According to professional services firm Jones Lang LaSalle the sector witnessed a number of major capital transactions during 2009. Five office buildings were reportedly sold with a combined value of more than THB9.98 billion, and more capital transactions are likely this year, This is because a significant number of companies are putting surplus assets up for sale, while investors are show higher levels of interest in acquiring office buildings, according to company.

Two of the five transactions were concluded by property funds. CPN Retail Growth Leasehold Property Fund acquired two office towers and the retail component of Central Pinklao for THB5.68 billion, representing the largest office-related capital transaction in the Bangkok office market last year. Sala@Sathorn, a newly completed Grade A office building on Sathorn Road, was acquired by Sala@Sathorn Property Fund for THB1.65 billion. The fund was set up by Primavest, which was later taken over by Ayudhya Fund Management.

Phayathai Property Fund sold TMB Bank’s former head office premises on Phayathai Road, including a 14-storey building and two low-rise buildings. CP Plaza acquired the property for THB805 million and aims to renovate the asset before releasing space back into the market for rent. Another former bank headquarters building sold last year was located on Sathorn Road with a transacted value of slightly more than THB1 billion.

TCC Land acquired an office building on Surawongse Road for THB800 million which will house the firm’s affiliate companies.

At the beginning of 2010, Jones Lang LaSalle successfully acted on behalf of an investor to dispose a portfolio of strata title units at Serm-Mit Tower on Asoke Road with combined space of 34,000 square metres. The portfolio was transacted for THB 1.5 billion.

Longlom Bunnag, Chairman of Jones Lang LaSalle in Thailand, said: “Historically, the volume of capital transactions in the Bangkok office market was relatively low, due mainly to limited supply available for sale. In 2009 many corporations restructured their asset portfolio in response to the changing economic environment, and some decided to dispose of non-core assets. This trend is likely to continue in 2010 as there is a growing need for companies to manage the cost, efficiency and performance of the real estate they own and occupy.”

From an investment perspective, Mr. Longlom says there are a number of cash-rich Thai families looking at office buildings as alternative investments.

He said: “Office buildings are one of the low-risk investment asset types. Buildings, particularly those that are well located and well managed, generate consistent income streams. They also offer higher investment returns in a range between 5 per cent and 7 per cent, compared to bank deposits and government bonds that offer returns on investment ranging between 1 per cent and 4 per cent.”

He adds that buyers could also anticipate higher returns on investments in the near term as conditions in the market are likely to pick up in 2011, in line with the overall economic trends expected in Thailand and across Asia Pacific.

SOURCE: Property-Report

The firm reported that, in light of the economic climate, most firms cancelled expansion plans and froze recruitment for all but the most essential positions. Many embarked on efficiency drives to make better use of the space they occupy and returned space which became surplus to their requirements.

The report, published last week, noted: “Whilst this modest improvement is in line with anecdotal accounts of an improving business climate, we remain reluctant to describe this as a beginning of a trend at this stage. The economy is still in a weakened state subject to stability in the political arena and amid concerns about a double dip in Thailand’s major export markets, the U.S. and Chinese economies.”

The company expects to see further pressure on vacancy rates with the release of new supply – amounting to almost 5 per cent of the grade A stock – coming on stream during 2010.

The report concluded: “The outlook for the Thai office market is as uncertain as the outlook for the Thai economy. Reports that domestic consumption is up and exports are recovering are encouraging, and should these trends continue unabated then we can expect to see demand for office space recover by the second half of the year. This however comes with the usual caveat so long as there is no further political disruption or any further weakening in the global economy.”

SOURCE: Property-Report.com

The company expects to see demand for office space recover by the second half — as long as there is no further political disruption or any further weakening in the global economy.

Bangkok’s office market is showing higher vacancy rates with an average rise of 3.35 percent last year, reflecting the difficulties most firms in the services sector have faced during the year.

Despite minor rallies in the third quarter of 2009, demand remained sensitive to local political stability and the health of the world’s major economies.

