May 21, 2012
ReseaRch
OcT-Dec 2011/4th quarter
real estate highlights
highlights
· ·
Developers'newsalesfellby2.4%y-o-yin2011(15,904units).Privatepropertyprices grewmarginallyat0.2%q-o-qwhilepricesofresaleHDBflatsrose1.7%in4Q2011. 2011islandwideprimeretailrentsperformedwellandincreasedapproximately2.4% overtheyear,althoughrentsmayremainflatgoingforwardinviewoftheslowing economy. 4Q2011officemarketshowsearlysignsofinflectionwiththeofficemarketturningin favouroftenants. Industrialpropertymarketremainsstablewithhealthyoccupancyratesdespiteglobal uncertaintyandmoderategrowthinthemanufacturingsector. Totalinvestmentsalesvaluefor2011increased13.06%year-on-year(y-o-y)to$25.08 billion.Publicsectoraccountedfor52%ofthesalesor$13.14billion,28.9%y-o-y increasewhileprivatesectorsawmarginalincreaseof2%y-o-y. Totalnumberofpropertiesin2011putupforauctiondecreasedby21.37%to504. Inlinewiththeslowdownofboththeglobalandlocaleconomyandfewerproperties beingauctioned,thetotalvalueofpropertiessolddecreasedby53%to$95.93million.
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Oct-dec 2011/4th quarter
real estate highlights
Residential Property Market
Developers'newsalesfellby2.4%y-o-yin 2011(15,904units).Privatepropertyprices grewmarginallyat0.2%q-o-qwhilepricesof resaleHDBflatsrose1.7%in4Q2011.
Private Residential Sector Mass Market Dominate Primary Market
Stemmedfromthecombinationofyear-end festiveseasonandthelatestAdditional Buyer'sStampDuty(ABSD)imposedby thegovernmenton8December2011,sales volumeforprivatehomesinDecember droppedsubstantiallyto632unitsas comparedto1,702inNovember.TheslideoffinDecembersalesvolumeresultedina 15.5%dropthisquartertoatotalof3,603 salestransactionsforprivatehomesin4Q 2011. Despitethis,primaryresidentialsales marketinthewholeof2011wasactiveas developerslaunchedarecordnumberof newhomesexcludingECssales(17,710 units).Totalsalesvolumeintheyear alsoremainedbuoyantat15,904units,a marginaldropof2.4%fromlastyearrecord highof16,292units. Whilstthegloomyeconomicconditionin EuropeandtheUnitedStatesdampened investmentsentimentsinmidandhigh-end segment,buyinginterestsinmassmarket segmentremainedstrong.Supported bycurrentlowinterestrateenvironment andgenuinedemand,newmassmarket residentialprojectsthataresituatednear MRTstationsandshoppingamenitiesas wellasthosethatareattractivelypriced continuedtoboastbrisksales. Assuch,massmarketorOutsideCentral Region(OCR)dominatestheprimary residentialmarketin2011,accountingfor 67%oftotalnewsalesvolumeand64% ofnewlaunchesfortheyear.TheOCR salesvolumehitarecordhighwithatotal numberof10,292salestransactionsand projectswhichexperiencedgoodresponses uponlaunchesin2011includeATreasure Trove,BedokResidences,Boathouse Residences,EightCourtyards,Euhabitat, H20Residences,Terrasse,TheMiltonia Residences,andWaterfrontIsle. Onthecontrary,salesvolumeinhighend marketdecreasedsignificantlyin2011, dropping64%to1,430units.Mid-end segmentalsosawsubduedinterestwith 3,750newunitssoldbydeveloper,or18% fallfromthepreviousyear.Therewerefew majorhigh-endprojectslaunchedthisyear andmostoftheseprojectshavelessthan 100units,withtheexceptionofSkysuites@ Anson(360units),TheScottsTower(231 units)andtheBoutiq(130units).
Proportion of Foreign Buyers Increased in 2011
Proportionofprivatehomepurchasesmade byforeigners(includingpermanentresidents (PR)andnon-permanentresidents(NPR)) rosetoarecordof31%in2011from25% in2010.Assuch,theimplementationof
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Chart1
Percentage of Foreign Homebuyers (PR and NPR) in 4Q 2011 (Landed and Non-Landed Properties)
3000 TotalNo.ofForeignBuyers 2500 2000 1500 1000 500 0 35.0% 30.0% %ofForeignBuyers 25.0% 20.0% 15.0% 10.0% 5.0% 4Q10 1Q11 2Q11 3Q11 %PRandNPR(RHS) 4Q11 0.0%
Singaporeanhomebuyersofprivate residentialpropertiesin2011.Intotal,China nationalsbought2,555homesin2011,a 43%increasefrom2010.WithSingapore beingastrongeducationhub,manyofthese Chinesehomebuyersmayhavemorethan justinvestmentincentivestobuyproperties inSingapore.
