-zoned plot in nearby Tuas South Avenue 7 – dubbed Plot 12 and which has about the same size and tenure – sold for S$31 million (S$56.01 psf ppr) in August. Already considered a low price then, it was still higher than that of this latest winning bid.

Last April, another Tuas Bay Close site, where the West Star building now stands, went at S$37.1 million (S$81.19 psf ppr).

Mr Mak said yesterday’s lower-than-expected bid could have been the result of the large supply of and potential competition from B2-zoned sites for sale in the Tuas Bay Close area.

B2-zoned sites are meant for heavier and more pollutive industrial use.

That said, the three bids were within the range of two to five bids which consultants expected.

The 2.7ha site is one that can be strata-subdivided for sale and is expected to be developed into a multi-user ramp-up factory. Mr Mak expects the breakeven price to range from S$220 to S$250 psf.

It comes with a 30-year tenure with a maximum gross plot ratio of 1.7, which means it can be developed into a project with a gross floor area of up to 4.6 ha.

R’ST Research director Ong Kah Seng noted that the winning bid was 22 per cent higher than the second highest bid of S$20.9 million (S$41.99 psf ppr) submitted by Wee Hur Development.

“That the winning developer bid is much higher than the rest shows that it has a stronger confidence in the site, but it also shows that the rest of the bidders at large were not very aggressive, which suggests developers’ dwindling interest for the conventional factory development,” he said.

Only two large land parcels – along Tampines North Drive 2 and Penjuru Road – are left for sale in the “confirmed list” of the industrial government land sales programme until the end of the year. When their turns come, their bids may take a cue from yesterday’s tender results, Mr Mak said.

 

Citimac on sale for $1350 psf-psr

http://www.businesstimes.com.sg/premium/top-stories/citimac-complex-seeks-s1350-psf-ppr-en-bloc-sale-20140923

The owners of Citimac Industrial Complex have hit the en bloc trail, with a minimum price of S$550 million, which works out to S$1,350 per square foot of potential gross floor area for the freehold site.

The unit land price figure is inclusive of an estimated development charge (DC) of S$109 million payable to the state.

Located a stone’s throw from Tai Seng MRT Station, the 139,789 sq ft site can be redeveloped into a new project with 489,261 sq ft maximum gross floor area (GFA). The site is zoned for Business 1-White use, with a 3.5 maximum gross plot ratio. Of this, at least 2.5 plot ratio (translating to 349,473 sq ft GFA) shall be for Business 1 (or B1) use and the remaining GFA of up to 139,789 sq ft will be for white uses. Most developers would likely utilise the white component for retail use, given the site’s prime Macpherson Road frontage.

The Citimac site is the largest freehold Business 1-White redevelopment site in Singapore to be put up for sale, according to Cushman & Wakefield, which is handling the collective sale through a tender that will close on Oct 30.

The property consulting group said it is expecting “very good reception” for Citimac especially from local and overseas mid-sized and large developers, given its prized location and the white component in its zoning. The potential future growth of the Paya Lebar commercial hub will drive strong investor interest, it added.

Christina Sim, director of capital markets at the property consulting group, said: “Given current market conditions and a dearth of freehold Business 1-White sites in prime locations, this site offers a unique opportunity to develop top-end Business 1 space for data centres, research and development, information technology, as well as a sales and distribution centre for the medical and aviation industries.” Business 1 typically includes non-pollutive light industrial and warehouse use.

Market watchers acknowledged the site’s prime location but said the pricing expectation is ambitious. A seasoned observer said assuming average selling prices of about S$4,500 psf for the retail space and S$1,200 psf for the B1 space, the land price could be around S$1,000 psf per plot ratio (psf ppr) at most, including DC. “This would be how established local developers would bid for the site, assuming 15 per cent profit margin,” he said. That said, it may be conceivable for say a China player keen on investing in Singapore, to bid more aggressively.

In October last year, Guang Ming Industrial Building, also near Tai Seng Station albeit on a longish, somewhat irregular-shaped strip of nearly 20,000 sq ft land, fetched S$45.8 million or S$837 psf ppr.