Rents continued to slide in all sectors of the market in the fourth quarter of 2009, resulting in a net drop in average rents of 1.47 percent over 2009 to 493.71 baht per square metre per month on average. The grade A market bore most of the brunt of the downward pressure, with rents down by 1.94 percent over the year.

The latter half of 2009 saw rentals drop at an accelerating rate as landlords came to grips with the reality of the softer market conditions. New supply entering the market next year is likely to put further stress on achievable rents.

Rents here could fall to as low as $5 per square foot (psf) per month in 2011 as massive new supply comes onstream, the firm’s research shows. Grade A office rents stood at $8.80 psf per month at the end of 2009, according to Savills.

By contrast, office rents in Hong Kong’s CBD are expected to climb 5 to 10 per cent in 2010 on the back of a supply crunch and anticipated surge in demand from mainland Chinese firms looking to expand.

‘The good news is that over the next year or two, Singapore is going to look a lot more competitive in the region, particularly in comparison to Hong Kong,’ said Simon Smith, head of research & consultancy at Savills’ Asia Pacific unit. His research shows that the Hong Kong Grade A office rental premium over Singapore could climb to as high as 150 per cent.
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The Grade A office supply here will rise by 47 per cent between 2010 and 2012, with 7.7 million square feet of space being added.

Savills’ worst-case scenario forecast assumes that take-up will average at 950,000 square feet a year over the next three years. The rental market here will then bottom out in 2011 at an average $5 psf per month.

An analyst from another property firm however said that a fall to $5 psf per month is ‘possible’, but added that he was not sure how likely it is that the fall will be so large.

Separately, data from CB Richard Ellis (CBRE) showed that Grade A office rents in Singapore fell to $8.10 at end 2009 from $15 at the end of 2008. The firm expects Grade A office rents to fall to $7 by the end of 2010 – a year-on-year fall of 13.6 per cent.

In Hong Kong, the Grade A office stock is expected to climb by a much smaller 6 per cent from 2010 to 2012, Savills estimates.

The supply pipeline for Hong Kong Island remains subdued for the foreseeable future, so ‘given the supply of space is still constrained, vacancy levels on Hong Kong Island are likely to recover before other markets where the market cycle will be deeper and longer’, said Rhodri James, executive director of office services for Hong Kong at CBRE.

Savills’ Mr Smith also noted that the completion of new buildings in Singapore will bring about a ‘flight to quality’ as tenants upgrade to better quality office space. This could lead to a fall in rentals and occupancies at less-prime Grade B office buildings.

And upon the completion of the new buildings, a two-tier Grade A office market could also rise, Savills predicts. Newer buildings are likely to command a premium in rents and capital values compared to older ones, the firm said.

However, capital values should not fall even as office rents fall as vendors are not likely to sell office space for lower prices. Savills said that it expects a 0 to 5 per cent rise in office values in Singapore.

This article was first published in The Business Times.

The vacancy rate was 13.9%, indicating a fall from the 14.0% recorded in Q2 2009.

Bangkok office market rents have moved downwards. As of Q3 2009, the overall rents dropped for the third consecutive quarter, since the beginning of the year. Grade A offices in the CBD area faced a 0.9% Q-o-Q and 6.7% Y-o-Y drop in rents, down to THB 694/sqm in this quarter.

During Q3 2009, net new take-up posted positive figures in all segments (Grade A CBD and Non-CBD; and Grade B CBD and Non-CBD), Q2 had seen negative figures in a number of the grades. Total net take-up stood at 9,253 sqm, which was down 31.6% Q-o-Q and 43.7% Y-o-Y.

To download the full report, please look here.

Mrs Pojanard Prinyapatpakorn, Managing Director of Suntowers Limited, an affiliate of Sunflower Group, said: “Over the past 12 months we have received more and more leasing enquiries for Suntowers as companies look for affordable quality office space in convenient locations outside the central business district. By appointing Jones Lang LaSalle as the sole leasing agent, we want to make sure that Suntowers captures most of the leasing opportunities that are rising in the Vibhavadi Rangsit area.”

