Friday, May 11, 2007

HK Market to record steady growth

Market to record steady growth

Wee-Liat Lee

Friday, May 11, 2007

With strong economic fundamentals, a buoyant labor market, rising incomes and the impetus stemming from the generous offerings in the 2007-08 budget, the property market in Hong Kong as a whole recorded steady growth in the first quarter.
Demand in the Hong Kong Grade A office market continued to benefit from corporate expansions despite moderate economic growth through the latter part of 2006, and anecdotal evidence suggested that this momentum continued into the first quarter.

While banking, finance and legal services companies continued to expand in Central, the market likewise saw a steady level of expansion across the other markets.

Meanwhile, cost-sensitive tenants continued to relocate to non-core markets like Kowloon East and to non- Grade A offices within core areas.

With the exception of Hong Kong East, all office sub-markets recorded a positive net take-up in the first quarter. Overall net take-up amounted to about 342,000 square feet, slightly higher than that in the fourth quarter of 2006.

On the supply side, no new Grade A office project was completed in the first quarter after the delay of 633 King's Road's completion until the second quarter.

With the absence of new supply and the strong leasing activity in Central and the Kowloon non-core office sub- markets, overall vacancy decreased from 5.4 percent to 5 percent at the end of the first quarter.

The investment market was highlighted by the whole-block purchase of three adjoining non-Grade A office buildings in Sheung Wan by Citigroup Property Investors for about HK$1.5 billion. It is reported that the three sites will be amalgamated and redeveloped into Grade A offices.

During the first quarter, overall average net effective rental for Grade A offices rose by 2.8 percent quarter on quarter while overall average capital value increased by 2.3 percent.

In the retail property market, growing incomes stemming from rising salaries and bonus payments contributed to a higher level of domestic demand. The retail market continued to register robust growth in the first quarter, with retail sales increasing by 11.4 percent year on year during the January-February period. The various tax benefits proposed in the 2007-08 budget are set to benefit the consumption market. In the long run, the tax cut will raise the disposable income of taxpaying households by 23 percent. This will in turn induce further spending.

With the strengthening consumer confidence, the market saw stronger expansion demand for prime retail properties in major shopping districts from brand-name retailers throughout the quarter. These retailers are generally those with wider profit margins and stronger financial positions to bear rising rental costs.

The renovation of Crawford House (formerly Lane Crawford House) in Central was completed in the quarter with the opening of H&M as its anchor tenant in March.

During the quarter, rents for prime street shops grew by 3.3 percent while prime and decentralized shopping center rentals grew by 5.6 percent and 2.9 percent respectively. Leveraging on the existing momentum and additional stimulus from tax relief, we expect a more positive outlook.

Rents in prime streets and prime shopping centers could continue to achieve moderate rental growth in the next 12-month period.

In the residential market, the sales market saw a significant pick-up in transaction volume in the first quarter, driven primarily by lower mortgage rates and improved buyer affordability stemming from salary increases and year-end bonuses.

The generous offerings in the 2007-08 budget will also relieve the financial burden of property buyers, thus triggering stronger "end-user" demand.

The number of residential sale and purchase agreements rose by 31.6 percent year on year to 23,328 units during the quarter.

During the quarter, capital values for luxury properties rose by 5.1 percent.

Demand for high-end properties remained strong for the leasing market, with those on Hong Kong Island particularly sought after.

The remaining units in Hos Villa in Stanley and Luard on the Park in Wan Chai were all leased out in the quarter. Rents recorded a rise of 1.9 percent in the same period.

The pay rises underpinned by the buoyant labor market and the generous offerings in the 2007-08 budget, will help boost buyer confidence and trigger upgrading demand.

Capital values for the overall residential market will continue to grow while rental values for luxury properties will continue to rise on the back of the inflow of expatriates and tight supply.

In the industrial market, the momentum of the warehouse market remained strong during the quarter, on the back of a robust trading environment.

Total imports and exports grew by 9 percent year on year in the first two months.

The outlook for local consumption and retail sales in Hong Kong remained upbeat, leading to sustained demand for warehouses from retailer and other logistics operator.

The quarter saw a pickup in leasing activity.

The sales market continued to be energetic amidst the limited availability of large and quality warehouse space for sale in the market. Sales transactions were more for smaller and strata-titled properties (on a floor-by-floor basis).

