Even though construction of major projects here may have been deferred or cancelled, the refurbishment of older, smaller buildings by new owners is still very much alive

WEEK OF DECEMBER 29, 2008

Beach RoadMAKEOVER

Aerial view of Beach Road with Raffles Hotel at No 1 Beach

Road on the left and the South Beach site on the right

Residential outlook still bleak Funds and investors in search of opportunities

Looking for daylight next year More sales activity expected in 2H2009 for offi ce sector

CITY&COUNTRY

THEEDGE SINGAPORE | DECEMBER 29, 2008 • CC3

| BY CECILIA CHOW |

Beach Road, with its medley of shophouses, mixed-use commercial developments and high-rise office towers, was earmarked last year by

the authorities as “the next develop-ment hot spot”.

While Marina Bay and the existing CBD will continue to be key commer-cial centres in Singapore to meet the demand for space coming from the fi-nancial, business services and tourism sectors, the Beach Road/Ophir-Rochor corridor “will be developed as strate-gic gateways to the city centre”, ac-cording to the URA Master Plan 2008. The plans call for the doubling in size of Singapore’s financial district to that of Hong Kong’s with a total of 30.35 million sq ft office space.

In line with its development plans for the area, the government also pro-moted a 2.67 ha white site located on Ophir Road-Beach Road and adjacent to Parkview Square at an international property road show in Cannes early this year. The white site has the po-tential to be developed into a mixed-use project with commercial space of 1.5 million sq ft in gross floor area and a 480-room hotel. Pegged at a price tag of $1.4 billion back in March, it was regarded then by property ana-lysts as the most desirable on the gov-ernment’s list of confirmed sites for sale this year.

The enthusiasm was not unfound-ed as the consortium of City Devel-opments Ltd (CDL), Dubai World’s Istithmar World, and Elad Group bid for, and won, another site along Beach Road in September 2007 for $1.69 bil-lion. The new mixed development on the 376,737 sq ft site, which includes the conservation of the former Non-Commissioned Officers’ Club and three army barracks built in the 1930s, is designed by renowned architect Nor-man Foster.

“I see [Beach Road] as a definite CBD extension but not necessarily like Harbourfront,” observes Chris Archibold, regional director and head of markets at Jones Lang LaSalle. “It will have more of an entertainment feel with the retail portion of CDL’s Beach Road development and the il-uma, an urban entertainment centre currently under construction on Victo-ria Street. We may well also see more F&B outlets springing up in the shop-houses to service the new apartments and offices.”

Global financial crisis clouds development plans By October, as the global financial crisis continued to ravage markets, and Singapore fell into recession, it was clear that something had to be done. On Oct 31, the URA cancelled the tender for the Ophir Road-Beach Road white site, and along with the other sites on the confirmed list, was pushed into the reserved list, meaning a site will only be launched for tender

if triggered by an offer by a developer with a minimum bid that meets the URA’s reserve price for the site.

In November, CDL also announced that the consortium was deferring the construction of the $2.5 billion South Beach project to 2H2009 in anticipa-tion of lower construction costs.

The authorities have gone ahead to gazette Master Plan 2008, which puts into effect the government’s plan for land use over the next 10 to 15 years. The government is sticking to the four key thrusts outlined in the plan: “to enhance Singapore as a home of choice, a magnet for business, an exciting playground and a home to cherish”, according to URA in the Dec 5 announcement. The “magnet for business” is where Ophir Road-Beach Road is positioned, and the gov-ernment plans to release more devel-opment land parcels in the area over the next five to 10 years.

The mega development projects may have been shelved for now, but there are still pockets of redevelop-ment or refurbishment of older build-ings taking place on Beach Road. For instance one of the most significant launches this year was that of Con-course Skyline in September, devel-oped by the family-owned, Singapore-listed Hong Fok Corp.

Construction of the 360-unit Con-course Skyline residential high-rise towers has started and consists of re-developing the Concourse retail po-dium and serviced apartments. The developer also paid the government $83 million to get a new 99-year lease on the site.

The soft launch may have been ill-timed — just the week before the collapse of Lehman Brothers on the weekend of Sept 13/14 – however, Hong Fok still sold 60 units out of 90 released in the first phase that week, with prices ranging from $1,500 to $1,800 psf.

Philip Cox, the appointed design architect of Concourse Skyline, joins the growing list of luminary archi-tects who’ve developed projects along Beach Road — Paul Rudolph for the original Concourse development,

The Gateway by I.M. Pei, James Ad-ams for Parkview Square, and Nor-man Foster for the upcoming South Beach project.

