Samsung Hub Office sold at S$3280 psf

The 20th floor of the 999-year-leasehold Samsung Hub office tower is sold at S$43.07 million or S$3,280 psf based on the strata area of 13,132 sq ft. Standard Commodity Trade Centre Pte Ltd is selling the space on a vacant possession basis to Lei Shing Hong Properties (Singapore). The buyer plans to occupy the space for its own use.

The company is part of Hong Kong-based Lei Shing Hong group, which is involved in businesses ranging from retailing premium cars, trading and securities brokerage, to property development and investment. The S$3,280 psf fetched for the 20th floor is identical to that for the 21st level back in 2014.

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Frasers Tower received strong interest ahead of its completion

About 30 per cent of upcoming Frasers Tower, in the heart of the Central Business District, has been leased – or has received a leasing proposal. The relatively strong interest comes even though the 38-storey office building in Cecil Street is not due to be ready for tenants for more than a year.

The interest came from multi-sector conglomerates, legal services and technology firms, including the first signed lease with The Executive Centre, a serviced office provider, which will take up an entire floor covering 20,000 sq ft.

The supply pipeline favours Frasers Tower, as there are just a few new developments in the core CBD from mid-2017 until the end of 2020: Marina One, UIC Building and the redevelopment of the CPF Building. Frasers Tower has 663,000 sq ft in total net lettable area. An adjacent three-storey building will host food and beverage tenants.

 

Prime office rents seen softening further

OFFICE rents in Singapore’s Central Business District (CBD) likely peaked in the first quarter of this year, with further softening becoming more pronounced as more tenants opt for cheaper decentralised offices and financial institutions consolidate amid an uncertain economic outlook.

Key projects seen weighing down office rents in the Raffles Place and Marina Bay area in the second quarter were Asia Square in Marina Bay as well as CapitaGreen in Raffles Place.

According to some consultants, there was an aggressive marketing strategy to fill up Asia Square amid a potential divestment of Tower 1 by BlackRock Inc. The sale is said to have drawn bids from Norway’s sovereign wealth fund, CapitaLand and Keppel Land.

“As Asia Square Tower 1 is going through divestment exercise, it is in the landlord’s interest to fill up the building quickly,” said Cushman & Wakefield research director Christine Li.

In Marina Bay, Grade A effective direct rents – which are based on per floor basis and account for rent holidays and other incentives – slipped to S$11.01 per square foot per month (psf pm) in Q2, down from S$13.22 psf pm in Q1, Cushman & Wakefield estimated. In Raffles Place, rents dipped to S$10.66 psf pm in Q2 from S$10.92 psf pm in Q1.

Data released by the Urban Redevelopment Authority (URA) showed that office rents in the Central Region weakened by 2.6 per cent in the second quarter, after rising 0.6 per cent in the first quarter.

Ms Li is projecting a decline of 2 per cent in overall CBD prime office rents for each quarter in the second half, with the Marina Bay area more susceptible to rental fluctuations since some 58 per cent of the tenants there are banking tenants – of which many are reviewing their space requirements – compared with about 49 per cent in Raffles Place.

Savills head of research Alan Cheong said that he is expecting another 3-5 per cent slide in prime office rents in the CBD in the second half compared with the first half.

According to Colliers International, cost-conscious companies that do not require a CBD front office are making plans to move out of the financial district to reduce their occupancy costs.

Germany’s automotive firm Daimler Group, for instance, is moving from Centennial Tower in City Hall to about 55,000 sq ft at Westgate Tower in Jurong East with an estimated 30 per cent rental savings. Insurance company Great Eastern Life is also taking up close to 33,000 sq ft at Westgate Tower. Mechanical engineering services firm Beca has reportedly leased 26,000 sq ft at Westgate Tower, relocating from Anson Centre in Shenton Way.

Knight Frank head of consultancy and research Alice Tan noted that the current lack of demand from potential large-space tenants, adding that with the possible deterioration in market sentiment, “downside risks on Singapore’s rental growth could become more pronounced going forward”.