Property Prices Eases in 4Q 2011
4Q2011URAPropertyPriceIndexfor privateresidentialhomeseasesasit registeredthelowestquarterlyprice increaseof0.2%sincerecoveryin3Q2009. Allsubindicesincreasedmarginally,with exceptionof0.6%dipforsemi-detached homeprices,thefirstslideinURAproperty priceindexsince2Q2009. Forthewholeof2011,propertypricesin OCRsawthebiggestincreaseof7.7%, followedbyRCR(4.4%)andCCR(4.0%). Onaquarterlybasis,4Q2011pricesof non-landedhomesinOCRincreased0.6% ascomparedtoa0.5%increaseforCCR.
NumberofPRandNPR(LHS) Source:REALIS,KnightFrankResearch
Chart2
Percentage of Foreign Homebuyers (PR & NPR) by Nationalities in 2011 (Landed and Non-Landed Private Residential Properties)
AdditionalBuyers'StampDuty(ABSD) mayhavebeenanattempttomoderate theincreasingproportionofforeignhome ownershiphere. Accountingfor28%offoreignhome purchases(Chart2);theChineseovertook theMalaysianandemergedastopnon-
Chart3
URA Property Price Index 4Q 2011
205 200 PropertyPriceIndex 195 190 185 180 175 170 165 160 4Q10 1Q11 OverallPPI(LHS) Source:REALIS,KnightFrankResearch 2Q11 3Q11 4Q11 -0.5% 0.5% 1.5% 2.5% %Changeq-o-q 3.5%
China Malaysia Indonesia India UnitedKingdom Others
28% 19% 18% 12% 3% 20%
Source:REALIS,KnightFrankResearch
%Change-OverallPPI(RHS)
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Oct-dec 2011/4th quarter
real estate highlights
Chart4
Prices of Private Properties by Segment 4Q 2011
$2,500 GrossRents($psfpermonth) $2,000 $1,500 $1,000 $500 $0
Pricesofnon-landedprivatehomesinRCR remainedunchanged. Basedonpropertybasketcompiledby KnightFrank(Chart4),massmarkethomes weretransactedat$995psfonaverage, high-endpropertiesweretransactedat $2,281psfin4Q2011,ora0.7%q-o-q increase.Meanwhile,mid-endproperties saw2.3%q-o-qpricedipwithaverageprice of$1,549. Thesignificanteasinginpropertyprice momentumreflectscautiousmarket reactionsfollowingtheimplementationof ABSD,coupledwiththeongoinguncertainty intheeconomy.
4Q10
1Q11
2Q11 Mid-endmarlet
3Q11 Mass-Market
4Q11
High-endResidential Source:REALIS,KnightFrankResearch
Chart5
Monthly Gross Rents of Non-landed Residential Properties by Areas
$6.00 $5.00 $4.00 $psf $3.00 $2.00 $1.00 $0.00 4Q10 1Q11 West 2Q11 East 3Q11 4Q11
Slower Rate of Rental Growth
URApropertyrentalindexrose0.4%this quarter,moderatedfromthequarter-onquarterincreaseof0.8%in3Q2011.On ayear-on-yearbasis,rentalsofprivate residentialpropertiesin2011increased 3.8%,comparedto17.9%increasein2010. AsshowninChart5,rentsinhigh-end marketgrew0.2%q-o-qin4Q2011to$5.48 psfpermonthonaverage,lowerthan1.9% increasein3Q2011.Onannualbasis,rents inthissegmentrose8.5%overthelast12 months. Massmarketrentsincreasesmarginally by0.8%q-o-q,albeithigherthan0.4%rise inthepreviousquarter.Meanwhile,rents inmidmarket,representedbyproperties situatedinEastCoastandLowerBukit Timahareas,stoodat$3.91psfpermonth onaverageinthelastquarterof2011.