“Most of the new developments along Beach Road are by very estab-lished and in many cases [boast] fa-mous architects,” acknowledges Jones Lang LaSalle’s Archibold. “The area will be rejuvenated significantly with the new buildings being planned in the area.”

Investor interestA couple of older commercial build-ings changed hands earlier this year and are now at various stages of re-furbishment and repositioning, a sign of investor interest in the area. One of them is KeyPoint, a 25-storey of-fice building with two retail/F&B po-dium levels. It was acquired by the former Allco Commercial REIT (now Frasers Commercial Trust) in Decem-ber last year for $370 million, in an attempt to improve its tenant mix and hence, rentals.

Early this year, real estate equity fund, Fine Grain Property, purchased the former InCity Lofts for $70 mil-lion. It is close to completing the re-furbishment of the eight-storey build-ing into a designer boutique office project called “700 Beach”, and is al-ready 75% leased.

Meanwhile, in August, British container transportation company Bulkhaul Ltd acquired the six-sto-

rey office building at 67 Beach Road from NTUC Income for $21.5 mil-lion. Previously called NTUC Income Beach Junction, the building is locat-ed across the street from Shaw Tow-ers and the upcoming South Beach project. Bulkhaul is said to be plan-ning a facelift and refurbishment of the building to be in keeping with the government’s plans to rejuvenate Beach Road, and the Ophir Road-Ro-chor Corridor.

Another building that’s ripe for re-development is the Golden Mile Com-plex, which commands a prominent frontage along Beach Road and the Nicoll Highway. Built at a cost of $18 million in 1973, it was pronounced “a vertical slum”, “terrible eyesore” and “national disgrace” by Nominated Member of Parliament Ivan Png two years ago. Various attempts by owners to put the development up for collec-tive sale failed due to complications, the main one being the 705 strata-ti-tles in a mixed use development with residential, retail and offices, each en-titled to its own share of votes. The new and more cumbersome en bloc regulations introduced on Oct 4 last year made things worse.

With the fallout of the global fi-nancial crisis, weakening property market and high construction costs, developers’ appetite for such collec-tive sales have waned. Any plan of a collective sale by the owners will have to be shelved until the market

Beach Road makeoverEven though construction of the crown jewel of the area, the $2.5 billion South Beach project, may be deferred, and the tender for the Ophir-Rochor white site cancelled, the refurbishment of older, smaller buildings in the hands of new owners is still very much alive

The white site (the green field in front of Parkview Square) on Ophir Road-Beach Road has been moved from the confirmed list to the reserved list

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Archibold: Most of the new develop-ments along Beach Road are by very established and in many cases famous architects. The area will be significantly rejuvenated with the new buildings planned in the area.

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improves. “Ideally, it should be refur-bished in line with the plan to spruce up this area,” admits Jones Lang La-Salle’s Archibold.

Government picks up slackPrivate sector development projects may have taken a backseat, but the government is picking up the slack and going ahead with its plan to in-vest a total of $6.7 billion in three stages for the construction of the Cir-cle Line MRT project. That will make the whole Beach Road corridor more accessible, and extend the connectiv-ity of Beach Road towards the East Coast and HarbourFront, says Archi-bold. The three stages of the Circle Line will have 29 MRT stations in a 33.3km stretch. Some of the stations will be in the vicinity of Beach Road, including Nicoll Highway MRT, and Promenade Circle Line MRT.

In addition to boosting infrastruc-ture and accessibility, the government is also keen on preserving Beach Road’s eclectic charm. The road is surround-ed by the cultural, arts and education hub in Bras Basah Road combined with the urban entertainment district of Bugis; the hodgepodge of F&B and retail businesses in the conservation shophouses in the Kampong Glam district; the upcoming Sports Hub and Kallang waterfront district; and the Marina Bayfront developments. They all play a role in the rejuvena-tion of Beach Road.

CC4 • THEEDGE SINGAPORE | DECEMBER 29, 2008

CITY&COUNTRY

1 SOUTH BEACH DEVELOPMENT• Architect: Norman Foster• Owner: City Developments Ltd, Dubai World and Elad Group• Description: Mixed-use project consisting of a retail piazza

and two high-rise towers — the 42m high North Tower and 45m high South Tower. Development consists of office, hotel and residences as well as areas marked for conservation.

