Real News‎ > ‎2015‎ > ‎January 2015‎ > ‎

6th January 2015

Singapore Economy

Tight labour market to get even tighter

The timing could hardly be worse. Events lined up to mark Singapore's jubilee will create more job vacancies

Source: Business Times / Government & Economy

Some economists are predicting that the clarion call to labour-starved bosses to be more productive will sound louder this new year because there are now fewer housewives and retirees to woo back to work. Labour force participation rates among women and older folk climbed to new highs in 2014 - 58.6 per cent for women and 68.4 per cent for men aged 55 to 64. Economists say these levels are about the limit already, which means the last sources of such workers for employers may soon be depleted.

-By Chuang Peck Ming

Three-month Sibor jumps on further weakness of Singapore dollar

Economist says the key interest rate could also be impacted by new rules on bank liquidity

Source: Business Times / Banking & Finance

THE key three-month Sibor or Singapore interbank offered rate jumped on Monday by 26 per cent or 0.12024 points to 0.57762 per cent from last Friday's 0.45738 per cent as the Singapore dollar (SGD) fell further, dragged down by the tumbling euro.

New liquidity rules may also have driven the interest rate up, said an economist.

The sharp movement of the three-month Sibor, used mainly to price home loans, seems to be playing catch-up with another benchmark interest rate - the three-month SOR or swap offer rate - which is typically used for commercial loans.

The three-month SOR at 0.74893 per cent has more than tripled from two months ago when it was at 0.24776 last Nov 3. The SOR reflects Sibor and SGD fluctuations.

The SGD on Monday fell further to 1.335 from last Friday's 1.328 as the euro tumbled to its lowest in almost nine years.

The euro slid as much as 1.2 per cent after European Central Bank (ECB) president Mario Draghi last week gave his clearest signal the ECB will start quantitative easing, reported Bloomberg. The euro also weakened as Greece began an election campaign that may see victory by an anti- austerity party, it said.

"As euro continues to drop, the SGD will fall further," said Leong Sook Mei, Bank of Tokyo-Mitsubishi UFJ Asean head of global markets research.

New rules on bank liquidity have also driven demand for SGD liquid assets, said Alvin Liew, United Overseas Bank senior economist.

"The new liquidity coverage ratio (LCR) requirement that came into effect on 1 January 2015 may have driven the demand for SGD liquid assets and therefore higher funding rates," said Mr Liew.

A bank incorporated and headquartered in Singapore shall maintain at all times, a Singapore dollar LCR of at least 100 per cent and an all currency LCR ("all currency LCR requirement") of at least 60 per cent by Jan 1, 2015. This ratio, part of Basel III regulations, is to ensure that banks hold enough high-quality liquid assets to match their total net cash outflows over a 30-day period.

On the weakness of the SGD and other Asian currencies and the speed of fall which took many by surprise, they were dragged down by the rapid depreciation of the euro in the past few days, said Ms Leong.

From July 1 to Jan 5, 2015, the ringgit has fallen 9.3 per cent, the Korean won is down 9 per cent, while the SGD and Taiwan dollar are both down 6.5 per cent. The Indonesian rupiah is down 5.9 per cent.

Ms Leong thinks the SGD will remain weak in the first half of this year given the euro's woes and the expectations of a hike in US interest rates, which some say could be in June.

"In tandem with the (expected) US rate hike of June 2015, the dollar will be well bid, and once that story is more fully priced, the market moves to the next story," she said.

For the second half of the year, some analysts expect the SGD and other Asian currencies to stabilise as these countries export more to a stronger US economy and also benefit from cheap oil prices.

-By Siow Li Sen

Swap Offer Rate spikes as US dollar strengthens

Interest rate benchmark at a high not seen since global crisis in 2009

Source: Straits Times / Money

A KEY interest rate benchmark that determines some home loans has shot up to levels not seen since the depths of the global financial crisis in May 2009.

The three-month Swap Offer Rate (SOR) - as the benchmark is called - hit 0.74893 per cent on Friday.

The rate has been trending up for a couple of months after staying between 0.2 per cent and 0.25 per cent from January to October last year.

It crossed 0.3 per cent in November and rose to 0.4 per cent last month, before steadily inching up to pass 0.7 per cent in recent days.

Expectations of a United States rate hike and the consequent strengthening of the greenback have driven up the SOR, said economists.

"Primarily, it's because markets are pricing in the rate hike and regional banks have also been trying to extract more funds here, leading to the tightening of liquidity conditions," said Barclays Capital economist Leong Wai Ho. He added that the situation is not unique to Singapore, noting the rising rates in Malaysia as well.

DBS economist Eugene Leow said adjustments in Asian foreign exchange rates against the US dollar are now under way as the market pre-empts an eventual policy shift in the US.

"The market is convinced about the strength of the US economy, resulting in fund flows towards the US in anticipation of tighter Fed policy," noted Mr Leow. "Accordingly, economies in the region are facing pressures on their currencies or interest rates."

The SOR has also risen much faster than another key benchmark, the Singapore Interbank Offered Rate (Sibor).

It ended 2014 at 0.73782 per cent, up from 0.22126 per cent at the end of 2013 - a rise of 233.5 per cent - while the Sibor rose from 0.40267 per cent to 0.45697 per cent, an increase of just 13.5 per cent.

The SOR rose 74.9 per cent in December alone compared with the Sibor's 6.7 per cent gain.

The SOR is based on a formula that takes into account the current and expected exchange rates of the US dollar against the Singdollar and the local interbank lending rates for the greenback.

Sibor, meanwhile, is the rate at which financial institutions lend unsecured funds to one another.