PrimeEastCoast
UpperBukitTimah
LuxuryCondominium Source:REALIS,KnightFrankResearch
OtherPrimeDistrict9,10,11
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Public Housing Sector Softening of HDB Resale Market
Similartotheprivateresidentialmarket, HDBresalemarketsoftenedslightlyasthe quarter-on-quartergrowthinHDBResale PriceIndexmoderatedfrom3.8%in3Q 2011to1.7%thisquarter.Whileresale transactionsincreasedslightlyby0.3%to 5,921casesin4Q2011,totalresalevolume fortheentire2011fellby24%y-o-y,hittinga lowof24,633units. Publichousingresalemarketshowedsigns ofstabilizationinthefinalquarterwithlower mediancash-over-valuation(COV)reported formajorityofflatsacrosstheisland. Tampines5-Roomflatsawthebiggest decreaseof29%($16,200). Tightenedownershiprulesand government'slargesupplyofBTOflats (25,200units)in2011putalidonprices anddemandsforHDBresaleflats.Under thenewrestrictions,ownershipofboth privateresidentialpropertiesandHDB flatswithinaminimumoccupationperiod offiveyearsisnotallowedandprivate homeownerswhopurchaseHDBflats mustdisposetheirprivatepropertieswithin sixmonths.Thebumpersupplyofnew flatsprovidedfirst-timehomebuyerswith moreaffordablehousingoptionsinvarious locations,includingmaturedestatessuch asTampines,BedokandAngMoKio.The highersuccessfulrateandshorterwaiting timefornewflatsasaresultofincreased supplyalsoencouragedmorehomebuyers tooptforBTOinsteadofresaleflats.
Outlook
Moving Towards Sustainable Private Property Market
TherecentABSDmaytriggersomeknee jerkeffectsinthebuyer'smarketasgenuine homebuyersthatarenotaffectedmay deferredtheirbuyingdecisionsinthenext fewmonthsinhopeofcoolingprices.Local andforeignbuyerswillalsotaketimeto accepttheABSDbeforecomingbacktothe market.Inviewoftheuncertaineconomic conditionandimpactsofnewmeasures,we expectoverallpropertypricestofallby5to 10%onyearlybasiswithmutedactivitiesin high-endsegment.Massmarketislikelyto remainthekeyfocusin2012. Whileweseeexuberantresidentialprice increaseinthelasttwoyears,goingforth Singaporeresidentialmarketismoving towardamorebalancedandsustainable phrase.Governmentcontinuedtorollout newsupplytothemarkettomeetstrong marketdemand.Developersarelikely torespondbyspacingoutnewlaunches toavoidexcessivecompetitionasthey moderatetheirtenderpricesfortheland bids.Genuinehomebuyersandinvestors maycontinuetobuyintoprojectsthat areattractivelypricedtocapitaliseon lowinterestrates.Newprojectsingood locationsandwithstrongsellingpoints arelikelytoseepositiveresultsalthough thesamemaynotbeexpectedacrossthe board. TheimplementationoftheABSDmeasures, affectsforeignersmost.The10%additional stampdutieswillinvariablydrivethem towardleasingmarketastheseforeign
buyersnolongerconsiderbuyingas attractive.Thosewhoarecurrentlyleasinga placebutconsideringbuyingwillputoffthe decision.Inadvertently,leasingactivitiesare likelytopickupasforeignersworkinghere arenotlikelytobuybutstillneedaroofover theirhead.Hencetheincreaseddemand willbodewellforlandlordslookingtolease outtheirhomes. Notwithstandingapossibleincreasein leasingqueriesanddemand,rentalsare notexpectedtoincreasesignificantlyas newsupplycomingonstreaminthenext twoyearswillresultinoffsettingeffects onrentals.Iftheeconomicperformance nextyearsoftenssignificantly,wecan expectrentalstofollowintandemalthough percentagedropmaynotbeashighas prices.Rentalsunderapessimisticscenario willfallbysome3to5%forthenextyear. Iftheeconomicperformancenextyearis withinexpectations(1%to3%),wecan expectrentstoimproveupto3%foryear 2012.
Further Slowdown in HDB Resale Market
Resalevolumeisexpectedtofallfurther resultingfrommorecautiousmarketmoving forward.COVwillalsoeaseinmostestates assellerswillbelessaggressiveamidst uncertaineconomicconditionandrestricted ownershiprules. However,wedonotexpectpricecorrection inHDBResaleMarketinthenextquarter, albeitslowergrowthrateof1-2%quarteron quarter.Demandforresaleflatswillsustain in2012notwithstandingamplesupplyof newBTOsashousingdemandbacklogwill takeseveralyearstoclearandnewflatsare notstillunderconstruction.
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Oct-dec 2011/4th quarter
real estate highlights
Retail Property Market
2011islandwideprimeretailrentsperformed wellandincreasedapproximately2.4%over theyear,althoughrentsmayremainflatgoing forwardinviewoftheslowingeconomy.