The narrowing choice of warehouse stocks started to divert the attention of institutional investors to other industrial premises including flatted factories and industrial-office buildings.

During the quarter, no new warehouse completion was recorded. Warehouse rents and capital values rose by 0.2 percent and 0.8 percent, respectively. With such vibrant economic growth, local consumption and other business investment activities will help ensure a sustained level of domestically driven warehouse demand.

The external trade sector will continue to benefit from China's growing export activity, putting healthy pressure on Hong Kong's warehouse properties and other logistics facilities.

Wee-Liat Lee is head of research, Greater China, at Jones Lang LaSalle

Thursday, May 10, 2007

The rush to push deals through …in en bloc sales

With residents increasingly holding out for higher payouts as estates around the island continue to fetch record reserve prices in en bloc sales, allegations have emerged of sale committees trying to push through deals before new legislation kicks in.

King’s Mansion resident Abdul Hamid, for one, was shocked at the haste in which the en bloc sale process was carried out. All it took was three days and “all that was left for us to do was to sign or not sign the Collective Sale Agreement (CSA)”, he said.

The Government has announced plans to amend the current laws governing en bloc sales by the year’s end. While this was welcomed by many, calls are growing for urgent action to address issues such as the lack of transparency and neglect of minority interests during an en bloc sale.

Over at Minton Rise, a resident, who declined to be named, accused his estate’s sales committee of pressuring unit owners into agreeing to the sale.

When contacted, the estate manager maintained that the sale committee did everything by the book, but he declined to comment further.

A member of Clementi Park’s sale committee, Mr K C Lim, conceded that his committee was looking to bring forward the deadline for residents to decide on the deal — not because of the impending legislative changes but due to the soaring prices.

Already, a group of owners at Horizon Towers are trying to back out of an en bloc sale because they felt that the $500-millon deal no longer reflect the condominium’s “true value”.

Said Mr Lim: “If everybody is playing a waiting game, it becomes very tedious and time-consuming to carry on.”

When contacted, a Ministry of Law spokesperson told Today that the ministry has “no intention” to suspend the current en bloc regulations pending the review exercise.

The spokesperson said: “Owners who object to the en bloc sale of their development need not sign the CSA. If they have valid grounds to object, they can file their objections with the Strata Titles Board (STB).”

And refuting suggestions that the current regulatory framework appeared to side with the majority owners, the ministry reiterated that the STB was “not partisan”.

So, can anything be done to help the aggrieved parties before the new laws kick in?

One way, lawyer S K Phang suggested, is for more developers and sale committees to work out old-for-new exchanges for unit owners, under which they would get back a comparable unit in the same location.

Said Dr Phang, who has helped facilitate such deals at Eng Kong Green and Paterson Lodge, where all the owners opted for a straight swap: “If I were a developer, I would save on land costs, cash outlay and the interest to pay. The risk is also smaller.” This way, homeowners would not be affected by property-market fluctuations, he added.

Chesterton International’s research director Colin Tan attributes the unhappiness to a “misunderstanding” of the majority consent rule. He said: “Many of those on the sale committees see the 80- or 90-per-cent majority consent required as the magic number. They think that as long as they structure a deal which the majority will agree to, their job is done.”

A change in approach on the part of the sale committee, such as taking into account the interest of everyone involved, could go a long way in reducing acrimony during an en bloc sale. Mr Tan added that the impending legislative amendments merely seek to “make it clearer that the whole process must be fair”.

For some such as Mr Abdul Hamid, the amendments cannot arrive quickly enough. He said: “Year-end is too late. By then, I would have lost my home. What the Government does six months later is of no advantage to me.”

Source: Today

One good turn…Orchard Turn...Orchard Turn Retail Mall

All eyes are now on CapitaLand’s upcoming retail project atop the Orchard MRT station.

Commonly dubbed Orchard Turn because of its address, 2 Orchard Turn, the landmark mall is part of a $2-billion retail and residential joint venture between Singapore’s biggest developer and Hong Kong’s Sun Hung Kai Properties.

But responding to queries from Life!, a CapitaLand spokesman says: ‘The brand name of our retail mall, Orchard Turn Retail Mall, has yet to be confirmed.’

Ms Soon Su Lin, chief executive of the joint venture company Orchard Turn Developments, says the name is likely to be announced in July.