A report released by Knight Frank last week showed a 1.4 per cent drop in prime office rents in Raffles Place and Marina Bay based on 2,500 to 5,000 sq ft of net lettable area and flagged that Singapore’s prime office market is at a stage of accelerating decline in the rental cycle.

“As global and domestic business conditions turned cautious, leasing activities in Singapore’s office market are showing signs of weakening,” Ms Tan added. “Typical large space occupiers, in particular financial institutions, are holding back their expansion plans or are going through a consolidation phase by relocating to alternative locations or consolidating their offices to fewer locations in the CBD.”

Ms Li noted that a growing amount of shadow and secondary space is easing the supply crunch this year as some large bank tenants give up more space in Raffles Place and Marina Bay.

For tenants whose leases expire next year, they will be “spoilt for choice” as about four million sq ft of prime office space and 2.3 million sq ft of business park space (out of which 1.1 million sq ft comes from MapleTree Business City II) will be completed, Ms Li added.

http://www.btinvest.com.sg/dailyfree/prime-office-rents-seen-softening-further/

Strata Offices running out of fizz?

The strata office sales market could be starting to run out of fizz – due to toppish prices and concerns about a future office oversupply and rising interest rates. The total debt servicing ratio also continues to clip appetites of mom and pop investors.

At the much-hyped GSH Plaza, sales have pretty much stagnated at 60-plus office units – around the level announced six weeks ago by the consortium that is doing a major revamp of the building.

Talk in the market is that the commission rate for agents to find buyers in the strata project has been doubled to 3 per cent by the owner in a bid to drum up sales.

A consortium led by GSH Corporation last year paid S$550 million for the 28-storey building, which was known as Equity Plaza at the time, and is undertaking an extensive refurbishment estimated to cost S$118 million (or S$400 per square foot based on the 295,000 sq ft gross saleable area).

When contacted on Thursday, a spokesman for the consortium, Plaza Ventures Pte Ltd, confirmed that there had been not much change in the sales status “because we are now focused on negotiating whole-floor sales”.

On average, there will be 10 strata office units per floor in the project. In all there will be 259 strata office units on Levels 3-28 of the building. Units range from 480-1,700 sq ft. Buyers have the option to buy entire floors (10,000 to 12,000 sq ft), thus enjoying additional discounts and floor space utilisation, according to promotional material on the development.

The spokesman declined to comment on market talk that some of the consortium members or their related parties/associates might have bought a chunk of the 60-plus units that have been sold.

Besides GSH, which controls 51 per cent of the consortium, Plaza Ventures’ other shareholders are TYJ Group, a private investment vehicle of GSH chairman Sam Goi (with a 14 per cent stake) and Vibrant DB2 (35 per cent stake). Vibrant DB2 is a 51:49 partnership between listed Vibrant Group and niche property developer DB2.

GSH Plaza’s attractions include its prime Raffles Place location and the bite-sized investment it offers individual investors with units as small as 480 sq ft, said observers.

So far, four caveats have been lodged based on URA Realis data. The units range from around 480 sq ft to 807 sq ft and are priced between S$1.57 million and S$2.49 million. The prices of the four units translate to S$3,009 psf to S$3,257 psf.

In early March, Plaza Ventures had said prices for the office units will range from S$2,850-3,500 psf, depending on the size of the unit and the floor it is on.

It is understood that most potential buyers found the average price of S$3,000-3,100 psf too demanding for a project with a balance lease term of only 73 years. “A price of S$2,700-2,800 psf would have been more reasonable,” said one party.

Moreover, the total debt servicing ratio framework continues to make it hard for individual investors to secure big loan quantums for property purchases.

Plaza Ventures is expected to retain the first two levels, which will have 21 retail units.

At Crown at Robinson – a brand new freehold strata office project coming up on the former Chow House site at 140 Robinson Road – sales are also said to have been slow. Prices of office units in the development range from S$3,348 psf to S$3,634 psf based on the seven caveats reflected in URA Realis so far.