Ms. Yupa Sathienpabayut, Head of Office Leasing at Jones Lang LaSalle, said: “In the current economic environment, companies are looking for strategies to minimize operational costs. Some of these companies opt to reduce occupancy costs by relocating to a more affordable office building in a fringe location that offers quality office space and convenient access. The Bangkok northern corridor, including Vibhavadi Rangsit Road, is one of the city’s fringe office locations where corporate occupiers have shown strong interest.”

According to a recent study by Jones Lang LaSalle, the Bangkok northern corridor office market, which covers a part of Phayathai and Ratchadapisek Roads, Phaholyothin Road, and Vibhavadi Rangsit Road, offers 2.2 million square metres of space, with an average vacancy rate of approximately 15 per cent. While the average rental in the area stands at around Bt400 per square metre per month, Grade A buildings enjoy a higher average rental rate of about Bt570 per square metre per month.

“The fact that very few Grade A office buildings are located along Vibhavadi Rangsit Road serves as a competitive advantage to Suntowers,” says Ms Yupa.

SOURCE: Property Report

Property consultancy Jones Lang LaSalle’s auction house said on Thursday that the quantum of non-residential properties has jumped from last year’s S$26.9 million to S$101.18 million to date.

It said the rise is due to investors being attracted to the higher rental yield from non-residential property, compared with an investment in residential property.

The actual number of mortgagee sales dropped from 232 in 2008 to just 216 this year. Total number of properties put up for auction has also decreased from last year’s 803 to the current figure of 729.

119 properties were sold at auctions this year, with the value amounting to S$167.3 million. This compares to just 68 properties sold last year, which carried a total value of S$69.8 million.

Jones Lang LaSalle expects to see more owner sales being put to auction next year. It is predicting a rise as it feels owners will be attracted by the competitive nature of the auction environment and the high chance of attaining an optimum price for their property.

SOURCE: Channel NewsAsia

Office rents

Its preliminary estimates show that the average gross effective rent of Grade A office properties in the core of the central business district reached $7.80 per sq ft per month in the fourth quarter, down 4.9 per cent from the third.

Rents in Singapore’s office market have been falling as demand slows and supply grows.

Experts expect rents to continue falling into next year, though at a slower pace. Vacancies are still rising as companies take advantage of falling rents to move to better quality office space.

The good news is that activities have picked up lately, with many financial institutions planning for moderate growth.

SOURCE: Straits Times

Singapore Offices

An oversupply of office space and low demand has knocked down prime office rentals in the central business district (CBD).

Rents have fallen as much as 40 per cent since the beginning of 2008 but observers said that rents are not in a free fall. They said the slowdown in rental rates is a correction that was going to happen due to the unusually high prices resulting from the boom in 2007.

“We could see office rentals return to a 2005 level. Office rentals have risen to such a high rate, so we must not take it that the 2007 rates are the norm,” said Nicholas Mak, Independent Property Consultant.

“For example, it was quite common before 2005 to find that Raffles Place rentals could be under S$6 (per square foot per month) in some places,” he added.

Experts said that prices should level out at between S$6 and S$10 per square foot per month in the CBD over the next year. This is down from an average of S$15 in 2007 and 2008.

The oversupply of office space has also stalled the developments in the city. However, interest in affordable non-central locations for companies which do not need to be housed in the CBD, has resulted in new project interests outside of town.

Thor Kerr, managing director, BCI Asian Construction Information, said: “If you talk about huge projects like the Marina Bay area, probably not as many, there is just an over supply right now.

“But if you look at smaller projects, especially along the new MRT lines, that is going to be interesting because they have good infrastructure and have a competitive advantage because of pricing.”

Such projects include the new Fusionopolis Tower near Buona Vista, and mixed developments along South Beach Road.

According to observers, this interest in non-prime properties is likely to keep rents down for prime office space until the global economy recovers and big tenants are once again interested in the CBD.