Economists note that the nature of the SOR makes it much more reactive and volatile than Sibor, as it essentially swaps between the US and Singapore dollars while the Sibor is more dependent on local conditions.

The Singdollar dropped 1.3 per cent against the US dollar last month, declining from 1.3044 to 1.3217.

United Overseas Bank economist Alvin Liew said the trend of a rising SOR is likely to persist this year: "We think the SOR will be higher than the Sibor at each tenure, but we don't think the spread will systematically get wider as the year progresses unless the US dollar rally is much stronger than what we project."

OCBC economist Selena Ling noted that the phenomenon of a higher SOR is not unusual.

"Actually, before May 2009, the three-month SOR has always been higher than the three-month Sibor; so, in a sense, the recent overtaking by SOR over Sibor could be seen as normalisation."

UOB forecasts that the three-month SOR could hit 1 per cent by the end of this year, while OCBC tips 1.1 per cent.

The SOR and Sibor are commonly used by banks to set floating rates for home loans, but the impact of the SOR's dramatic rise would be smaller.

Mr Sean Lim, head of mortgage at financial products portal, estimates that just about 20 per cent of his clients are on SOR-pegged rates.

"Over the past month or so, the rise of the SOR has been quite shocking and I would say that a customer looking for a mortgage today has very little reason to take up the SOR."

He added that only two banks - the Bank of China and ANZ - are still offering mortgages pegged to the SOR in the market.

-By Mok Fei Fei

Singapore’s hotel occupancy down in 2014: Cushman & Wakefield

Hotel occupancy in Singapore is expected to have fallen to 84.3 per cent in 2014, down from 86 per cent the previous year, due to a growing supply of rooms and the decline in tourist arrivals, the property consultancy says.

Source: Channel News Asia / Business

SINGAPORE: Hotels here have seen their growth affected by regional geopolitics and negative reactions to aviation incidents, property consultancy Cushman & Wakefield said on Monday (Jan 5).

In its latest report on the outlook of the hotel industry across Asia, Cushman & Wakefield said hotel occupancy in Singapore is expected to have fallen to 84.3 per cent in 2014, down from 86 per cent the previous year, due to a growing supply of rooms and the decline in tourist arrivals.

Still, Singapore remains one of the best performing markets in the region, with hotels here commanding the highest average room rate (ADR) in the region. Singapore’s ADR in 2014 was US$207 (S$276), ahead of Hong Kong at US$193 and Sydney at US$185.

However, Cushman & Wakefield said it will be difficult for hotels here to maintain their margins. “Although marginal growth in room rates are partially mitigating the slight downshift in occupancy, hoteliers will be challenged to sustain bottom-line margins in an environment of intensifying competition and growing costs,” it said in the report.

The property consultancy said it remains optimistic on the outlook for Singapore’s hotel industry, and expects demand to recover in the short term and keep pace with the growth in supply in the medium term.

- CNA/cy

Prime office rents to extend gains amid limited availability

Source: Today Online / Business

SINGAPORE — Prime office rents, which are set to post their biggest increase in at least four years in the year just ended, may extend gains in 2015 in a supply-constrained market, despite uncertain economic growth prospects.

The limited availability of new prime office space in Singapore has led to low vacancy levels and pushed last year’s rental growth to 14.7 per cent, real estate firm CBRE estimated yesterday. The same restricted supply will prevail this year, even while demand cools a little amid fears of slowing growth.

The office rental index for prime areas rose 8.7 per cent in the first nine months of last year, heading for its largest gain since 2010, data from the Urban Redevelopment Authority (URA) showed. The index for the fourth quarter will be released by the URA later this month.

Mr Moray Armstrong, CBRE executive director for office services, said yesterday: “The Singapore office sector performed within expectations in 2014, with rental levels advancing off low prevailing vacancy rates. Looking ahead, limited availability of office space will continue through 2015, with relief to occupiers only when the next wave of major new supply arrives in the second half of next year.

“In these circumstances, we anticipate further rental growth, particularly in the early part of the year. The pace of rental growth may slacken later this year and into 2016, as the impact of sizable future supply becomes apparent,” he said.

Singapore is ranked 14th among the world’s most expensive prime office markets at US$112.91 (S$151) per sq ft of occupancy costs a year, which include rent, local taxes and service charges, CBRE said.

London’s West End topped the list at US$273.63, Hong Kong’s Central was second at US$250.61, followed by Beijing’s Finance Street at US$197.75, CBRE’s ranking showed.

Mr Alan Cheong, a director at Savills, said landlords in Singapore are in a strong position to resist demands for lower rents because of the limited amount of new space available this year and next.

Only about 1.15 million sq ft of new office space will come on stream this year, down almost 40 per cent from 1.87 million sq ft last year, noted Ms Alice Tan, director of consultancy and research at real estate broker Knight Frank.

Some landlords are trying to use this to push tenants to accept unusually long leases, amid concerns that the large amount of new office space due to be completed two years from now will cause the market to soften.

Marina One, a development taking shape on reclaimed land in the Marina Bay area, will alone add 2.2 million sq ft of office space in 2017, boosting supply in that year to about 4.7 million sq ft, said Knight Frank.

Instead of the traditional three-year lease for office space, landlords have responded to the extra supply in 2017 by asking for five- to six-year lease agreements to lock in today’s high prices, Ms Tan said.

Tenants are asking for discounts in exchange for agreeing to the longer leases, she added.

On the other hand, prospects of slowing economic growth may cause prime office rental growth to slow to a range of 5 to 7 per cent this year, Ms Tan warned, as businesses become more cautious about taking on new space. 