• TOP date: 2012• Tenure: 99 years• Site area: 376,737 sq ft• Gross floor area: 1.58 million sq ft• Recent activity:

Sold for $1.689 billion. Positioned as an environmentally-friendly building, the development is aiming to achieve the BCA Green Mark Platinum Award, the highest category for sustainability.

2 SHAW TOWERS

• Architect: Iversen van Sitteren & Partners• Owner: Shaw Towers Realty• Year built: 1974• Floor area: about 10,000 sq ft• Gross floor area: about 280,000 sq ft• Anchor tenants: DTZ Debenham Tie Leung, Daiken Corp,

Bates 141 Singapore, BBC World, Frost & Sullivan, Hill & Knowlton.

3 67 BEACH ROAD• Owner: Bulkhaul

(Singapore)• Description:

Six-storey office development near the South Beach development at the junction of Middle Road and Beach Road.

• Tenure: 999 years from 1827. Commercial zoning with maximum permissible plot ratioof 4.2

• Site area: 3,945 sq ft• Net lettable area:

18,775 sq ft• Floor area:

3,000 sq ft per floor• Recent activity: Bulkhaul acquired the property from NTUC

Income in August for $21.5 million and plans to refurbish the building in line with government plans to reposition Beach Road including the Ophir-Rochor corridor.

BEACH ROAD GOES UPBY CECILIA CHOW, WITH RESEARCH BY JONES LANG LASALLE

4 PARKVIEW SQUARE• Architect:

James Adams Design, DP Architects

• Owner: Chyau Fwu Development (Singapore)

• Description:24-storey office building with unique intricate art deco exteriors and interiors.

• Year built: 2002• Cost of construction:

$88 million• Floor area: About

15,000 sq ft per floor• Gross floor area:

500,000 sq ft• Anchor tenants: Embassy of United Arab Emirates,

McKinsey, Hitachi Medical Systems, Austrian Embassy, Emirates Airlines, Cadbury Schweppes, ACE Insurance, DHL Global Forwarding

5 OPHIR-ROCHOR SITE• Development:

White site for commercial, hotel and/or residential use• Site area: 287,065 sq ft• Maximum permissible GFA: 1.722 million sq ft• Tenure: 99 years• Project completion period: 8 1/2 years• Remarks: Can be developed into a 40-storey development.

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THEEDGE SINGAPORE | DECEMBER 29, 2008 • CC5

CITY&COUNTRY

UPMARKET

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6 THE GATEWAY• Owner:

Singapore Land• Architect: I.M. Pei• Description:

Two 37-storey towers each standing at150m high.

• Year built: 1990• Site area:

242,801 sq ft• Floor area: About

10,000 sq ft per floor• Gross floor area:

105,307 sq ft• Anchor tenants:

BenQ Singapore, Brother International, Toshiba Asia Pacific, Zuken Singapore, Connell Wagner, Koelnmesse, Iggesund Paperboard, Pfizer, Mastercard Asia Pacific, Rider Hunt Levett & Bailey, Mitsubishi Heavy Industries, GlaxoSmithKline, Sumitomo Chemical, NDK, Kao Singapore.

7 THE PLAZA• Owner:

UOL Group, strata-title• Description: A mixed-

use development along Beach Road comprising hotel, shops, offices, service apartments and two adjacent four-storey commercial buildings.

• Year built: 1979• Floor area: 13,000 sq ft• Gross floor area:

About 300,000 sq ft• Anchor tenants: Diners

World Travel, Teva Pharmaceutical• Recent activity: Minor refurbishment works recently

completed

8 CONCOURSE SKYLINE• Architect:

The Cox Group• Owner:

Hong Fok Corporation• Description: Two

28- and 40-storey towers having a total of 342 units with a seven-storey podium block with 18 apartments. The proposed development comprises one to four-bedroom apartments, sky suites, penthouses and super penthouses.

• TOP date: End 2012• Tenure: 99 years• Average sale price: $1,500–1,800 psf

for the 1-4 bedroom apartments• Gross floor area: 514,515 sq ft• Recent activity: Hong Fok has set aside $200 million for

its construction. This is a redevelopment of existing retail and serviced apartment podiums into two blocks of residential apartments, with commercial space at the first storey.