‘We are exploring possible names… The name that we select will be unique and will give our mall a personality and branding that our target shoppers can identify and engage with,’ she says.

Orchard Turn Developments is currently working with a brand consultant, she adds.

The first new building to emerge in Orchard Road in a decade, the 218m-tall, 56-storey luxury project will also be the tallest along the shopping stretch.

The mall will take up eight floors - four basement levels and the four floors above ground - while 175 luxurious apartments will occupy the other 48 floors.

Called Orchard Residences, the first phase of 98 apartments were snapped up at a record average price of $3,213 per sq ft in March.

The retail mall will have more than 450 stores spread over 1 million sq ft of retail space. VivoCity, Singapore’s largest mall, has about 1.1 million sq ft of retail space.

The mall is set to be completed by the end of next year while the apartments will be ready at the end of 2009.

Property insiders Life! spoke to are not surprised that Orchard Turn’s name is still up in the air.

‘The name was too generic to begin with. I expect a name which will better reflect the mall’s unique positioning,’ says Ms Claire Cher, senior marketing and communications manager of UOL Group, which owns malls such as Velocity @ Novena Square and United Square.

Mr John Ting, former president of the Singapore Institute of Architects, agrees.

‘Orchard Turn could be anything. It could be a hotel, a mall. It doesn’t conjure up an image in people’s minds.’

He declines to suggest a name, but says: ‘It should have something to do with Orchard because this name is well-known and has value.

‘Everyone wants to be associated with Orchard. Even buildings a mile away state that they are within 10 minutes of Orchard Road.’

A mall’s name ‘makes a statement about what the mall stands for’, says Dr Seshan Ramaswami, practice associate professor of marketing at Singapore Management University.

‘It should add to the brand cachet of the mall rather than just describe its owners or location,’ he adds.

‘For instance, a plaza seems to denote a low-end atmosphere while the ‘city’ in Ngee Ann City or VivoCity brings to mind vastness.’

CapitaLand’s mixed project also makes it unique because there is a need for separate names for two projects under one roof.

Mr Danny Yeo, executive director of property consultancy Knight Frank, says: ‘In retail, the easier a name is to pronounce and remember, the better. But with residential projects, names tend to be fancy so they sound high class.’

Developers often rope in brand consultants, advertising agencies and focus groups to help christen their projects.

The process can cost anything from $3,000 to more than $30,000 and can take up to several months.

Take UOL Group, which paid home-grown branding consultants Bonsey Group and an advertising agency more than $50,000 when developing the name of Velocity @ Novena Square.

‘Advertising agencies are in the creative industry and bring a fresh perspective to the table,’ says Ms Cher.

Industry players tell Life! good names share three traits: They stand out, are easy to pronounce and stick in the mind.

Mr Ting cites The Centrepoint as a good example: ‘The Centrepoint is easy to remember and makes you think that it’s the centre of activity.’

Mrs Jannie Tay, managing director of luxury watch retailer The Hour Glass and president of the Singapore Retailers Association, agrees: ‘It made the mall sound more important simply by adding one word.’

Formerly known as Centrepoint, the mall owned by Frasers Centrepoint Malls was renamed last December.

Ms Cher says a good name should also convey a mall’s selling points, such as brand positioning or a unique experience - what the mall can offer.

One mall that passed this test is Paragon.

Dr Ramaswami says: ‘It is a nice name that captures the high-end nature of the mall.’

Others have problems with Ngee Ann City.

‘The fact that most people refer to the building as Taka, short for department store Takashimaya in the mall, suggests that the name was never effective,’ says Mr Spencer Ball, design director of British branding consultancy Fitch.

Then there are those that draw mixed reviews.

Mr Ting says of Palais Renaissance, home to designer labels like DKNY and Valentino: ‘Unless you know French, the name won’t make sense. You wouldn’t associate it with Singapore.’

But Mrs Tay feels the name suits its high-end image. ‘Palais Renaissance caters to a small niche market so its name is well-suited,’ she says.

At the end of the day, however, the success of a mall boils down to its location, design and mix of stores, says Dr Ramaswami.

But he notes that the name is ‘part of the package and can make a mall more attractive at practically no additional cost’.

Mr Yeo of Knight Frank believes an Orchard Turn by any other name would smell just as sweet.

‘I think people will head to the mall no matter what it’s called because it’s in a prime location,’ he says.

