THE company behind Resorts World Sentosa (RWS) has started building the first hotel in one of Singapore’s newly-emerging business and leisure hubs, Jurong Lake District.

Genting Singapore broke ground yesterday for the new hotel on Jurong Town Hall Road which is slated to open in the first half of 2015.

The Jurong Lake District has been earmarked by the Urban Redevelopment Authority as a new growth area with commercial, business and leisure facilities.

The 550-room hotel, five minutes away from the Jurong East MRT station, is on a 9,027 sq m site and has a 99-year lease.

Tan Sri Lim Kok Thay, chairman of the Genting Group and executive chairman of Genting Singapore, said the new hotel “signifies our commitment to reinvesting in Singapore”.

“With our hotel being the first to open in this growing precinct, we hope to create another unique hospitality product that will crank up the buzz meter in this already vibrant area to even higher levels,” he added.

Mr Tan Hee Teck, president and chief operating officer of Genting Singapore, said: “We will deliver a product that will bring incremental business to neighbouring merchants, accommodation convenience to companies in the vicinity, and amenities to Jurong West residents.”

The new hotel will be the seventh hospitality development for Genting Singapore, which owns six hotel properties at RWS – Crockfords Tower, Hotel Michael, Festive Hotel, Hard Rock Hotel Singapore, Equarius Hotel and the Beach Villas.

 

Source: STPROPERTY

INDUSTRIAL rents are expected to stabilise for the rest of the year amid a fragile economic outlook and ample supply for tenants, Colliers International said.

The property consultancy yesterday reported that rents were flat across all segments in the second quarter over the previous quarter. Colliers divides industrial property into prime conventional factory and warehouse space, high-specifications space and business park space.

Average gross rents for prime conventional factory space in Q2 was $2.49 per square foot (psf) for ground floors and $2.18 psf for upper levels. For warehouse premises, rents were at $2.62 psf for ground floor space and $2.15 psf for upper floor space.

Rents for high-specifications space was $3.30 psf for ground floors and $2.98 psf for upper floors.

Business park space also held steady at $4.04 psf.

“The stability in the rental movement across all segments in Q2 2013 was a reflection of landlords generally holding onto their rental expectations and a relatively tepid leasing demand,” said Tan Boon Leong, executive director of industrial services at Colliers International.

He specifically thinks that rents for prime conventional factory and warehouse space may have peaked.

The overall take-up rate was slow in the second quarter as tenants took more time to evaluate their real estate needs amid lingering economic uncertainties, Mr Tan said.

“Additionally, in some cases, the leasing process was also prolonged by more detailed checks conducted to qualify users and to ensure compliance with the government’s guidelines.”

Industrial properties generally can only devote up to 40 per cent of floor area for non-industrial use such as offices and canteens. At least two developers were rapped by the authorities for illicit usage earlier in the year.

With cost-conscious tenants, as well as sufficient supply of industrial real estate, any increase in rents will be limited for the rest of the year, said Chia Siew Chuin, director of research and advisory at Colliers International.

Ms Chia expects rents to remain unchanged for prime conventional industrial space, with some upside for high-specifications and business park space.

In the sales market, average prices rose in Q2 over the previous quarter.

Mr Tan said healthy demand from genuine end users and long-term investors for freehold industrial properties with good locations and specifications held up prices, even as speculative activity waned with the introduction of a Sellers’ Stamp Duty in January on all industrial properties sold within three years of purchase.

Average capital values for ground floor space at prime freehold conventional factory space gained 0.7 per cent to $718 psf; those for upper floor space rose 1.5 per cent to $658 psf.

For prime freehold conventional warehouse space, prices grew by 1.1 per cent to $656 psf for ground-floor premises and 0.9 per cent to $581 psf for upper-floor space.

Ms Chia expects prices to gain 3 per cent for the full year for these two property types, significantly lower than the 10 to 22 per cent growth last year.

 

Source: STPROPERTY

MAS Introduces Debt Servicing Framework for Property Loans

Singapore, 28 June 2013 … The Monetary Authority of Singapore (MAS) will introduce a Total Debt Servicing Ratio (TDSR) framework for all property loans granted by financial institutions (FIs) to individuals¹.  This will require FIs to take into consideration borrowers’ other outstanding debt obligations when granting property loans. They will help strengthen credit underwriting practices by FIs and encourage financial prudence among borrowers.

2   MAS will also refine rules related to the application of the existing Loan-to-Value (LTV) limits on housing loans.  These refinements seek to ensure the effectiveness of the LTV limits that were put in place to cool investment demand in the housing market.  In particular, they aim to prevent circumvention of the tighter LTV limits on second and subsequent housing loans.