9 THE CONCOURSE• Architect: Paul Rudolph, Architects 61 • Owner: Hong Fok Corporation• Description:

41-storey office block standing at 180m high• Year built: 1994• Tenure: 99 years• Cost of construction: $248 million• Site area: 220,563 sq ft• Floor area: About 13,000 sq ft• Gross floor area: 1.14 million sq ft• Anchor tenants: Boehringer Ingelheim International, Cargill

Asia Pacific, Parsons Brinckerhoff, Merck Sharp & Dohme, American Express International, Dentsu Young & Rubicam

• Recent activity: Part of The Concourse retail podium is being redeveloped into the Concourse Skyline.

10 KEYPOINT• Owner: Frasers Commercial Trust (formerly Allco

Commercial REIT)• Description: 22-storey office tower with a three-storey

podium, and a four-storey car park block with 227 car bays• Year built: Constructed in 1978 and underwent a

$35-million refurbishment that was completed in early 2000• Tenure: 99 years from 1976 • Site area: 78,242 sq ft• Total lettable area: 311,892 sq ft• Recent activity: Former Allco Commercial REIT had

acquired the property in October 2007 for $370 million ($1,186 psf), and it became part of Frasers Commercial Trust’s portfolio in July. Also, 2nd and 3rd floor retail podium have floor plates of 45,000 sq ft and office tower from 4th floor up have floor plates of 9,600 sq ft

11 700 BEACH• Architect: Wee Chwee Heng

of Kumpulan Akitek• Owner: Private equity

real-estate firm Fine Grain Property

• Description: Boutique office development comprising an eight-storey loft-style office tower

• Year built: 2002• Tenure: 99 years from 2004• Site area: 18,396 sq ft• Floor area:

About 8,500 sq ft per floor• Gross floor area: 67,000 sq ft• Sale price: $70 million• Anchor tenants:

Hirsch Bedner Associates, GroupM, Mindshare• Recent activity: The building has just completed major

refurbishment works. $3.5 million have been spent to fully upgrade and reposition it as a boutique office development.

12 GOLDEN MILE COMPLEX• Architect: DP Architects• Owner: CDL, strata title• Description: Golden Mile is considered one of the first mixed-

use developments in Singapore where residential, commercial and office spaces are integrated into one infrastructure.

• Year built: 1973• Tenure: 99 years from 1969• Cost of construction: $18 million• Site area: 139,931 sq ft• Recent activity: Minor refurbishment works were done in

1983 and 1986. As this is a strata-titled mixed development, there had been plans for an en bloc sale, but these have since been shelved given the weak property market.

DELINE TING AND PC LEE, PHOTOS BY SAMUEL ISAAC CHUA

BROUGHT TO YOU BY:

CC6 • THEEDGE SINGAPORE | DECEMBER 29, 2008

CITY&COUNTRY

| BY CECILIA CHOW |

The residential report card this year has been bleak. Only 310 new homes were sold in October and November, with 450 to 500 units in the full 4Q ring-ing in at. The full-year figure stands

at 4,300 to 4,350 units, “a record low since the early 1990s”, says Joseph Tan, executive director of residential services at CB Richard Ellis (CBRE).

Prices of new luxury homes have declined 25% y-o-y from an average of $3,200 to $3,500 psf to an average of $2,400 psf. “How the lux-ury market will fare will depend on the rate of recovery from the global financial turmoil,” says Tan.

Generally, most property consultants are expecting residential prices and rentals to be earth bound next year, although no one is able to call the bottom as yet. Tan expects weak sentiment to continue into 1Q2009, and fore-casts overall private residential prices to drop another 10% to 15% in the new year, with “even larger adjustments expected for the top end of the market”. He’s also expecting rents to soften by 5% to 10% next year.

DPS fears overblown? Analysts have been speculating about the proper-ties bought under the deferred payment scheme (DPS) that are due for completion next year, figuring that the en masse unloading by cash-strapped owners will likely have a catastrophic impact on an already weakened market. Prob-ably to put an end to the speculation, the URA released the DPS figures on Dec 19.

The DPS introduced in October 1997, in the wake of the Asian financial crisis, was scrapped at the end of October last year. Unlike a normal progressive payment scheme that is linked to the completion of each construction phase, the DPS home buyer need not pay anything after putting down the initial 10% or 20% down pay-ment on the property until the temporary occu-pation permit (TOP) is received — that’s when the project is completed. It also means that the owner need not take a mortgage nor pay any-thing beyond the down payment until then.

According to URA figures, as at end-Novem-ber 2008, 10,450 units sold in 2005-08 offered DPS, and will be completed in the next five years. The largest chunk that’s due for com-pletion — an estimated 4,560 units (44%) — is coming on stream next year.