Source: The Straits Times

Ascendas builds high-rise factory for food firms...FoodXchange @ Admiralty

Ascendas has started to construct a $118 million factory building for use by food production businesses. A total of 72,000 sq m of space spread out over 284 units will be for sale at the new FoodXchange @ Admiralty site.

Speaking at the groundbreaking ceremony for the seven-storey ramp-up facility on Admiralty Road West yesterday, Ascendas president and CEO Chong Siak Ching said that, based on feedback, food industrialists - most of them with small or medium-sized companies - generally preferred to own their own premises.

Ms Chong said that at the end of Q2 2006, occupancy in high-rise food facilities exceeded the 84 per cent level for non-food multi-tenanted facilities.

She said current market rates for comparable sale units are $260 to $310 per square foot.

The FoodXchange @ Admiralty site has a balance of 53 years on its lease.

On whether the new facility could see its way into Ascendas’ real estate investment trust, Ascendas Reit, Ms Chong said: ‘The development is still in early stages and discussions of its future plans, such as whether it would be part of a trust, would be premature.’

Spring Singapore chairman Philip Yeo, also present at the ceremony, said that the output of SMEs in the food manufacturing industry increased 11.4 per cent in 2005 over the previous year to hit $2.4 billion. He said that 95 per cent of the 680 enterprises in the food manufacturing industry are SMEs.

He said: ‘Growing local SMEs develop higher value added exportable food products. Direct exports increased by 6 per cent to $714 million in 2005.’

Mr Yeo said that global sales of processed foods are worth more than $4.5 trillion and are expected to grow at 4.4 per cent each year.

FoodXchange @ Admiralty will have specialised features including a dedicated kitchen exhaust shaft, cold room operations and design which helps prevent cross-contamination.

In March, Soilbuild Group launched its Senoko Food Connection terrace food factories. The net saleable area is 20,271 sq m and industry watchers estimated that prices would be $140-$150 per square foot.

Source: The Business Times

Shops where SPC Golden Shoe used to be...Capitaland

The space vacated by Singapore Petroleum Company in Golden Shoe Car Park earlier this week is to be used for shops and F&B outlets, the property’s owner said yesterday. The car park is owned by CapitaCommercial Trust, a real estate investment trust sponsored by property company CapitaLand.

The development is the last phase of the trust’s efforts to improve the look of the car park, and renovation works are expected to take several months.

After the revamp there will be about 20 fewer parking spaces. There are at present more than 1,000 spaces, CapitaLand told BT yesterday.

The refurbishment of Golden Shoe comes after CapitaLand’s renovation of the nearby Market Street car park, which reopened in November.

At Market Street car park, rents went up by 38 per cent and the net lettable area increased to 1,970 sq m from 1,550 sq m. Market observers expect rents to rise similarly at Golden Shoe car park once the revamp is complete.

CNA yesterday also reported that CapitaLand has received provisional permission to build a nine-storey office tower on top of the existing Funan DigitaLife Mall.

This will include additions and alterations to the building, home largely of retailers of electronics and computer products. To maximise the useable space, CapitaMall Trust is working out a plan with the Urban Redevelopment Authority.

The report said CapitaMall Trust wanted to achieve a more efficient floor plate when developing the proposed office block and to minimise disruptions to the retail tenants. The trust will release more details when the plans are finalised.

Source: The Business Times

A reclaimed island to the north-east of Singapore is being developed into a $30-million industrial park for construction-related activities.

A reclaimed island to the north-east of Singapore is being developed into a $30-million industrial park for construction-related activities.

Pulau Punggol Timor - about one-third the size of Sentosa - will be called the Construction Industry Park (CIP) and will be Singapore’s first such purpose-built facility offshore.

The island, which is currently uninhabited, will be a future landing and stockpile site for sand and granite imports.

Companies supplying pre-mixed concrete and prefabricated components will also set up plants there. This will save time and money because raw materials will not need to be transported to different locations.

Currently, sand and granite brought into Singapore end up either at Tuas or Lorong Halus.

While there are concrete plants at Tuas, they are not located next to the landing point, a spokesman for the Building and Construction Industry (BCA), which is spearheading the project, told The Straits Times.

When the CIP is fully operational by end-2009, the facility at Lorong Halus will be shut down and the land redeveloped for other uses, she said.