-From Agencies

Singapore Office Rent to Gain Most in Four Years: Southeast Asia

Source: Bloomberg / News

Singapore’s prime office rents are set to post their biggest increase in at least four years in 2014, and may extend gains this year in a supply-constrained market.

The office rent index for prime areas rose 8.7 percent in the first nine months of last year, heading for its largest gain since 2010, when it was up 12 percent, according to data from the Urban Redevelopment Authority.

A limited supply of new prime office space over the past two years, compared with demand from companies seeking central office locations, may push 2014’s rental increase as high as 14 percent, according to real estate broker Savills Plc. (SVS) The same restricted supply will probably prevail this year and next, even if demand cools a little as the economy slows.

“Going into 2015, demand would almost match supply for prime office space, making the office market fundamentally sound,” said Alan Cheong, a Singapore-based director at Savills. He said landlords are in a strong position to resist demands for lower rents due to the limited amount of new space available this year and next.

About 1.15 million square feet of new office space will come on stream in 2015, compared with 1.87 million square feet in 2014, said Alice Tan, the director of consultancy and research at real estate brokers Knight Frank LLP. Marina Bay Financial Centre, which held its grand opening in May 2013, has about 3 million square feet of office space in three towers.

Long Leases

Some landlords are pushing tenants to accept unusually long leases amid concerns that the large amount of new office space due to be completed two years from now will cause the market to soften.

Marina One, a development taking shape on reclaimed land in the downtown Marina Bay area, will alone add 2.2 million square feet of office space in 2017, boosting supply in that year to about 4.7 million square feet, according to Knight Frank. The property is being developed by a joint venture of the state-owned Temasek Holdings Pte and Malaysia’s Khazanah Nasional Bhd.

Instead of the traditional three-year lease for office space, landlords have responded to the extra supply in 2017 by asking for five- to six-year lease agreements to lock in today’s high prices, Tan said. Tenants are asking for discounts in exchange for agreeing to the longer leases, she said.

The rental index for office space in the central region rose to 192.3 at the end of September last year, up from 176.90 at the end of 2013 and the highest since the quarter ended December 2008, URA data showed. The index for the fourth quarter will be released later this month.

Singapore REITs

The buoyant rental market will continue to support the share prices of Singapore office real estate investment trusts this year, said Vikrant Pandey, an analyst with UOB Kay Hian Pte in Singapore.

Last year, Suntec Real Estate Investment Trust (SUN) rose 27 percent, the second-best performer on the FTSE Strait Times Real Estate Invest Trust Index, which rose 9.2 percent, outpacing the 6.2 percent gain in the Singapore benchmark Straits Times Index. (FSSTI)CapitaCommercial Trust, Mapletree Commercial Trust and Frasers Commercial Trust (FCOT)were among the 10 best performers on the REIT index last year.

The REIT index was little changed at the close of trading in Singapore today, while the Straits Times index fell 1.3 percent.

On the other hand, slower economic growth this year may cause prime office rental growth to slow to a range of 5 percent to 7 percent this year, Tan from Knight Frank said, as businesses become more cautious about taking on new space.

Economic Growth

Singapore’s economy expanded less than economists estimated last quarter after its manufacturing industry weakened with slowing growth in China and an uneven global recovery. Gross domestic product rose an annualized 1.6 percent in the three months to Dec. 31 from the previous quarter, when it expanded 3.1 percent, the trade ministry said on Jan. 2.

The major leases agreed in 2014 included Sanofi-Aventis Group (SAN) taking up 40,000 square feet of space in the new South Beach development, vacating its current office space at 6 Raffles Quay, according to Knight Frank. Sanofi didn’t respond to a request for comment on its new lease. South Beach is being developed by Singapore’s City Developments Ltd. (CIT) and Malaysia’s IOI Group. (IOI)

Companies operating in technology, media and telecommunications were especially active in renting prime space last year. LinkedIn Corp. (LNKD) doubled its office size by taking space at Marina Bay Financial Centre Tower 2, DTZ said. LinkedIn declined to comment on the details of its new lease.

-By Pooja Thakur

Rents for industrial units fall 1.3% in last quarter 

Source: Straits Times / Money

AVERAGE rents for industrial units fell by 1.3 per cent in the last quarter of 2014 from the previous three months, due to weak demand and fresh supply of factory space, said property consultant DTZ.

The take-up in the first three quarters of last year fell to 4.8 million sq ft from 5.3 million sq ft registered for the same period in 2013, as poor outlook for the manufacturing sector took its toll.

The lack of improvement in sentiment among manufacturing firms also likely contributed to the slow take-up rate in the third quarter last year, DTZ said in a report yesterday.

An Economic Development Board survey out in October found that a weighted 85 per cent of manufacturers said they expect the outlook for the six months to March this year to remain the same as that from April to September last year.

Although the Singapore Purchasing Managers' Index (PMI) rose from 49.7 in August to 51.9 in October in 2014, factory output dropped by 2.8 per cent in November over the same month the previous year, DTZ noted.

An injection of 14.5 million sq ft of factory space to the existing stock in the first nine months of last year also dampened sentiment, yet rents remained stable last year, DTZ figures showed.

Compared with levels in 2013, average monthly rents for traditional industrial space inched up by 1.6 per cent to $2 per sq ft last year. On the other hand, demand for space in business parks and high-tech space continued to increase.

Occupancy rates for business park space rose by 1.5 percentage points quarter on quarter and 7.1 percentage points year on year.

Average monthly gross rents of business parks and high-tech space remained stable at $5 psf and $3.20 psf, respectively, in the fourth quarter.

On a yearly basis, rents for business park space registered the largest increase, at 6.8 per cent from the fourth quarter of 2013.