Knight Frank’s director of research and con-sultancy, Nicholas Mak, estimates that 10,033 new homes will to be completed in 2009. This means 45% of total new private homes to be com-pleted next year will be those that offered DPS.

Residential prices, rentals to remain earthbound in 2009Funds and investors looking for more attractive opportunities, developers looking to sell properties beyond Singapore’s shores

could further depress real estate prices, and some of these buyers may not wish to do so in a weak property market.”

However, most of the units that are due for completion over the next two years were prob-ably purchased in 2005-06 at prices that are still relatively lower than today’s levels or per-haps even the price levels in 2009, say property consultants. (Refer to table of major projects to TOP from now till end-2009).

The Real Estate Developers’ Association of Singapore issued a statement recently voicing the same sentiment, adding that “with the pur-chase prices of these units likely to be below current market prices, we are confident that such property purchasers will want to proceed with completion of their sale, upon their unit’s grant of the TOP”.

According to Chua Yang Liang, head of re-search at Jones Lang LaSalle (JLL), about 13% of new homes sold in 2007 eventually resur-faced as subsales on the secondary market. (Note that subsale buyers are generally not entitled to DPS). Assuming the same percent-age of buyers sell their property next year pri-or to TOP, this will bring down the number of DPS units next year to just under 4,000 units or 40%, estimates Chua.

“There is insufficient information on the credit standing of these buyers,” points out Chua, and this makes it difficult to ascertain the number of properties likely to default. “There are chal-lenges,” he admits. “On the other hand, in the event that distressed sales do happen, this will provide an opportunity for buyers who are wait-ing on the sidelines to jump in.”

Looking beyond 2009Perhaps distressed sales are exactly the thing needed to unclog the logjam before buyers jump into the market again. “There are buyers — both institutional and private — waiting for these opportunities,” says Tan Tiong Cheng, managing director of Knight Frank.

Other pockets of opportunities could come from developers and homeowners who are prepared to reduce their asking prices “to fa-cilitate cash flow”, says CBRE’s Tan. He adds that some developers may also consider sell-ing units in bulk at an attractive price.

There are already property funds looking to deploy capital to invest in residential as “they like the residential story”, says Christopher Fos-sick, managing director of Jones Lang LaSalle for Singapore and Southeast Asia. “From a lot of investors’ perspective, they may have felt that they had missed the boat in 2007… But with prices coming down in 2009, they [now] have a chance to get into the market.”

Foreign funds are exploring several alter-natives: either a joint venture with a local de-veloper who has already bought sites and pro-vide an equity infusion, or buy units en bloc. “The foreign funds haven’t changed their me-dium- to long-term view of Singapore,” notes Fossick. “They still believe that Singapore will grow, and give them good returns.”

Collective sales? Not just yet The collective sale market was pretty much dor-mant in 2008 as markets turned south. Lukewarm response to new launches, rising construction costs and the worsening global financial crisis also took a toll on the collective sale market. “Al-though construction costs have come down and will continue to do so in 2009, the global econom-ic downturn is expected to be protracted, lead-ing to further downside risks,” says CBRE’s Tan. “We do not expect much interest from develop-ers [in collective sale sites] in the next three to six months, as they have already built up a sub-stantial landbank in 2006-07.”

Some have also decided to put their collec-tive sale purchases back on the leasing mar-ket for the time being. The latest was the 193-unit Grangeford apartment block at Leonie Hill Road, says Tony Darwell, head of Singapore re-search (property) at Nomura Singapore in Dec 12 report. Grangeford was acquired by Over-seas Union Enterprise (OUE) for $625 million in August 2007 at an estimated $1,810 psf (in-cluding the lease top-up premium to a fresh 99-year lease).

“The move by developers to return en bloc units back to the leasing market to cover a degree of the holding costs is not unanticipated,” notes Darwell. With such developers being “price tak-ers”, adds Darwell, this would put pressure on an already weakened rental market. He forecasts rents to fall 16.3% in 2009, and at a time of rising risk premiums, “the reality is that asset prices are destined to fall at a faster rate than we posited in March 2008”. Hence, his forecast is for luxury residential prices to fall a precipitous 43.8% over 2008-10, and for mass market residential prices to fall by 32.1% over the same period.

To launch or not to launchKnight Frank’s Tan is also expecting home buyers at the mass market segment to turn cautious with

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Of the total number to be completed in 2010, around 30% were sold on DPS.