Introduction of TDSR framework

3   MAS conducted a thematic inspection of banks’ residential property loan portfolios in 2012.  While banks generally had in place sound policies to assess the credit worthiness of borrowers, the inspection and subsequent surveys revealed uneven practices with respect to the application of debt servicing ratios and highlighted areas for improvement in credit underwriting practices.

4   The TDSR framework will provide FIs a robust basis for assessing the debt servicing ability of borrowers applying for property loans, taking into consideration their other outstanding debt obligations.  FIs will be required to compute the TDSR, or the percentage of total monthly debt obligations to gross monthly income, on a consistent basis.²

5   The coverage of the TDSR framework will be more comprehensive than FIs’ current practice.  The TDSR will apply to loans for the purchase of all types of property, loans secured on property,³ and the re-financing of all such loans.⁴   6   The methodology for computing the TDSR will be standardised.  FIs will be required to:

• take into account the monthly repayment for the property loan that the borrower is applying for plus the monthly repayments on all other outstanding property and non-property debt obligations of the borrower;
• apply a specified medium-term interest rate or the prevailing market interest rate, whichever is higher, to the property loan that the borrower is applying for when calculating the TDSR;⁵
• apply a haircut of at least 30% to all variable income (e.g. bonuses) and rental income; and
• apply haircuts⁶ to and amortise the value of any eligible financial assets taken into consideration in assessing the borrower’s debt servicing ability, in order to convert them into ‘income streams’ in computing the TDSR.

7   FIs will be required to verify and obtain relevant documentation on a borrower’s debt obligations and income used in the computation of the TDSR.

8   MAS expects any property loan extended by the FI to not exceed a TDSR threshold of 60% and will regard any property loan in excess of a 60% TDSR to be imprudent.⁷ The threshold is set at 60% for a start to allow both the FIs and borrowers to familiarise themselves with the TDSR framework and its computation methodology.  MAS will monitor and review the 60% threshold over time, with a view to further encouraging financial prudence.

Refinement of rules related to application of LTV limits

9   MAS will refine certain rules related to the application of the existing LTV limits on housing loans granted by FIs.  In particular, MAS will require:

• borrowers named on a property loan to be the mortgagors of the residential property for which the loan is taken;
• “guarantors” who are standing guarantee for borrowers otherwise assessed by the FI at the point of application for the housing loan not to meet the TDSR threshold for a property loan to be brought in as co-borrowers; and
• in the case of joint borrowers, that FIs use the income-weighted average age of borrowers⁸ when applying the rules on loan tenure.⁹

Measures for the long term

10   The new rules will take effect from 29 June 2013.

11   The TDSR framework and refinements to the rules relating to the application of LTV limits are structural in nature, and will be in place for the long term. They aim to encourage prudent borrowing by households and strengthen credit underwriting standards by FIs.

12   They do not involve changes to the LTV limits on housing loans themselves, which were last tightened in January 2013 as part of the government’s package of measures to promote stable and sustainable conditions in the housing market.¹⁰ The current LTV limits are not permanent, and will be reviewed depending on the state of the property market.

 

Source: MAS

 

Although net absorption in Q2 2013 was 55% quarter-on quarter (q-o-q) lower than Q1, at only 170,000 sq ft, islandwide office occupancy rates increased notably q-o-q by 0.9 percentage-points from 95.4% to 96.3% in Q2. The increase in occupancy rates were in part contributed by substantial office building terminations in Q2.

Occupancy improved the most across all areas in Shenton Way/Robinson Road/Cecil Street by 3.3 percentage-points q-o-q to 94.8% while in Raffles Place, occupancy increased by about 1.0 percentage-point to 94.3%. Average gross office rents in both Shenton Way/Robinson Road/Cecil St and Raffles Place held firm q-o-q at $7.25 per sq ft per month and $9.30 per sq ft per month, but fell year-on-year (y-o-y) by 4% and 2% respectively.

Occupancy rates for Q2 improved because of the fairly large office stock removals in the quarter. These buildings, located mainly in Shenton Way/Robinson Road/Cecil St, have a cumulative net lettable area (NLA) of approximately 430,000 sq ft which are no longer available for occupation. The entire Robinson Towers and its Annex Building, International Factors Building, The Corporate Office, Cecil House and some floors in DBS Tower 1 were vacated in Q2 in view of future redevelopment plans. Some of the displaced tenants from these older buildings due for redevelopment moved either into nearby buildings in the CBD or the CBD fringe, where rents can be about 10% to 20% lower. Rental increases were seen in some areas in the CBD fringe due to sustained demand from a diversified tenant profile, additional demand from displaced tenants and the recent lack of new supply. Average gross rents in Orchard Rd, Bras Basah/Selegie Road and River Valley edged up by 2.3%, 2.4% and 3.3% respectively in Q2. Elsewhere, in Marina Centre, Anson Rd/Tanjong Pagar and Beach Road/North Bridge Road, average gross rents held firm in Q2.