Market Pulse
Caution and Pessimism Among Retailers Rise in Anticipation of Tougher Times Ahead
Amidhealthyeconomicgrowthandrecord- highemploymentratesthisyear,theRetail SalesIndex(RSI)excludingMotorVehicles grew3.9%overthecourseoftheyear. Notably,theRSIforDepartmentStore, WatchesandJewellery,andRecreational Goodshavedeclinedfromthestartofthe year,signifyingdecliningdiscretionary spending.Recentconsumerconfidence surveyshavealsodemonstratedincreased pessimismoverthethirdquarterof2011. Withslowereconomicgrowthof1to3% expectedin2012,theretailsectormaysee toughertimesinthecomingyear. SupplyconditionsalongOrchardRoad remainedrelativelystableascomparedto thelasttwoyears.However,approximately 240,000sqftofnetlettableretailarea fromtherefurbished268Orchardandthe redevelopedOrchardGateway(formerly HotelPhoenix/Specialists'ShoppingCentre andOrchardEmerald)isexpectedtobe completedin2013.
New Shopping Options for Residents in the East
ResidentsintheeasternregionofSingapore willhavenewshoppingoptionswiththe openingofChangiCityPointand112 KatonginDecember2011.Thesemallsadd approximately400,000sqftofnewretail spacetotheestimatedexistingsupplyof 3.3millionsqftintheeasternregion.112 Katongispositionedasapremiumlifestyle andF&Bhub,whileChangiCityPoint,which islocatedwithintheChangiBusinessPark, featuresamixofretail,servicesandlifestyle trades,includingaclusterofoutletconcept stores. Goingforward,thereisnomajorupcoming retailsupplyintheEastwiththeexception oftheapproximately40,000sqftnet lettableareaattheupcomingUEBizhub East,expectedtobecompletedby2012. Followingstablesupplyconditionsinthe next2yearsorso,rentalsandoccupancy intheeasternregionoftheislandcanbe expectedtobestableaswell.
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Consumer Sentiments
Another Year of Record Visitor Arrivals of 13.2 million in 2011
TheSingaporetourismindustryhad performedstronglyin2011,withtotalvisitor arrivalsforthewholeyearat13.2million. Thisexceededthe2010recordhighof11.6 millionarrivals,andachievedtheSingapore TourismBoard's(STB)forecastof12-13 million. PreliminaryTourismReceiptsalsoreached anewrecordhighof$22.2billion,meeting theforecastrangeof$22-$24billion. Year-on-yeargrowthwasseeninall RevenueComponents,withSightseeing &Entertainment(whichincludesgaming revenues)seeingthehighesty-o-ygrowth of37%. STBhadearliersetatargettoachieve17 milliontouristsby2015.Toattainthislevel, touristarrivalsmustgrowatanaverage CompoundedAnnualgrowthRate(CAGR) ofapproximately7.0%overthenext4years. Inthepast5years,CAGRofvisitorarrivals wasapproximately7.0%andwaslargely duetothestrongjumpintheyear-on-year growthofmorethan20%in2010following theopeningofthe2IntegratedResorts.
Chart1
Total Annual Tourist Arrivals
14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source:SingaporeTourismBoard
Chart2
Retail Expenditure by Tourists
35.00% 30.00% %ofTotalReceipts 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 %ofTotalTouristReceiptspentonShopping RetailExpenditure($) Sightseeing&Entertainment 5,000,000,000 0 15,000,000,000 10,000,000,000 25,000,000,000 20,000,000,000 Expenditure($)
2011 Retail Sales Hold Up Though Consumers Growing Cautious
Againstthebackdropofhealthyeconomy growthandemploymentratesin2011, theoverallretailsalesfortheyearheldup despitethenegativesentimentsinEurope andUnitedStates.ThelatestRetailSales Index(RSI),excludingMotorVehicles, whichmeasuresretailsalesvolume, grew3.9%overtheyear,withthelargest increasesseenintheTelecommunications
TotalTouristReceipt($)
Source:UrbanRedevelopmentAuthority,KnightFrankResearch
Apparatus&Computers(26.3%)and MedicalGoods&Toiletries(20.2%) categories.However,declineswere observedindiscretionaryspending categoriessuchasDepartmentStore, Watches&Jewellery,andRecreational Goods,signifyingdecliningdiscretionary spending.Movingforward,dampening sentimentscausedbyuncertaineconomic outlookcouldleadtoacutbackindomestic discretionaryexpenditure.
Goingforth,retailsalesmaybeless buoyantastheeconomyundergoesmore subduedgrowth.Cautionamongconsumers isincreasingandaccordingtoNielsen, consumerconfidenceinthethirdquarterof theyearslidtothelowestlevelintwoyears, pushingSingaporeoutofthetop10most confidentcountriesgloballyandwithinAsia Pacific.