SOURCE: Channel NewsAsia

Thailand’s residential and office markets have significantly improved, while most retail developers are monitoring the market situation closely prior to taking further steps, according to research by real-estate adviser DTZ Debenham Tie Leung (Thailand).

The study found that the condominium market was more active in the third quarter as a significant handful of new condominiums were launched in the central business district (CBD). Seven projects were launched for sale, accounting for some 2,462 units. The recorded number of new units launched in the third quarter alone exceeded market expectations, as the figure surpassed the total number of units launched in the whole of the first half.

This may be attributed to the more contained political situation over the past two or three months, which brought about regained confidence among both developers and home-buyers. To help boost purchasing activity, the government confirmed the extended transfer tax and specific business tax breaks till 2010.

It seems the market has gone through a phase of market correction, as prices of newly launched condominiums have increased quite significantly.

Average capital values for all grades of condominiums in the CBD stood at Bt82,250 per square metre at end of the third quarter, reflecting an increase of 0.7 per cent quarter on quarter. However, prices of selected new condominiums launched this quarter were able to attain premiums of 30 to 40 per cent over the overall CBD average, with prices ranging from Bt110,000 to Bt120,000 per square metre, the study found.

Average prime rents remained unchanged at Bt457 per square metre per month. The rental market was largely stagnant as the amount of newly completed condominiums coming on board exceeded the number of enquiries for rental property.

Only a handful of good-quality condominiums located in areas with good accessibility are able to achieve rents at a premium of 10 to 20 per cent above the market average.

The Bangkok residential market is expected to continue to see a steady increase in purchasing activity, barring any unforeseen disruptions on the political front. For the rest of the year, local buyers will dominate most condominium sale transactions as foreign buyers continue to adopt a “wait-and-see” attitude. In line with this, prices of new condominiums launched within the CBD irrespective of grade are expected to continue to move in an upward manner in the coming months, the study found.

Meanwhile, occupancy for prime offices registered a positive increase quarter on quarter after four quarters of consecutive decline. The average occupancy rate of prime office buildings across the CBD rose by 0.8 percentage point quarter on quarter to 85.8 per cent and was largely supported by strong occupancies recorded among newer prime buildings.

As there was no significant adverse event in the quarter to further erode business confidence, the number of office leasing enquiries started to pick up – particularly from local businesses.

Despite rising occupancies, average prime CBD rents continued to fall by a marginal 0.6 per cent quarter on quarter in the third quarter to Bt648 per square metre per month. Selected prime buildings within the core CBD are still maintaining strong rentals at approximately Bt650 to Bt700 per square metre per month. Landlords of selected prime buildings have come back stronger this quarter in terms of negotiation, narrowing the gap between asking and achieved rents, the study found.

Looking ahead, both rents and occupancy are likely to continue to be stable or record slight increases as business confidence is cautiously regained. Tenants may start to reassess their occupational strategies in the months ahead. The low level of potential supply coming onboard in the short term will aid in propelling leasing activity in the near future. It is unlikely that developers will start initiating new developments till there is significant evidence from market activity to justify this.

The third quarter was generally a healthy quarter for the retail sector. Leasing transactions improved in line with higher consumption activity. Part of the reason for this may have come from the reduction in political activity over the past two to three months. It is likely that the pent-up demand to spend will lead to a positive growth in retail activity in the coming months, the study found.

Although most landlords decided to maintain rents at a stable level in the third quarter, there is evidence to suggest that rents are bound to increase in midtown areas moving forward, in light of some potential pre-commitment negotiations just before the end of the quarter.

Average prime rents in the third quarter remained at Bt2,280 per square metre per month, just as rents for midtown areas held steady at Bt1,530.

Retail developers are likely to wait to see how the following quarter pans out prior to making any major new announcements. About 24,000 square metres of retail is expected to be completed in the next quarter, all of which will be in the downtown zone. Focal areas for new retail developments moving forward will continue to be in midtown and suburban locations where there is still room for expansion, the study found.

SOURCE: The Nation