For easy access to the new facility, the BCA is building a 6km-long road called the Western Road Link. The two-way road, with a single lane in each direction, will branch off from the junction of the Central Expressway and Tampines Expressway, near the Seletar Water Reclamation Plant.

From there, it will run next to the Seletar Country Club and past Seletar Airport before linking to Pulau Punggol Barat, another reclaimed island, and Punggol Timor.

A new bridge will also be built between Pulau Punggol Timor and Punggol Way.

When The Straits Times visited the area recently, road works were already in full swing just outside Seletar Country Club.

The 6km road link is expected to be ready by the end of next year and costs $50 million, bringing the total cost of the project to $80 million.

The BCA spokesman said the island had been identified as the most appropriate location for the construction park.

Mr Andrew Khng, a director at Tiong Seng Contractors, welcomed the development.

‘Consolidation is always a good thing, and a one-stop centre will definitely add to convenience for the industry and construction companies,’ he said.

Building the facility on an island and away from population centres also makes good sense, he said. The stretch of the Tampines Expressway near Lorong Halus can get very busy and ‘unsightly’, especially on hot days, when the whole area also becomes very dusty, he added.

The new, bigger facility will ‘enhance the construction industry’s overall resilience’ by providing extra space to stockpile sand and granite, said the BCA spokesman.

This is important, especially if the industry is hit by supply disruptions, she said.

Source: The Straits Times

China could soon come to play a greater role in global markets as a source of capital

China could soon come to play a greater role in global markets as a source of capital, DTZ Research believes.

The growing reliance of the world’s economy on Chinese growth could also extend to global real estate and capital markets, it says in a report.

Although China’s phenomenal growth is well documented, ‘a different and, potentially, more important story over the medium term is that of China, not as a destination for global investment, but as a source of capital increasingly active on the world’s stage’, says the report.

Already in Singapore, a Chinese company is said to be part of a consortium that has just bid for a residential redevelopment site in the Cairnhill area, setting a new collective-sale benchmark price in the process.

DTZ says that if the deal goes through, it would be the first direct foreign investment by a Chinese company in Singapore real estate here.

Whether this will lead to more Chinese capital flowing into Singapore is not known, but DTZ China head of investments Frances Li says: ‘At the moment, pension funds and insurance companies in China have generally not been allowed to invest in real estate by regulations.

‘I do know the insurance authorities are considering the possibility and in discussion to draft the policy. It is estimated to take at least two years for them to open the real estate market by the current pace.

‘Therefore, I believe most investors (here) will be developers.’

In its report, DTZ also says that Chinese capital could play an instrumental role in ‘plugging’ the estimated shortfall in household wealth of most mature economies as a result of the impending ‘demographic shift’.

The report says that China’s savings pool now makes up about 50 per cent of GDP, with foreign exchange reserves expected to double to US$2 trillion in the next two or three years.

‘This represents a potentially enormous investment capital if deployed internationally,’ DTZ says.

‘An increasing likelihood given the need to diversify risk, maximise returns, as well as improve the general management of these funds.’

For the moment though, more capital is likely to be flowing into China rather than out of it.

For 2006, global investment transactions in direct real estate totalled US$551 billion, a 35 per cent increase from 2005. Cross-border investment activity accounted for 40 per cent of this, up from 30 per cent in 2005.

DTZ estimates that US$2.5 trillion of capital is currently looking to be deployed in real estate worldwide, roughly a ratio of US$5 of capital chasing every US$1 of investment grade stock.

In China, the ratio is estimated to be 15:1.

Tuesday, May 8, 2007

Seafront bungalow land parcels at Sentosa Cove

SINGAPORE : Sentosa Cove is launching an expression of interest for one of its last batches of seafront bungalow land parcels, from Thursday.

The land parcels for four bungalows are situated within the gated Southern Residential Precinct.

Interested homeowners are free to amalgamate adjoining land parcels and offer a bid on two parcels.

The parcels have a minimum reserve price of S$1,000 per square foot (psf).

The land parcels in the area have a benchmark price of S$1,308 psf set at a similar exercise in October last year. - CNA/ms

Source: Channel NewsAsia, May 08, 2007

Monday, May 7, 2007

CB Richard Ellis Group Inc, the largest commercial real-estate broker by market value, said that first-quarter profit fell 68 per cent

CB Richard Ellis Group Inc, the largest commercial real-estate broker by market value, said that first-quarter profit fell 68 per cent, the first decline in almost three years, on charges related to buying Trammell Crow Co for US$1.9 billion.