As early as next month, SEB could begin strata sales at Anson House. The 13-storey building is on a site with a balance lease term of 81 years. Word on the street is that SEB is awaiting approval for strata subdivision from the authorities.

The strata units are expected to mirror existing tenancies with the minimum size exceeding 1,000 sq ft. Full-floor units will be 7,600-plus sq ft. Asking prices are S$2,900 psf and above.

The offices are located on Levels 5 to 13. Car park lots fill Levels 2, 3 and 4. On the first level are three retail units, which will also be made available for sale at prices exceeding S$4,000 psf.

http://business.asiaone.com/news/strata-offices-starting-run-out-fizz#sthash.pd4vfvzh.dpuf

Samsung Hub’s office sold at $3175psf

AT LEAST two sizeable strata office deals have been done lately in the Raffles Place area: Level 19 of Samsung Hub, and half of the 11th floor at Prudential Tower.

The 19th floor of Samsung Hub along Church Street has been sold for nearly S$41.7 million or S$3,175 per square foot (psf) based on the strata area of 13,121 sq ft. The buyer is said to be a foreign party purchasing the space purely as an investment. Market watchers say that might have resulted in the psf price being lower than the S$3,225 psf fetched for the whole of the 18th floor spanning 13,132 sq ft, sold last month.

In that transaction, which amounted to S$42.35 million, the buyer is believed to an Asia-based group involved in the oil and gas business among others, looking to occupy the space; existing leases on the floor run out in phases starting later this year. An owner occupier may be more motivated to pay a higher price than an investor. The lease on the entire 19th floor was recently renewed until 2017. The net yield to the buyer is believed to be sub-3 per cent.

The 18th and 19th floors each comprise six strata units.

The seller of both 18th and 19th floors is Church Street Holdings – a partnership between Buxani Group and a group of offshore investors advised by Mukesh Valabhji of Seychelles-based Capital Management Group.

With the latest sale, Church Street Holdings has sold five of the six floors in the 999-year leasehold building that it acquired from OCBC in 2007 for S$1,560 psf or S$122.4 million. The six floors were Levels 16-21. The company is now left with Level 21, for which it is said to have received unsolicited offers.

Savills is said to have brokered the sale of the 19th floor.

Over at Prudential Tower, which is on a site with about 80 years’ balance lease, half of the 11th floor space, under a single strata unit of 5,952 sq ft, has been sold for S$2,750 psf or S$16.368 million. CBRE brokered the sale, which was made to a Chinese construction group that currently occupies rental premises elsewhere in Singapore and plans to eventually occupy the Prudential Tower space it is purchasing. The space is currently leased to two tenants; the leases are said to expire next year.

The unit is being sold by a consortium that earlier this year bought Keppel Reit’s 92.8 per cent stake in the building for S$512 million or nearly S$2,316 psf on net lettable area.

Comprising KOP Limited, Lian Beng Group, KSH Holdings and Centurion Global, the consortium is said to be preparing to launch an expression of interest exercise for the other half of the 11th floor of Prudential Tower, spanning 5,102 sq ft under a single strata unit. CBRE will be marketing the unit in Singapore, while Savills will do the overseas marketing. The pricing expectation is expected to be in excess of S$2,750 psf.

Also available for sale is a half-floor unit, also 5,102 sq ft, on Prudential Tower’s 16th floor owned by the consortium. Galven Tan, director (investment properties) at CBRE, noted that the strata office market is still seeing keen buying interest from potential owner occupiers.

Market watchers, note, however, that since the total debt servicing ratio framework was introduced in June last year, strata office investors have found it harder to get loan approval compared with those buying the space for their own use.

http://www.businesstimes.com.sg/real-estate/samsung-hubs-19th-floor-sold-at-s3175-psf

Office landlords in CBD call the shots amid crunch

The pendulum is swinging in favour of office landlords in the third quarter, with rents and capital values continuing to climb, said consultancy Colliers International yesterday.