In May this year, Irving Industrial Building, a 65,309 sq ft site with a more regular shape albeit tucked from the main road, was launched for collective sale. The reserve price was said to be S$200 million (or S$1,079 psf ppr) but there were no takers.

The latest talk in the market is that a potential buyer, believed to be China’s Nanshan Group, has been secured and that efforts are underway to get the requisite consent level from Irving Industrial Building’s owners at a lower price that would reflect around S$930 psf ppr.

Citimac Industrial Complex in comparison is a rectangular-shaped plot boasting prime road frontage. “It is likely that the developer will break even on B1 use, with profit likely to come from the retail space for the white component,” said Ms Sim.

Cushman & Wakefield brokered the sale of Guang Ming Industrial Building and is also marketing Irving Industrial Building. Both are also freehold and have the same zoning as Citimac Industrial Complex.

JLL regional director (investments) Tan Hong Boon noted that freehold industrial sites are not easy to come by. “Sources are typically from single-owner sales and collective sales of generally small to medium sized, old projects,” he added.

DC rates for condo falls while that for commercial land rose

Development charges – the rates developers pay the Government to enhance land use – have fallen for the first time in almost 18 months for residential sites earmarked for non-landed homes such as condominiums.

However, these rates shot up for commercial land, places of worship, civic institutions, as well as hotels and hospitals.

Development charges, which can be a significant cost in a redevelopment, are revised after regular half-yearly reviews based on land prices and market deals.

They fell by an average of 2 per cent for non-landed homes, on the back of flagging property sales since the start of the year. The new fees were released by the Urban Redevelopment Authority (URA) yesterday.

They are applied when the value of a site goes up because of a re-zoning or when a taller building can be erected after a change in the site’s plot ratio.

Consultants said they expected the dip in the rates for non-landed residential plots, given the 2.1 per cent slip in the official residential price index in the first half of the year.

Bids for land sold under the Government Land Sales programme have also been conservative, noted Ms Chia Siew Chuin, director of research and advisory at Colliers International, unless the plot is in a popular area.

Moreover, the collective sale market has screeched to a halt this year, she said.

However, the dip in development charges is not expected to boost the acquisition of land significantly, because the risk of shrinking profits from falling property prices is still far greater, noted Mr Nicholas Mak, research head at SLP International.

This was because “the reduction in the development charge rate would only increase the developer’s return on investment of the residential project by 1 per cent, assuming all other factors remain unchanged”.

Non-landed residential plots in Prince Charles Crescent, Alexandra Road, Tanglin Road, Henderson Road, Depot Road and the Telok Blangah area recorded the sharpest dips of 5 per cent.

On the other hand, experts were surprised by the 9 per cent hike in fees for land slated for hotels, hospitals, places of worship and civic institutions – the highest average across all segments.

After all, hotel deals this year have paled in comparison with the “landmark year of transactions” last year, said Dr Chua Yang Liang, head of research Southeast Asia at Jones Lang LaSalle (JLL).

The increase in charges for land for places of worship and civic institutions was also the first hike in five years, JLL noted.

“We believe that the upward revision in both (categories) is for the overall harmonisation of development charge rates with other use groups,” said Dr Chua.

For the commercial sector, charges rose by an average of 2 per cent, with the highest increases in places such as Balestier Road, Thomson Road and the Novena area.

This was largely thanks to the uptick in strata-sales activity at Balestier towers, Dr Chua added. Construction group Low Keng Huat, for instance, had in July forked out about $64 million for 36 units at the mixed-use project in Balestier Road.

The rates were unchanged for landed residential and industrial sites.

Though there were transactions for industrial land in the review period which showed that development charge rates were “trailing behind land prices”, there were also plots of industrial land being sold for less than the land value imputed by the development charge for the area, said Ms Chia.

For instance, the highest bid for a plot in Tuas South Avenue 7 was 22.7 per cent lower than the land value imputed by its development charge.

The new development charges will take effect on Monday.

– See more at: http://business.asiaone.com/news/development-charges-condos-fall#sthash.l5XBjpPj.dpuf

Central Area Masterplan

A video that summarises the development plans for the Central Area of Singapore!