"Demand for business parks and hi-tech properties were more resilient in 2014," said Ms Cheng Siow Ying, DTZ's executive director of business space.

"This is due to the increase in office rents, which motivated some qualifying occupiers to seek out more affordable options in these office-industrial hybrid spaces.

"Tenants prioritising on cost savings and good locations will be willing to pay higher rents for newer and better quality buildings such as those at one-north, Aperia and Mapletree Business City."

Ms Cheng noted that Galaxis@One North has been well received, achieving close to a 70 per cent pre-commitment rate from tenants that include multinational companies such as Oracle, Canon, Garena and Electrolux.

"As the trend continues, the rental gap between such newer buildings and the older ones will widen," she said.

Rents for conventional industrial space and older business parks are likely to stabilise or ease this year, while those for newer business parks and high-tech spaces are expected to increase, said DTZ.

Meanwhile, transaction activity for industrial space slowed down, with the number of deals for strata-titled industrial property in the fourth quarter falling almost 20 per cent from the previous quarter.

In all, only 936 properties were transacted last year, nearly 60 per cent below the 2,451 strata-titled transactions registered in 2013.

-By Dennis Chan

Weak demand hits industrial rents, but business parks boom

Source: Today Online / Business

SINGAPORE — Weak demand for conventional factory space, coupled with a big injection of supply to existing stock, contributed to falling rents for industrial space in the fourth quarter of last year, said property consultancy DTZ Research yesterday.

Demand for space in business parks and high-tech industrial facilities, on the other hand, continued to rise, underpinning rents for this sector, it said, adding that the rental gap between newer and older industrial buildings is expected to widen this year.

Demand for factory space plunged to 4.8 million sq ft in the first three quarters of last year from 5.3 million sq ft in the corresponding period in 2013, weighed down by the weak outlook for manufacturing.

Factory output in November unexpectedly fell by 2.8 per cent from the same month in 2013, against the median forecast for a 0.3 per cent gain.

The weak market, exacerbated by the injection of 14.5 million sq ft of space in the past three quarters, caused rents for industrial property to fall by 1.3 per cent in the fourth quarter from the third, DTZ said.

The number of transactions for strata-titled industrial properties in the fourth quarter dropped almost 20 percent from the previous quarter. A total of 936 properties changed hands last year, down sharply from the 2,451 strata-titled transactions in 2013, as the Total Debt Servicing Ratio framework, uncertain global outlook and an expected rise in interest rates made industrial property less attractive.

Despite the weak fourth quarter, the rental market for the full year was stable, with average monthly rents for traditional industrial space inching up 1.6 per cent last year from 2013 to S$2 per sq ft.

Meanwhile, demand for business-park space was solid, with rents jumping 6.8 per cent to S$5 per sq ft, while those for high-tech space stood at S$3.20 per sq ft.

Ms Cheng Siow Ying, DTZ’s executive director of business space, said: “Demand for business parks and high-tech properties is more resilient this year, due to the increase in office rents, which motivated some qualifying occupiers to seek more affordable options in office-industrial hybrid spaces.

“Tenants prioritising cost savings and a good location will be willing to pay higher rents for newer and better-quality buildings, such as those at one-north, Aperia and Mapletree Business City. As the trend continues, the rental gap between such newer buildings and the older ones will widen,” she added. Tan Weizhen

-By Tan WeiZhen

Five adjoining shophouses to be auctioned as single bloc

Source: Straits Times / Money

FIVE adjoining two-storey refurbished shophouses off Upper Serangoon Road have been put up for auction.

The shophouses at 9, 11, 13, 15 and 17 Teck Chye Terrace will be auctioned as a single bloc by property consultant Colliers International at the Amara Hotel on Jan 22. The units have freehold tenure and sit on land of 7,861 sq ft, with a total floor area of 12,163 sq ft.

Each shophouse has a side staircase for access to the upper storey.

Their collective indicative price is $13 million, or $1,069 per sq ft (psf). Under the 2014 Master Plan, the land is earmarked for residential use with a plot ratio of 3.

However, the first storey of all five units has permanent approval for shop use.

Colliers International deputy managing director Grace Ng said the indicative price was reasonable, given that the average value of a similar suburban freehold shophouse ranges from $1,300 psf to $1,500 psf.

Comparable transactions last year include a shophouse in Serangoon Garden Way that was sold at $2,478 psf in March and another in Serangoon Road that went for $1,556 psf in February.

"It is not often that a row of adjoining shophouse units is made available for sale as an entirety," said Ms Ng.

"We are optimistic that the subject property will greatly appeal to investors."

Companies' Brief

Reits returned 13% in 2014, beating STI

Fortune Reit, Suntec Reit, CapitaRetail China Trust, First Reit also outperform other Reits

Source: Business Times / Companies & Markets

Fortune Reit, Suntec Reit, CapitaRetail China Trust, CapitaCommercial Trust and First Reit outperformed other real estate investment trusts (Reits) last year, according to data compiled by the Singapore Exchange (SGX). Total returns include both price changes and reinvested dividends. For these five Reits, their stock prices jumped double digits over 2014 - from 18 per cent for First Reit, which owns healthcare assets in Indonesia, to 24 per cent for Fortune Reit, which owns retail malls in Hong Kong.

-By Lee Meixian

Fortune, Suntec among top performing trusts in Singapore

Source: Straits Times / Money

THE 34 trusts listed in Singapore posted average returns of 12.9 per cent last year, according to SGX My Gateway yesterday.

The firms - 28 real estate investment trusts (Reits) and six stapled trusts - had a combined market capitalisation of $66.7 billion as at Jan 2.