It noted that most areas – called micro-markets – are experiencing a worsening supply squeeze that has generated occupancy rates of 95 per cent and kept rents rising for 18 months.

“The tight market has given landlords greater pricing power over tenants and we are seeing a growing divide between the type of spaces tenants desire in relation to affordability and landlords’ rental expectations,” said Mr Marcus Loo, the firm’s executive director of office services.

Raffles Place and New Downtown are the market’s red-hot zones.

Monthly rent for premium-grade offices shot up 6.1 per cent from the second quarter to the third to $11.67 per sq ft (psf) a month, the highest quarterly growth in three years, while Grade A office rents rose 2.9 per cent to $10.25 psf.

Rents for Grade A offices in other areas of the Central Business District (CBD) have expanded between 0.4 per cent and 2.9 per cent quarter on quarter and are heading for the “psychological rental benchmark level” of $10 psf a month, said Colliers.

Overall, the average occupancy rate for completed premium-grade and Grade A offices in the CBD has held firm during this quarter, at 96.5 per cent – the highest in six years.

The average occupancy rate is 97.2 per cent in Orchard Road, 97.8 per cent in the city fringe and 98.8 per cent in the suburbs.

While there were fewer transactions of strata-titled office units due to the Hungry Ghost Festival, the market for sales en bloc has been “bustling with activity” in this quarter.

Anson House in Tanjong Pagar sold for $172 million, Straits Trading Building in Battery Road reportedly went for $450 million and three levels of GB Building in Cecil Street sold for about $31.7 million in total.

The prices at these sales pushed up capital values, which are up 2.2 per cent for premium-grade offices and by 1.9 per cent for Grade A ones in the Raffles Place and New Downtown.

Ms Chia Siew Chuin, director of research and advisory at Colliers International, said rents of premium-grade office space in this zone are expected to grow close to 15 per cent for the full year, with rents in overall CBD grades A and B office space growing up to 10 per cent. She said capital values for premium and Grade A offices in Raffles Place and New Downtown will grow about 5 per cent this year.

The report also noted that more tenants have been asking for longer lease terms of, say, five years, with an option to extend for another five, or six-plus-six- year terms, with built-in rental review terms.

“(This) provides tenants with more stability and allows them to spread their asset depreciation for the longer period of time…

“However, longer lease terms do not generally equate to lower rents. Landlords may factor in potential rental upside if they are tied to a longer period of time,” said Mr Loo.

GB Building floors for sale

http://www.businesstimes.com.sg/premium/singapore/three-gb-building-office-floors-sale-20140722

ABOUT 16,000 square feet of office space spanning three contiguous floors in GB Building in the Central Business District (CBD) have been put on the market for between S$32.1 million and S$33.7 million, or between $2,000 and $2,100 per square foot.

Each floor of the space, occupying the 20th to 22nd storeys of the Cecil Street building, ranges from 5,210 sq ft to 5,425 sq ft in size, is rectangular and column-free.

DTZ Debenham Tie Leung (SEA) is marketing the property, which is being sold with vacant possession.

GB Building comprises a 23-storey office tower atop three storeys of commercial space and has 67 years left on its lease.

It has three levels of basement carpark lots and is within walking distance of Tanjong Pagar MRT station on the East-West Line and the upcoming Shenton Way MRT station on the Thomson Line.

DTZ investment advisory services director Tan Chun Ming said that the property was a “rare opportunity” for owner-occupiers.

Given that the space is strata-titled, he expects keen interest from a range of investors looking to capitalise on the rising rental rates in the CBD.

A DTZ report has noted that average gross monthly rents in Marina Bay rose 6.5 per cent to S$12.25 psf in the second quarter from the first.

But average gross monthly rents for Shenton Way, Robinson Road and Cecil Street – older areas of the CBD – had stagnated at S$8 per sq ft.