“There is some concern in the property mar-ket that a large number of the uncompleted homes sold under the DPS could be disposed of at distressed prices in 2009 and 2010 as the buyers are required to pay the balance of the purchase price when the projects are complet-ed,” acknowledges Mak. “Such distressed sales

There is some concern in the property market that a large number of the uncompleted homes sold under the DPS could be disposed at distressed prices in 2009 and 2010 as the buyers are required to pay the balance of the purchase price when the projects are completed — Mak

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THEEDGE SINGAPORE | DECEMBER 29, 2008 • CC7

CITY&COUNTRY

Major projects likely to be completed between December 2008 and December 2009

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the rapidly deteriorating economy and tighten-ing labour market. “Some buyers may even de-fer their housing aspirations, by choosing public housing over private homes,” he adds.

Developers with projects in the pipeline will have to prioritise their launches, contin-ues Knight Frank’s Tan. They would need to evaluate which projects are in “critical need” of being launched, and which ones are with-out “strong physical selling points”, and de-ploy creative marketing methods and packag-ing for the latter.

For some projects, developers may have few options apart from waiting out the crisis until market confidence returns, says Tan of CBRE. Some are hoping that they could achieve sales by embarking on overseas marketing road shows. Beyond the traditional markets of In-donesia and Kuala Lumpur, still the top two foreign buyers of Singapore property, some de-velopers are also venturing to other emerging markets such as Russia and India.

There are developers who have turned up their creativity a few notches to achieve great-er product differentiation (in terms of prod-uct development, promotional activities and sweeteners to entice buyers.) “Starchitects” or star architects are increasingly popular with developers. Also popular is the practice of engaging renowned or celebrity interior de-sign firms to dress up show apartments, and incorporating branded finishing and fittings, and recreational facilities with wow-factors (like an aqua gym). In terms of promotions, CBRE’s Tan also sees more co-branding with lifestyle retailers. Tying up with banks to con-tinue offering the Interest Absorption Scheme will also help in giving purchasers “a payment holiday” till TOP. E

PROJECT DISTRICT LOCATION TYPE NO OF UNITS TENURE DEVELOPERThe Clift 1 McCallum Street Apt 312 99Y Far East OrganizationThe Metropolitan 3 Alexandra Road/Tiong Bahru Road Condo 382 99Y CapitaLand/Lippo GroupThe Regency@Tiong Bahru 3 Chay Yan Street Apt 158 Fh UOL/UICThe Oceanfront@Sentosa Cove 4 Ocean Drive Condo 264 99Y City Developments/TID The Coast 4 Ocean Drive Condo 249 99Y Ho Bee Developments/Ergo CorpThe Infi niti 5 West Coast Road /Upper Ayer Rajah Road Condo 315 Fh Frasers Centrepoint LtdBotannia 5 West Coast Park Condo 493 999Y City Developments/CapitaLandone-north residences 5 One North Gateway/Slim Barracks Rise Apt 405 99Y Kheng Leong Co/UOL/Low Keng HuatCarabelle 5 West Coast Way Condo 338 956Y Sim Lian LandClementiWoods 5 West Coast Road Condo 240 99Y Frasers Centrepoint LtdSouthbank 7 North Bridge Road Mixed Devt 197 99Y UOL/Low Keng HuatCity Square Residences 8 Kitchener Road/Jalan Besar/Serangoon Rd Com/Resi 910 FH City DevelopmentsParc Emily 9 Mount Emily Road Condo 295 FH City Developments/TIDVida 9 Peck Hay Road /Cairnhill Rise Apt 137 FH Far East OrganizationThe Inspira 9 Arnasalam Chetty Road Condo 120 FH Hock Giap LandRiverGate 9 Robertson Quay Condo 545 FH CapitaLand/S’pore WarehouseThe Trillium 9 Kim Seng Road Condo 231 FH Lippo Real Estate Pte LtdSt Thomas Suites 9 St Thomas Walk Condo 176 FH Frasers Centrepoint Tribeca By The Waterfront 9 Kim Seng Rd/Jiak Kim St Condo 175 Fh Hong Leong Holdings/City DevelopmentsThe Suites At Central 9 Devonshire Road/St Thomas Walk Condo 157 FH Keppel Land/Chip Eng Seng Corp Ltd One Jervois 10 Jervois Close/Road Condo 275 FH Frasers Centrepoint LtdThe Orchard Residences 10 Orchard Boulevard Mixed 175 99Y CapitaLand Retail S’pore Investments & GreswardThe Sixth Avenue Residences 10 Sixth Avenue Condo 175 FH Keppel Land/Singapore LandWaterfall Gardens 10 Farrer Road Condo 132 FH MCL LandArdmore ll 10 Ardmore Park/Anderson Road Condo 118 FH Wheelock Properties Sky@eleven 11 Thomson Road Condo 273 FH Singapore Press HoldingsPavilion 11 11 Minbu/Akyab Road Condo 180 FH UOLOne St Michael’s 12 St Michael’s Road/Serangoon Road Condo 131 FH Frasers Centrepoint LtdAtrium Residences 14 Lorong 28 Geylang Condo 142 FH Novelty Properties Pte ltdOne Amber 15 Amber Gardens Condo 562 FH UIC/UOL/SingLandThe Seafront On Meyer 15 Meyer Road Condo 327 FH CapitaLand Tierra Vue 15 St Patrick’s Road Condo 129 FH MCL LandGrand Duchess@St Patrick’s 15 St Patrick’s Road Condo 121 Fh UIC LtdCasa Merah 16 Tanah Merah Kechil Avenue Condo 556 99Y NTUC Choice Homes/Wing Tai Ferraria Park 17 Flora Drive Condo 472 FH Tripartite Developers Pte LtdThe Quartz 19 Compass Bow/Sengkang Central/Buangkok Drive Condo 625 99Y GuocoLandFontaine Parry 19 Poh Huat Road Condo 125 999Y OUB Centre LtdThe Centris 22 Jurong West Central 3/Jurong West St 64 Mixed 610 99Y Guthrie/Lee Kim Tah/TMW Asia Pty Fund No 1Yew Tee Residence 23 Yew Tee Close/Choa Chu Kang North 6 Com/Resi 139 99Y NTUC Choice Homes