Cheng Siow Ying, DTZ’s Executive Director of Business Space commented, “Rents in decentralised offices have also held up well. Last quarter saw some movement of occupiers from industrial space to decentralised offices as the government authorities continue to reinforce eligibility criteria on users in hi-tech buildings. In addition, tenants from older buildings and those displaced from buildings due for redevelopment are propping up demand for decentralised office space as well, such as in the soon-to-be completed Metropolis. Although 1.5 million sq ft of decentralised office space will be completed in H2 2013, only 14% lower than islandwide supply last year, there will still be room for decentralised office rents to grow. Nexus@One-North, Jem and Metropolis have all secured strong pre-commitments before its completion date. Jem is currently fully committed, while Metropolis and Nexus@One North have a known pre-commitment rate of 89% and 83% respectively.”

Meanwhile, in Marina Bay, occupancy rates also increased by 1.6 percentage-points q-o-q to 95.2% in Q2 as average gross rents in Marina Bay held firm at $10.50 per sq ft per month. New occupiers continued to move into Asia Square Tower 1 and Marina Bay Financial Centre Tower 3. In Asia Square Tower 1, new leases over Q2 were signed from companies in the advertising, legal, energy and trading fields, bringing its total occupancy to above 90%. With occupancy rates in Marina Bay improving consistently since the start of 2012, some landlords are now less flexible with settling rents. This is an indication that rents in Marina Bay are firming and could start moving slightly upwards in H2 2013. A similar uptrend in rents is expected in Raffles Place and Shenton Way, supported by healthy occupancy rates and continued demand from non-financial sectors.

Lee Lay Keng, DTZ’s Head of Singapore Research, commented, “If economic growth improves as expected in H2, we expect CBD office rents to start rising in H2. This increase in rents however will be calibrated as demand for office space from banks and financial services firms, which tend to pay higher rents, will remain modest. Office demand will continue to be supported by the non-financial sectors such as the IT, energy and infocomm and professional sectors which have recorded more positive sentiment.”

Source: DTZ Singapore

Despite increasing activity in the manufacturing sector, price growth of first and upper-storey conventional industrial space continued to decelerate q-o-q in Q2 2013 while rents held steady, according to DTZ, a UGL company.

The capital value growth of industrial properties is losing momentum with resale prices of first and upper-storey space rising marginally by 0.3% and 0.6% q-o-q respectively in Q2. This brought price growth of first and upper-storey space to 0.8% and 2.6% for H1 2013 respectively, slower than the 7.8% and 6.5% growth in H2 2012.

Transaction activity for strata-titled industrial units also continued to fall in Q2. Based on caveats from URA REALIS, only 266 resale strata factory units were transacted in Q2, 17% less than that recorded for Q1. As a whole, the total number of strata-titled factory transactions for H1 2013 was 53% lower than H2 2012 and also 46% lower than H1 2012.

Lee Lay Keng, DTZ’s Head of Singapore Research said, “Besides the dampening effect of the seller’s stamp duty (SSD) implemented in January, the fall in transaction volume was also due to a mismatch in expectations between buyers and sellers. Sellers are holding on to their asking prices while buyers are becoming increasingly cautious due to the SSD and the possibility of an increase in interest rates.”

Meanwhile, based on a basket of existing buildings tracked by DTZ Research, rents for industrial space held firm q-o-q. Average gross rents for first and upper-storey conventional industrial space were unchanged at $2.15 per sq ft per month and $1.75 per sq ft per month respectively. Similarly, hi-tech rents held steady q-o-q at $3.10 per sq ft per month after a 3.3% increase in Q1.

According to Angela Tan, DTZ’s Regional Head, Occupier Services, “In the business park segment, rents held steady at $4.70 per sq ft per month as this quarter saw continued interest from companies in the pharmaceutical, infocomm, media and technology sectors which favour the newer, better quality and more self-sufficient environment offered by business parks. Although the business park segment will see a surge in supply of about 2.5 million sq ft over the next two years, rents are still projected to increase alongside the expected economic recovery in H2 2013. Moreover, about 60% of this upcoming supply is owner-occupied or has been pre-leased, thus the impact of this new supply on business park rents will be somewhat limited.”

Between Q2 2013 and 2014, approximately 32 million sq ft NLA of industrial space will be completed. Of this amount, 32% will encompass warehouse space while another 24% will be single-user factory developments, both predominantly located in the western region of Singapore. On the other hand, the majority of multiple-user factory developments are more evenly spread across the island and constitute about 27% of the oncoming supply from Q2 2013 till 2014. Some of the major multiple-user factory developments anticipated to be completed in the next two years include North Spring Bizhub (2013), Premier@ Kaki Bukit (2014) and Synergy @ KB (2014). –

Source: DTZ Singapore