Their indicative dividend yields averaged 6.4 per cent for the 12 months to Dec 31, according to the report.

The best performers in terms of total returns included Fortune Reit, which owns and invests in Hong Kong retail property.

Fortune, which had a market capitalisation of $24.8 billion as at Jan 2, generated a total return of 38.5 per cent last year.

It reported revenue of HK$1.23 billion (S$211.8 million) for the nine months to Sept 30, a year-on-year increase of 33 per cent, and went ex-dividend in August, distributing HK$0.2088 per share in dividends.

Suntec Reit, managed by ARA Trust Management (Suntec), was another top performer here.

The fund, which invests in real estate and real estate-related assets primarily for retail or office purposes, had a market capitalisation of about $49 billion on Jan 2, and generated a total return of 34.4 per cent last year.

Suntec Reit reported a total distribution income of $58.3 million for the three months to Sept 30, which amounted to a 12.4 per cent year-on-year increase.

It went ex-dividend in October, distributing 0.44 cent per share in dividends.

Other trusts that did well last year included CapitaRetail China Trust, CapitaCommercial Trust and First Real Estate Investment Trust.

Reits listed here have to distribute a minimum of 90 per cent of taxable income to investors.

-By Jacqueline Woo

Views, Reviews & Forum

Uneven playing field in land tender exercise?

Source: Straits Times / Forum Letter

ALTHOUGH the future residents of Fernvale Lea are upset about not being told that a columbarium would be built next to their flats, it was not possible for the Housing Board to have informed them in advance ("Residents surprised by columbarium plan"; Dec 30).

The Build-to-Order sale exercise was launched in 2013 while the tender for the land where the Chinese temple will be sited was held last year.

It is interesting that the winning bid came from funeral services company Life Corporation, while the other two bidders were religious organisations.

Commercial public-listed entities may have greater financial means to put in higher bids than religious groups. The authorities need to reconsider allowing commercially driven entities to participate in tender exercises for sites zoned for religious use.

-By Goh Ee Ca

Global Economy & Global Real Estate

World's costly offices mostly in Asia

Source: Straits Times / Money

OFFICE space here is the 14th most expensive in the world with costs rising fast, according to a new report.

It also noted that Singapore occupancy costs rose 16.5 per cent in the first nine months of last year.

Occupancy costs refer to the expenses a tenant incurs taking on property, including rent and additional outlays such as service charges and taxes.

"The Singapore office sector performed within expectations in 2014 with rental levels advancing off low prevailing vacancy rates," said Singapore-based Mr Moray Armstrong, executive director of office services at real estate firm CBRE, which compiled the report.

It found that London's West End topped the list in the bi-annual survey of 126 markets, with total prime occupancy costs at US$274 (S$366) per sq ft (psf).

It was followed by Hong Kong's Central district at US$251 psf and two parts of Beijing - Finance Street at US$198 psf and the central business district at US$189 psf. Singapore was well back on US$112.91 psf.

Asia dominated the world's highest-priced office locations, accounting for seven of the top 10 markets, which included New Delhi's Connaught Place and Marunouchi Otemachi in Tokyo.

"Notwithstanding Singapore's strong rental growth last year (at 14.7 per cent), the city's current office occupation cost does not appear out of step with comparable global business centres," noted Mr Armstrong yesterday.

The report also noted that global prime office occupancy costs rose 2.5 per cent year on year, led by the Americas and the Asia-Pacific region - a change which "mirrored the gradual, multi-speed recovery of the global economy".

Mr Richard Barkham, CBRE's global chief economist, added: "We expect the gradual recovery of the global economy to continue, leading to better hiring rates and further reduction in the availability of space across most markets over the near term.

"In this environment, we expect occupancy costs to continue rising from current levels, further limiting options for occupiers."

Mr Armstrong believes Singapore's market will stay robust for a while yet: "Looking ahead, limited availability of office space will continue through 2015, with relief to occupiers only when the next wave of major new supply arrives in the first half of 2016.

"In these circumstances, we anticipate further rental growth, particularly in the early part of the year.

"The pace of rental growth may slacken later in 2015 and going into 2016 as the impact of sizeable future supply becomes apparent."

-By Jacqueline Woo

Malaysia gives nod for Johor reclamation project but cuts size

Source: Straits Times / Top of The News

RECLAMATION for the Forest City project in Johor will proceed, but its size has been shrunk to a quarter of the original after complaints from Singapore and local residents near the site.

The Malaysian environmental authorities gave the go-ahead and new limits - 405ha - to developer Country Garden Pacific View, The Malaysian Insider said yesterday, citing sources.

This comes nearly seven months after the joint venture between Johor and Chinese developer Country Garden Holdings voluntarily stopped work on the 1,600ha development due to concerns from both sides of the border over damage to the ecology and waterway between Singapore and Malaysia.

Sources told The Straits Times yesterday that the limits set could be for the first phase of the mega-project to build luxury homes on four man-made islands. More importantly, they noted, the project has finally received approval from the Department of Environment (DOE).

"What's certain is that only one of the four proposed islands will be allowed," a source with knowledge of the project said, referring to an earlier enforced split of the reclaimed area to allow better water flow through the western edge of the Johor Strait.

"But it means the project has been approved. It may be limited but this means new phases can be added."

A source close to the Johor government also said the DOE decision was a compromise between Singapore's ecological concerns and the interests of backers of the project, who include Johor's Sultan.

"This is a trial period of four years before the rest can be approved," the source said.

According to reports, one- third of the joint venture belongs to Esplanade Danga 88, in which the state has a 20 per cent interest, with the rest belonging directly to Sultan Ibrahim Ismail and member of the royal court Daing A Malek Daing A Rahaman.