TOTAL 11,366

Projects in Sentosa Cove, downtown & prime districts — 3,677 or 32.4% of total Data as at Dec 17, 2008

ad.indd 1ad.indd 1 12/23/08 4:45:37 PM12/23/08 4:45:37 PM

CC8 • THEEDGE SINGAPORE | DECEMBER 29, 2008

The news that sent shock waves through the retail sector was not really the

collapse of Lehman Brothers, the sale of Merrill Lynch to Bank of America, or the bail-out of AIG in September. It was the announcement in ear-ly October that Singapore was in recession. “I remember that Friday, it was terrible,” recalls Turner Canning, associate di-rector of retail consulting and leasing at property consulting

firm, Cushman & Wakefield. “I spent all day on the phone calming people down, every-one freaked out.”

Prior to coming to Singapore in March this year, Canning spent six years in Shanghai, where he worked for a Morgan Stanley Real Estate joint ven-ture building hypermarket-an-chored shopping malls.

The biggest shift in the re-tail sector is the sluggishness on the part of fashion and ac-

cessories retailers in taking up new space. “It has fallen off a cliff,” says Canning, who helps several shopping mall landlords along Orchard Road find ten-ants, and retailers find space. “Even the luxury brands are taking a hit,” he adds.

Seizing upAlong Orchard Road, while F&B space may still be quickly taken up, the retail portion is seizing up. Word on the street

is that retailers are renegotiat-ing with landlords to reduce the space they are planning to take up in some of the up-coming malls.

F&B players, on the other hand, are going strong — lo-cal players are still looking to make acquisitions, he notes. Big coffee chains, however, are trimming back their oper-ations or starting to walk away from deals. “It’s really a matter of being overextended,” says

| BY CECILIA CHOW |

Investment sales all but evaporat-ed this year, especially in 2H2008. Of the $5.29 billion worth of office investment sales done in 2008, 96.5% took place in 1H2008. The

situation in 1H2009 will likely mirror 2H2008 — with very few transactions as buyers and sellers are still holding on to very different price expectations, says Jeremy Lake, executive director of investment properties at CB Richard Ellis (CBRE). “Sellers want last year’s price and buyers want next year’s price,” says Lake.

He expects the price gap to be bridged for some deals in 2H2009, and forecasts that total office invest-ment sales in 2009 could possibly fall below $5 billion, the volume seen in 2002 when Singapore was last in a recession.

Shaun Poh, senior director for in-vestment advisory services and auc-tion at DTZ, is expecting to see more assets coming up for sale, and more deals happening in the commercial mar-ket. Like Lake, he is expecting deals to only start happening in 3Q, with peo-

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More sales activity expected in 2H2009 for office sector

View of Singapore’s city area — a bird’s eye view on buying opportunities?