Net earnings fell to US$12 million, or five US cents a share, from US$36.9 million, or 16 US cents, a year earlier, the Los Angeles-based company said on Tuesday. Revenue increased 62 per cent to US$1.2 billion from US$751.3 million a year earlier.

CBRE bought Trammell Crow to increase its North American building management business and diversify beyond leasing and sales. Ultimately, the acquisition will help protect the company against cyclical declines in the real estate market, Michael Fox, an analyst with JPMorgan Chase & Co, said before the release of CBRE’s results.

The integration of Trammell Crow is ‘ahead of schedule’, Brett White, CBRE president and chief executive officer of CB Richard Ellis said. ‘Our bias for full-year 2007 results is at the upper end of our previously discussed earnings guidance range.’

Excluding one-time charges, net earnings rose 62 per cent to US$65 million, or 27 US cents a share. By that measure, the broker beat the average estimate of six analysts surveyed by Bloomberg for earnings per share excluding some charges of 15 US cents.

The company has exceeded analysts’ estimates for the past six quarters as office rents and commercial sale prices in cities such as New York have risen. US office rents climbed an average of 11 per cent in the first quarter as companies sought bigger space to accommodate more employees, according to New York-based real estate services provider Cushman & Wakefield, a closely held competitor of CBRE.

Jones Lang LaSalle, CBRE’s closest publicly traded competitor, also reported first-quarter results on Tuesday. The second-largest commercial real estate broker said that first-quarter profit jumped almost sixfold on revenue gains in Europe and Asia. Net earnings for the quarter ended March 31 rose to US$27.2 million, or 81 US cents a share, from US$4.6 million, or 14 US cents, a year earlier, the Chicago-based company said. Revenue increased 45 per cent to US$490.1 million.

CBRE reported that revenue from the Asia-Pacific region rose almost 50 per cent to US$94 million, driven mainly by improved results in Australia, Singapore and Japan.

In Europe, CBRE reported revenue rose 37 per cent to US$225.4 million, with more than three-quarters of the increase from existing businesses. Growth was led by the UK, France, Spain and Germany.

Assets under management grew to US$30.6 billion at the end of the first quarter, up US$2 billion, or 7 per cent, from year-end 2006.

Source: The Business Times

The glut of US properties for sale is about to hit the rental market.

The glut of US properties for sale is about to hit the rental market.

A record number of homeowners who can’t sell condominiums and houses are competing for tenants with the country’s biggest apartment owners led by Chicago-based Equity Residential, said Jack McCabe, the founder of Deerfield Beach, Florida-based McCabe Research & Consulting LLC. Rents in metropolitan New York, where demand for housing exceeds supply, may be the only place where rents increase, albeit at a slower pace, he said.

‘Competition already is forcing the big apartment owners to offer concessions like two months free rent,’ Mr McCabe said.

Vacant rental apartments rose to 6.1 per cent in the US during the first quarter, the most in almost two years, even as the average monthly rent reached a record US$991, said Sam Chandan, chief economist of New York-based real estate research company Reis Inc. New York had the lowest vacancy rate in the first quarter, he said.

Nationwide, 2.8 per cent of houses for sale were unoccupied in the first quarter, the highest since the Census Department started collecting the data in 1956. Unsold properties on the market totalled a record 3.45 million in 2006, according to the Chicago-based National Association of Realtors. ‘Unsold properties being turned into rental units are creating a shadow market that’s driving up the vacancy rate and slowing the growth of rents,’ Mr Chandan said in an interview. ‘Areas that saw the most speculative investing, particularly in condos, will see the biggest pressure on rents.’

Anthony De Silva said he’s not happy to become a landlord. He bought a two-bedroom condominium on the ocean in Hollywood, Florida, 18 months ago expecting to sell at a US$100,000 profit. Instead, he’s looking for tenants at US$1,700 a month.

‘I don’t want to sell for less than I paid, so my only choice is to rent it,’ said Mr De Silva, 45, a New Yorker who made US$80,000 in November 2005 by flipping, or selling quickly, his first Florida real estate investment, a condominium in Ft Lauderdale. At the time, prices had gained 29 per cent from a year earlier, the peak of the market in that area.

