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Retail market looking good

Posted on 24 Sep 2009 | Comments Off

Some 1.1m sq ft of retail space will be added to Orchard Rd this year, bumping up supply in the prime shopping belt by 24%

THE retail scene appears to be regaining some momentum after a quiet first quarter, thanks in part to the Great Singapore Sale, the opening of Ion Orchard and Orchard Central, and news about the high pre-commitment levels in upcoming malls. With the opening of Orchard Central and Ion Orchard, some 613,548 sq ft of space has been added to private stock along Orchard Road.

This represents a 15.7 per cent increase to private Orchard Road stock in Q2 this year. As a result, the occupancy rate for Orchard Road dropped 11.5 percentage points from 95.3 per cent in Q1 2009 to 83.8 per cent in Q2. Average rents in the Orchard Road basket of prime retail space that CBRE tracks saw a 2.9 per cent dip quarter-on-quarter. As at H1 2009, prime Orchard Road rents have fallen 6 per cent.

There is no doubt that retailers are increasingly being challenged by the economic downturn that is driving down tourist numbers and local spending. Coupled with high overhead costs, retailers face the prospect of not being able to achieve their projected turnover. But this is probably a short term view of the situation. Fundamentally, there are factors working in favour of retailers.

Market talk has also been rife with concerns about supply looming in the two new integrated resorts (IRs) and how it would impact rents in Orchard Road and the rest of Singapore. Again, the concern of over-supply may be premature. Continue reading →

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Posted in Office / Retail / Industrial, Property Market / Real Estate

Tagged Retail Rental, Retail Space, Singapore Retail, Singapore Retail Market

Room for improvement in en bloc laws

Posted on 24 Sep 2009 | Comments Off

The 80 per cent en bloc law made it possible for the private sector to take the lead in maximising the value of scarce land

Chip off the old block: The 1970s saw the introduction of larger scale high-rise condominium housing, with pioneering developments such as Pandan Valley (above). It was also during this period that HUDC started building affordable flats on a large scale for the then ‘sandwiched’ group of middle-income families. Among them were Farrer Court, Pine Grove, Gillman Heights and Laguna Park (next)

COME October, it will be 10 years since en bloc sales became a practical reality with the law that allowed an 80 per cent majority to decide the sale of a development, (90 per cent for those less than 10 years old). Before this, there had to be unanimous consent by owners for the sale of a development. To mitigate the effects of ‘majority rule’, safeguards were put in place to protect the rights of the non-consenting minority owners. The key tenet was that any deal must be entered in good faith.

The new regulations were welcomed by many sellers, in particular those who felt held to ransom by a single dissenter in previous attempts, or who saw the entire exercise scuttled because one owner in the estate was uncontactable.

Since the change in the law, over 270 en bloc developments have been successfully sold. The average value of the deals was close to $100 million per development. This compares starkly to the average of $50 million for the 140 deals that took place from 1994 to 1999, before the law came into effect. While the increase in property prices did contribute to the increase, the ability to maximise development potential and extract value was the major factor. The projects sold under the old 100 per cent rule were typically no larger than 50-80 units.

Without the 80 per cent rule in place, embarking on the exercise for large developments with over 100 units was simply unthinkable. Just the thought of one owner being able to scuttle the deal was enough to deter the owners from slogging through the process. Continue reading →