Country Garden, which is China's seventh-largest property developer, was "very disappointed" with the news, one of the sources said, adding that it plans to appeal against the decision as it would result in huge changes to the masterplan.

Forest City was originally conceived as a man-made island with a title deed amounting to 2,000ha, about four times the size of Sentosa. But the split into four man-made islands reduced the total land size, which has now been cut again by the DOE.

The department will likely issue an official decision to Country Garden Pacific View next week. Although it is not known exactly where the approved 405ha lies, the island closest to the Tanjong Pelepas port appears to fit the bill.

Singapore conveyed its concerns on a number of occasions to Malaysia, asking for more information on the reclamation and construction works in the Johor Strait and that work be stopped until full studies are done.

Apart from Forest City, the royal family is also involved in a 1,410ha reclamation project for an oil and gas hub farther west off Tanjung Piai.

-By Shannon Teoh, Malaysia Correspondent

Canada Homebuyers Joining Real Estate Doubters: Nanos

Source: Bloomberg / Luxury

Canadians who last year brushed off predictions of a real estate slowdown and kept buying houses are increasingly joining the doubters.

The nation’s households are the least optimistic since May 2013 that home prices will keep rising, according to weekly polling data compiled by Nanos Research for Bloomberg. The share of survey respondents predicting higher prices fell to 31.1 percent last week, from as high as 47 percent in July.

The survey results suggest policy-maker warnings about overvalued home prices are starting to sink in, amplified by plunging prices for crude oil, the nation’s biggest export. The gloom may spell the end of a housing rally that helped pull the world’s 11th largest economy out of a 2009 recession.

“Any negative changes in real estate values coupled with low oil prices could be a one-two punch for Canadian consumer sentiment,” said Nik Nanos, Ottawa-based chairman of Nanos Research Group.

The Bank of Canada estimates that house prices are 10 percent to 30 percent overvalued. That didn’t stop sales and prices from rising through most of 2014, fueled by low mortgage rates and a shortage of single-family housing in some markets such as Vancouver, where the average price of a detached home reached a record C$1.36 million ($1.15 million) in February.

Through November, the average residential sales price in Canada rose 6.8 percent on an annual basis, putting 2014 on pace to be even stronger than 2013, when average prices rose 5.2 percent.

The survey of real estate expectations is part of polling for the Bloomberg Nanos Canadian Confidence Index and based on phone interviews with 1,000 people, using a four-week rolling average of 250 respondents. The results are accurate to within 3.1 percentage points, 19 times out of 20.

Respondents are also asked about their expectations for the economy, their job security and changes in the state of their personal finances.

The broad confidence index climbed to 55.8 in the week ended Jan. 2, the first increase in five readings, from 55.1 in the prior period.

-By Theophilos Argitis

Revel Wins Approval of Backup Sale as Buyer Weighs Options

Source: Bloomberg / News

Revel AC Inc. won bankruptcy court approval to sell its shuttered Atlantic City, New Jersey, casino to the original bidder for $95.4 million, after an earlier sale at a higher price fell apart.

U.S. Bankruptcy Judge Gloria Burns in Camden, New Jersey, today said she will enter an order authorizing the sale to Florida real estate investor Glenn Straub’s Polo North Country Club Inc. The company and Straub will have 30 days to close the deal once the order is entered.

Revel was one of four casinos that closed last year after New Jersey’s gambling center saw its dominance fade amid growing competition from game rooms in neighboring states. Casino revenue in Atlantic City fell more than 40 percent to about $2.8 billion in 2013 from a peak of more than $5 billion in 2006.

The company received court approval to scrap a $110 million sale to Brookfield Property Partners LP, the winner at auction. Brookfield walked away from the deal because it couldn’t arrange a cut in its electric bill, according to two people with knowledge of the matter who weren’t authorized to speak publicly.

The casino owner turned to Straub, who came in second at the auction with a final offer of $95.4 million. The backup plan may not pan out either, as Straub has sought to lower the price.

‘Most Unusual’

“This is a most unusual sale motion” because the buyer “has objected to its own sale,” John K. Cunningham, an attorney for Revel, told Burns, saying it was the first time in his decades of bankruptcy practice to see such a situation.

“This is a case where there is a first time for everything,” Burns replied.

The Judge denied Straub’s request to cut the sale price by about $8.4 million, rejecting the argument that the sale process was flawed. The judge also rejected Polo’s attempt to apply a $3 million breakup fee it was due for losing the auction after setting the $90 million floor for bidders.

Straub said in an interview during a break in today’s hearing that he’s considering all his options, including an appeal of the sale order. His company would scrap Revel’s existing contracts if it proceeds with the sale.

Revel, which opened in April 2012 at a cost of $2.4 billion, was the first new Atlantic City casino since 2003. The bankruptcy, its second, and subsequent closing last September erased more than 3,000 jobs.

The city saw Trump Plaza, Caesars Entertainment Corp. (CZR)’s Showboat, Revel and the Atlantic Club close last year.

The bankruptcy is In re Revel AC Inc., 14-bk-22654, U.S. Bankruptcy Court, District of New Jersey (Camden).

-By Michael Bathon

Irish Home Prices Fall for First Time in More Than a Year

Source: Bloomberg / Luxury

Irish home prices fell for the first time in more than a year in the fourth quarter as proposed caps on mortgages damped buyer expectations, according to property website

Asking prices declined by 1 percent from the previous quarter, the first dip since mid-2013, said today in a report. Prices were down 0.7 percent in Dublin, the first quarterly drop since mid-2012, and values were 1.3 percent lower outside the capital, according to the report.