The increase in competition is spurring apartment owners to offer enticements. Lincoln Green Apartments, a Philadelphia complex that rents units from US$840 to US$1,370 a month, is offering two months free rent for people who sign a one-year lease. Citrus Park Apartments in Tampa, Florida, and Ten Faxon in Quincy, Massachusetts, have the same deal.

‘Increasing vacancies does not bode well for rental incomes,’ said Nabil N El-Hage, a professor at Harvard Business School in Boston, across the Charles River from Harvard University’s main campus in Cambridge, Massachusetts. ‘We’ve seen a softening in apartment Reits as a result.’

A Bloomberg index of 19 apartment-focused real estate investment trusts, or REITs, has fallen 14 per cent over the last three months, the longest consecutive monthly decline since a three-month rout that ended February 2003.

Frustrated sellers who become landlords have created an inventory of for-sale properties that could derail a housing recovery next year, Mr Chandan said. If home sales improve in early 2008, as predicted by Freddie Mac, the No 2 mortgage buyer, properties now being rented could reappear in 12 months time to flood the spring market.

‘Those homes that are disappearing off the sales market can just as easily appear again when demand is stronger,’ he said.

US real estate prices ‘continued to weaken’ in many districts during March and April, the Federal Reserve said last week in its regional survey known as the Beige Book. The report cited the San Francisco and Richmond, Virginia, markets as ‘falling or soft’. Sales dipped in the Cleveland, Atlanta, Kansas City, and
St Paul, Minnesota regions, the Fed said.

The exception was New York, where homes were ’selling well’, the Fed survey said. Manhattan’s median apartment price rose 1.2 per cent to US$835,000 in the first quarter from a year earlier, said Jonathan Miller, president of New York residential appraiser Miller Samuel Inc. For all of the US, the median fell 2.1 per cent to US$212,300, according to Fannie Mae, the largest mortgage buyer.

The city’s average rent was US$2,605 a month in the first quarter, the highest in the nation, and the vacancy rate was the lowest, at 2.5 per cent, according to Reis. Fairfield County, Connecticut, had a 3 per cent vacancy rate, central New Jersey was 3.6 per cent, and New York’s Long Island was 3.9 per cent, fuelled by demand from New York commuters, said Mr Chandan of Reis.

In markets such as South Florida, Nevada and Arizona that led the country in speculative buying, owners who can’t rent their properties may default on their mortgages, Mr Chandan said.

Demand to purchase real estate will begin to improve in the final quarter of 2007, the Mortgage Bankers Association said last week. Until then, home prices may decline 2 per cent, the Washington group said on April 24.

Source: The Business Times, 03 May 2007

Investment sales of industrial properties could set a new record of S$3 billion this year, said property consultants, easily outstripping last year’s

Investment sales of industrial properties could set a new record of S$3 billion this year, said property consultants, easily outstripping last year’s record high of S$1.9 billion.

Analysts attribute the increase to more acquisitions by real estate investment trusts and an impending divestment by JTC.

JTC, Singapore’s largest industrial landlord, is expected to divest properties totalling some 1.7 million square metres through a REIT and trade sales later this year.

The deal includes JTC’s flatted factories, business park buildings and a warehouse.

At the same time, other industrial REITs are also looking to boost their portfolios.

Tay Huey Ying, Director of Research, Colliers International, said: “The industrial REITs are seen to be continuing with acquisitions to grow their portfolio. Moreover, we are also seeing the listing of more REITs, for example, the recently-listed MacArthur Cook Industrial REIT.

“The impending divestment of JTC’s ready-built facilities will also boost the investment sales figures in 2007 so we are likely to see a higher volume compared to last year.”

Market watchers said there is a growing trend of companies selling their buildings and then leasing back the space.

This will help to boost activity in the sector.

Lim Kien Kim, Director (Industrial), Knight Frank, said: “These companies generally have property sizes that are in excess of 100,000 square foot gross floor area, usually worth more than S$10 million, and with land tenure in excess of 40 years. These are key components which will interest the REITs.”

Property consultants also note that the entry of foreign funds from countries like Australia and the Middle East has added more fuel to the mix.

Mr Lim said: “These funds are basically looking at industrial properties that they can enhance. The enhancements will lead to better rental yields and possibly an increase in capital values, which they may then sell off later.”

Foreign funds have already bought into offices such as Temasek Tower and apartments like Horizon Towers this year.