Average office prices in those three areas inched up 0.2 per cent in Q2 from the previous quarter, supported by continued interest in strata-titled office units and en bloc office deals, as further rental increases are expected, said the report.

Based on caveats information from URA Realis, the top three strata floors of SBF Centre on Robinson Road, were transacted at an average price of S$3,069 psf in April. Last November, one strata floor at Eon Shenton on Shenton Way went at S$2,550 psf.

The expression of interest exercise for the GB Building space closes on Aug 21. Interested parties may submit bids for single or multiple floors.

FIVE adjoining shophouse properties at Club Street on sale for $22 million.

http://www.btinvest.com.sg/property/local/22m-asking-price-five-shophouses-club-street-20140703/

FIVE adjoining shophouse properties at Club Street have been put on the market with an asking price of $22 million.

They comprise Nos 1, 3 and 5 Club Street, which are three storeys high and have an attic, and Nos 7 and 9, which are two storeys high. All five have balance land tenure of about 80 years.

The properties are being marketed jointly by JLL and Historical Land Pte Ltd. The latter is a boutique property agency specialising in shophouses.

The five shophouses are being offered as a package. Nos 1, 3 and 5 are owned by Citystate Properties while Nos 7 and 9 are owned by Dr Ling Ai Ee, who is also one of the shareholders of Citystate Properties.

The $22 million asking price translates to $3,230 per square foot on floor area of about 6,800 sq ft. The shophouses are currently leased, with insurance company EQ occupying the ground level. The upper levels are leased out as residences.

A strong attraction of the properties is that they are part of a stretch of Club Street and Gemmill Lane that was recently rezoned to commercial use under Urban Redevelopment Authority’s Master Plan 2014. The stretch involved was previously zoned as “residential with first-storey commercial”.

In a circular issued on June 10 this year, URA said the zoning change is consistent with the commercial zoning for the rest of the shophouses along Club Street.

Historical Land director Simon Monteiro said: “With full commercial zoning, this means foreigners are now eligible to buy these shophouses.”

Foreigners require the approval of the Land Dealings (Approval) Unit of the Singapore Land Authority before they may purchase an entire shophouse on a site zoned for residential use, although they may buy a unit within a strata-subdivided shophouse building on residential-zoned land.

“In addition to offering prime frontage at the Club Street/Cross Street corner, a stone’s throw from the Telok Ayer MRT Station on the Downtown Line, these five shophouses make up a rare island-site in the popular Club Street locale which is steeped in history,” added Mr Monteiro.

Club Street was the last part of Chinatown to be developed, beginning in the early 1890s, according to architecture historian Julian Davison, who traced the provenance of the five properties for Historical Land.

The five shophouses on offer comprise two separate developments: Nos 7 and 9, which were most likely built in the late 19th century, and Nos 1, 3 and 5, which were built by business magnate Ezekiel Saleh Manasseh in 1924-1925.

A leading businessman and property developer in Singapore at the time, Mr Manasseh commissioned the architectural firm of Westerhout & Oman to build the shophouses that currently stand at Nos 1, 3 and 5 Club Street. The principal feature of the front facade is the central airwell. There is also a cantilevered balcony halfway up as well as a star-shaped pediment on top, intended to recall the Jewish Star of David, writes Dr Davison.

During World War II, Mr Manasseh was interned by the Japanese and died in 1944.

At a URA tender in August 1995, Citystate Management Consultants clinched Nos 1, 3 and 5 Club Street for $3.01 million while L&B Engineering picked up Nos 7 and 9 at $2.064 million. The properties were sold on 99-year leasehold tenure and with the requirement that successful tenderers had to restore them.

While activity-generating uses such as food and beverage outlets, and shops are allowed on the street level, URA in its June 10 circular stated that the shophouse owners and tenants are encouraged to use the upper storeys for residential or institutional use. Office use will be the only commercial use allowed on upper levels, as this is less likely to cause disturbance to the residents of the nearby Emerald Gardens.