The Central Bank of Ireland in October proposed rules to limit mortgage lending amid concern that values were increasing too quickly as the country recovers from the worst real estate crash in western Europe. Prices soared in Dublin last year amid a shortage of supply.

The central bank, led by governor Patrick Honohan, proposed rules limiting most loans to 80 percent of a property’s value. Some of the nation’s most senior bankers and politicians have criticized the proposals, due to be finalized this month, saying they would hurt first-time buyers.

The bank’s proposals are an “obvious and welcome step in creating a healthy housing market,” Daft analyst Ronan Lyons said in the report. The steps help avert a return to easy credit that helped fuel Ireland’s property bubble in the past, he said.

The central bank may change its proposals this month to introduce the lending limits over several years, the Sunday Times reported yesterday without saying where it got the information.

-By Donal Griffin

China Developers Extend Surge as Analysts See Sales Rebound

Source: Bloomberg / News

China Resources Land Ltd. and China Vanke (2202) Co. jumped for a second day in Hong Kong, with analysts saying shares of mainland developers may gain as much as 20 percent this year as sales rebound.

Government stimulus will help China’s property market recover, boosting stocks, according to CIMB Securities Ltd. and UOB-Kay Hian (Hong Kong) Ltd. China Resources Land jumped 4.8 percent today at the close in Hong Kong, capping a two-day surge of 12 percent. China Vanke, the nation’s biggest listed developer by sales, advanced 3.3 percent today.

“Sales should see a strong recovery in 2015,” said Johnson Hu, an analyst at CIMB in Hong Kong. “We think there will be more supportive policies including another interest rate cut and a mortgage rate reduction.”

China Resources Land, China Vanke and Guangzhou R&F Properties Co. (2777) rallied at least 24 percent since the central bank unexpectedly trimmed its benchmark interest rate on Nov. 21, fueling speculation the government will take more steps to support the economy. Chinese property shares jumped on Jan. 2 after Beijing said it would raise the cap on housing-fund loans for first-time buyers.

New-home prices fell in fewer Chinese cities in November after the government eased property curbs and cut interest rates. Prices dropped in 67 cities of the 70 tracked by the government from the month before, the National Bureau of Statistics said last month. Prices fell in 69 cities in October.

“The fundamentals look very solid in first three months, due to weak base last year,” Edison Bian, head of China property at UOB Kay-Hian, said in an e-mail. Share gains in the industry will be led by mid-sized companies with strong growth momentum, he said.

Shares of Chinese developers listed in Hong Kong may gain 15 percent to 20 percent in 2015, according to both Bian and CIMB’s Hu.

-By Kana Nishizawa

Young Home Buyers Return in U.S. as Economy Accelerates

Source: Bloomberg / Luxury

After Damien and Tina Bucci were approved for a mortgage in 2012, they decided they couldn’t afford the biggest purchase of their lives without greater confidence in the U.S. economy. Next month, they will close on their first home -- a four-bedroom Colonial with a half-acre yard.

“We could have made it work two years ago but it would have stretched our budget too thin,” said Damien Bucci, 30, from the kitchen of his two-bedroom apartment in a 238-unit development in Fairless Hills, Pennsylvania. “Financially, we’re in a lot better position now.”

The Buccis have been shut out of the housing market since its rebound in 2012 from the biggest collapse since the end of World War II and now are belatedly part of its recovery. They will benefit from faster economic growth and a labor market that’s approaching what the Federal Reserve calls “full employment,” meaning anyone who wants a job has one. An increase in first-time buyers, whose market share dropped to a record low last year, will provide a boost to the sluggish mortgage industry.

“Credit tightness has been an issue for the housing market but demand weakness has been a bigger one,” said Douglas Duncan, chief economist at mortgage giant Fannie Mae in Washington. “The improving economy is going to put renters in a better place to buy.”

Duncan predicts a 6.3 percent increase in mortgage lending for purchases this year after a drop of 9.6 percent in 2014. He said increasing confidence in the job market is the strongest indicator home sales will improve.

Confidence Grows

The Thomson Reuters/University of Michigan consumer sentiment poll showed last month that consumers expect an increase of 1.7 percent in their incomes in 2015, the highest since 2008. Those under 45-years-old expect the biggest gain, at 4.7 percent.

“Young renters have wanted to keep their living situations flexible because they didn’t know if they were going to have to move for a job,” Duncan said. “More of them are going to be willing to put down roots if they feel more confident in the labor market.”

Economic growth, bolstered by consumer spending and business investment, is accelerating. The U.S. grew at a blistering pace of 5 percent in the third quarter, the fastest since 2003, the Commerce Department said at the end of December. The Fed said last month it expects the economy will expand between 2.6 percent and 3 percent in 2015, up from 2.3 percent to 2.4 percent in 2014.

The economy added more than 2.7 million jobs last year, the most since 1999, according to the Bureau of Labor Statistics. The jobless rate will average 5.2 percent to 5.3 percent, levels last seen before the financial crisis, according to the Fed.

Wages Accelerate

“With the labor market firming, wages are starting to accelerate,” said Diane Swonk, chief economist of Mesirow Financial Inc. in Chicago and chairwoman of the Securities Industry and Financial Markets Association’s Economic Advisory Roundtable. “Companies are finding themselves having to compete for workers, and then compete to retain them.”

The median household income in 2014 rose 1.6 percent to $53,880 through November, according to Sentier Research LLC. That pace should continue into 2015, said Swonk. For all of 2013, the gain was 0.1 percent.

“People who see their cash flow go up are going to feel a lot more confident about making a home purchase,” Swonk said.