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Canning. “They just expand-ed a little too quickly.”

The market will be espe-cially challenging for new en-trants trying to get a toehold in Singapore. “If you’re an ex-tension brand, and you may be big in say, in your home coun-try but nowhere else, then it’s going to be tough,” says Can-ning. “The F&B market is pret-ty fickle. When push comes to shove, people batten down the hatches and go to Yakun Kaya Toast, or Toastbox, and Food Republic.”

A trend that’s emerging among consumers as a result of the global financial crisis is creative ways to indulge without blowing your budget. Instead of a $10,000 vacation, people may opt for a $200 meal instead. “It’s still an indulgence,” says Can-ning. “People are still buying — you still need clothes, you still need food.” With consum-ers tightening their belts, even retail sales have been affected, with October sales dropping 6.8% versus September, and 3.6% from October 2007.

‘Slow going right now’To date, most of the new malls along Orchard that are opening

in 2009 — ION Orchard, Orchard Central, 313@Somerset and the New Mandarin Gallery — are about 60% leased, notes Can-ning. “How much more of that they are really going to fill? It is slow going right now.”

Canning expects Orchard Road rentals to remain rela-tively flat next year, as there hasn’t been any new supply on Singapore’s main shopping belt in over a decade.

“I think they are going to take a dip right now, but they are not going to take a tum-ble,” he says. “There’s a fi-nite amount of space on Or-chard Road.”

On the bright side, the big-gest opportunities in 2009 will be for smaller brands, fashion retailers “who take the bull by the horns and take space that was not otherwise avail-able to them”, notes Canning. “When you see the big names slowing down, and pulling out, and maybe not taking space they otherwise would have, it is a tenant’s market. So, it is a good thing as it al-lows smaller brands to get a foothold, and take space that is otherwise earmarked for someone else.”

ple watching the market closely for the first two quarters of 2009.

“There are still a number of property funds that are gearing up to buy,” says Poh. The dilemma for some of them is that, on the one hand they have raised equity, but they haven’t drawn down as they have yet to make an acquisi-tion. With the asset-value destruction happening in the market, “the real fear is that if they bought something today, the next day, the value would drop further”, he adds.

Forced to liquidateThere are also funds that had bought property in the last two years and are now starting to face redemption re-quests from some of their investors — typically, a mix of institutional in-vestors like fund of funds, superannu-

ation funds and foundations, as well as wealthy private individuals. These funds may now be forced to liquidate their properties.

“Most of the buyers of Grade A and B commercial buildings over the last two years had been largely foreign funds”, acknowledges DTZ’s Poh. He reckons that those who have properties in Sin-gapore, Hong Kong and Shanghai and looking to liquidate them, are likely to see greater interest from buyers, given that these are established commercial markets with high trading activity. “I wouldn’t call them distressed assets, but if you’re meeting with buyers to-day, you would have to be prepared to get some not-so-attractive offers,” says Poh.

With debt funding getting increas-ingly difficult, loan-to-value ratios are

now substantially below 50% to 60%. Poh feels that those who’ve already raised equity and are looking to se-cure debt financing will be looking to buy assets “at deep discounts”. With the debt portion substantially reduced, and very few funds willing to buy prop-erties using only cash, the quantum amount for acquisitions is also cur-rently relatively small, at US$100 mil-lion ($146 million) to US$200 million, say property consultants.

Buying opportunities next yearThis is a far cry from 1H2008, where some acquisitions made by funds and REITs were either close to, or exceed-ed $1 billion. Singapore Power Build-ing was sold to Pacific Star Group for $1.01 billion, Hitachi Tower was ac-quired by one of the funds linked to

Goldman Sachs for $811 million ($2,901 psf), and Commerz Real (a subsidiary of Commerzbank AG) bought 71 Rob-inson Road for $743.5 million ($3,125 psf). Meanwhile two CapitaLand-linked REITs, CapitaCommercial Trust acquired One George Street for $1.17 billion ($2,600 psf) and CapitaMall Trust bought The Atrium@Orchard for $839.9 million ($2,249 psf).

DTZ’s Poh observes that there will be buying opportunities for funds emerg-ing in the commercial sector next year. “They are more familiar with commer-cial property, and will prefer to look at properties which are already gen-erating income, and which they could sell later,” he adds. The expectation is that the level of activity will pick up in 2H2009, and perhaps we will see some buildings changing hands.

A mixed picture for retail in 2009

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Orchard Road rentals to remain relatively flat next year, and perhaps see a slight dip