Young Americans are making more money as technology companies ratchet up spending and hire. Business investment in intellectual property, which includes software and computer programming, accounted for 0.34 percent of the economy in the third quarter, up from 0.11 percent in the year earlier period, according to inflation-adjusted data from the Bureau of Economic Analysis.

Google Hires

The median age of employees is 28 at Facebook Inc., 30 at Google Inc. and 31 at Apple Inc., according to a study last month by PayScale Inc., a company that sells compensation software. Facebook hired about 2,000 workers last year through September, up from 1,175 in the year-earlier period. Google added about 7,300 positions in the first nine months of 2014 and Apple hired about 12,300 employees, according to regulatory filings.

Younger workers were the worse-hit during the recession. The unemployment rate peaked in 2009 at 10.6 percent for people aged 25 to 34 years and 9 percent for ages 35 to 44.

In November, the unemployment rate for people 25 to 34 years old was 6.1 percent, the lowest since 2008. For the 35 to 44 age group, it was 4.3 percent, matching the September level that was the lowest since 2008.

The Buccis, who have a three-year-old daughter and a six-month old son, decided last year that their financial situation had improved enough for them to buy a home. Damien is a high school teacher and Tina cares full-time for the couple’s two children. They are paying $310,000 for their house in Chalfont, Pennsylvania, about 30 miles north of Philadelphia.

“We’ve been living on a budget and saving money, so we’re in a better place financially than we were two years ago,” Tina, 29, said. “Our goal was to be out of the apartment before our second child started walking, and we’re going to make it.”

Home Sales

Sales of new and existing homes this year probably will gain 5.4 percent to 5.7 million after falling 2.7 percent in 2014, according to Fannie Mae’s Duncan. Lending for home purchases probably will grow to $714 billion from $672 billion last year, he said.

Household formation, a key measure of real estate demand, will rise to 1.1 million in 2015, the highest in three years, according to a forecast by IHS Global Insight Inc. First-time buyers accounted for about 29 percent of home purchases last year, according to data through November from the National Association of Realtors.

“If the first-time buyers aren’t in the market, the sellers can’t move up and buy their next houses,” said Bill Banfield, vice president of Quicken Loans Inc. in Detroit, the third-largest U.S. lender. “The real estate market needs an increase in entry-level demand” for it to be fully functioning, he said.

Ricardo Bonafe, 37, plans to buy his first home this year. He said he’s in the final stages of the hiring process for a job as a correctional facilities officer. The pay will be better than his current job as a roofing contractor, and the work will be more reliable, said Bonafe, who lives on the northwest side of Chicago.

First-Time Buyer

“The last few years have been tough ones for me and my family, but it looks like things have finally started to turn around for us,” said Bonafe, who lost an information technology position at a non-profit group four years ago.

Bonafe, his wife, Judy, and their two children have been living at a friend’s house, paying rent as they save money for a down payment. The couple said they plan to start looking at properties priced at about $250,000 this month.

For Bonafe’s 12-year-old daughter, Trinity, the real measure of the economy is whether she has to continue sharing space with her 10-year-old brother. If Bonafe’s plans for the New Year materialize, she’ll have a room of her own.

“I grew up in a home my family owned, here in Chicago, and I want to give them that same experience,” Bonafe said.

-By Kathleen M. Howley

U.S. Office-Occupancy Gains Jump to a Seven-Year High

Source: Bloomberg / News

U.S. office landlords ended last year with the biggest gain in occupancies since 2007, signaling a pickup in momentum for the sluggish recovery since the last recession.

Occupied office space increased by a net 10.97 million square feet (1 million square meters) during the last three months of the year, the most since the third quarter of 2007, according to property-research firm Reis Inc. (REIS) The measure, known as net absorption, jumped 28 percent in 2014 to 32.5 million square feet, also a seven-year high.

The increase indicates office vacancies may improve in 2015 as employers add jobs and absorption outpaces new construction, forcing tenants to lease in older buildings. Demand for space is broadening from technology and energy-focused areas, such as the San Francisco Bay area and Texas, which have been buoying the U.S. market in recent years, said Ryan Severino, senior economist at New York-based Reis.

“If you look at the top 79 markets in the U.S., there is only one that saw rent growth declines in the last 12 months -- Milwaukee,” Severino said in a telephone interview. “That is a marked change from a year ago, when there were still several.”

Effective rents, or what tenants paid after any landlord discounts, climbed 3 percent in 2014, Reis said. The top three markets for rent gains were San Jose, California, San Francisco and Houston, with increases of 7.2 percent, 6.7 percent and 5.1 percent, respectively.

Building Sales

The rebound in markets such as Northern California has helped fuel real estate deals, including Blackstone Group LP (BX)’s agreement last month to sell office properties in Silicon Valley to Hudson Pacific Properties Inc. for $3.5 billion. In San Francisco, office-building sales surpassed $7 billion through the first three quarters of 2014, more than six times the year-earlier period, data from Real Capital Analytics Inc. show.

Nationwide, effective rents climbed 1.1 percent in the fourth quarter from the previous three months, the 17th consecutive quarterly increase, Reis said.

Los Angeles, one of the country’s largest office markets, ranked last in net absorption for the fourth quarter because of a lack of demand drivers in the area, according to Severino. Effective rent growth of 3.5 percent for the year was less than half the gain in San Jose.

Completions of new U.S. office space totaled 26.2 million square feet in 2014, up from 25.6 million in the prior year, Reis said. The nationwide vacancy rate at the end of the year was 16.7 percent, the lowest since the third quarter of 2009 and down from 16.9 percent in 2013.

“As long as we don’t get a random shock to the economy, and labor growth continues, vacancies should fall and rents should rise faster in 2015,” Severino said.

-By Nadja Brandt

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