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Oct-dec 2011/4th quarter
real estate highlights
4Q2011 Retail Occupancy
Islandwide Occupancy rates Improved 0.5% yearon-year
Averageislandwideretailoccupancyrates in2011improved0.5%againsttheprevious yeartoreacharecordhighat94.7%. Changeintheoccupancyratesy-o-youtside theCentralRegionaccountedofmostof theincrease,risingby1.0%,whileCentral Regionsawamarginalincreaseof0.2%. WithinCentralRegion,occupancyat OrchardandFringeareasdeclinedby 0.3%and0.9%y-o-yrespectively.Onthe contrary,occupancyratesatDowntown CoreandRestofCentralAreagrew3.9% and0.4%y-o-y.
4Q 2011 Retail Rents
Central Region Rentals Increased 2.57% in 2011
TheRetailRentalIndexforCentralRegion rose2.57%in2011.Rentalsgrew0.77% q-o-qinthefirsthalfof2011,andmoderated to0.5%q-o-qinthesecondhalfoftheyear. RentalsattheCentralandFringeAreas (collectivelyknownasCentralRegion)rose 2.51%y-o-yand4.32%y-o-yto122.5and 108.6respectively.Althoughrentalshave continuedtogrow,thepaceofrentalgrowth inbothareashassloweddown. WithnomajorupcomingsupplyinCentral Areainthenextfewyears,theperformance ofmallsintheseareaswilllargelydepend ondemandconditions,i.e.domesticretail expenditureandtourismreceipts.
Rentals of Orchard Road Prime Spaces Increased 3.0% Year-on-Year
Islandwideprimeretailrentsincreased approximately2.4%overtheyearfollowing newmarketentrantslookingtosetuptheir firststoresinprimeretailspaces,highretail spending,andstrongtouristarrivalsand expenditurethisyear. WhileprimeretailspacesinFringeareas performedwell,primerentalsintheMarina Centre,CityHallandBugisareasregistered afallof2.5%.Toremainrelevantandto competebetterwithupcomingnewermalls, SuntecCity,thelargestmallinthisarea, announcedits$410millionmakeover, scheduledtocommencein2012.The assetenhancementinitiativeisprojected tocompletein2015.Thisexerciseaimsto improvetheshoppingexperienceofthemall withaviewtooptimisereturns.
Potential Retail Supply
Overthenext2years,approximately2.5 millionsqftofnewlettableretailareawill becompleted,ofwhichthemajority(57.0%) willbelocatedoutsidetheCentralRegion, whiletheremainderwillbeinCityFringe (19.8%)andCentralRegion(23.2%)areas. Newlifestylehubswillbeaddedtothe heartlandsandatnewgrowthareaswhere theGovernmentisfocusingoninthefuture. Outofthetotalupcomingsupply,1.3million sqftofnewretailareaisinJurongGateway comprisingJCube(expectedcompletion in2012)JEM,BigBoxandCapitaland's 25-storeyretail-cum-officedevelopment in2013.Whilethismayleadtorental andvacancyconcernsinthearea,the developmentoftheJurongLakeDistrict overthenext10to15yearswillattractmore retailerstoestablishtheirpresenceatthis sideoftheisland,creatinghigherdemand forretailspace.
Chart3
Total Islandwide Demand and Supply
IslandwideSupply/Demand(`000sqft) 38,000.0 37,000.0 36,000.0 35,000.0 34,000.0 33,000.0 32,000.0 31,000.0 30,000.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 100.0% AverageAnnualOccupancy(%) 98.0% 96.0% 94.0% 92.0% 90.0% 88.0% 86.0% 84.0%
AverageAnnualOccupancy
IslandwideSupply
IslandwideDemand
Source:UrbanRedevelopmentAuthority,Realis,KnightFrankResearch
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Chart4
Potential Retail Floor Area by Year
1,800,000 1,600,000 NetFloorArea(sqft) 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 2012 2013 2014 2015
Chart5
Potential Retail Floor Area by Region from 2012 - 2015
Source:Realis,KnightFrankResearch
URA Retail Rental Index
140
Chart6
CityFridge 30.6% DowntownCore 4.8% Orchard&Restof CentralArea 12.7% OutsideCentralRegion (Suburbs) 51.9% Source:Realis,KnightFrankResearch
Indices(4Q98=100)
120
Market Outlook
100
80
3Q09
1Q10 CentralRegion
3Q10 CentralArea
1Q11 FringeArea
3Q11
Movingforward,theglobaleconomyis cloudedbyeconomicuncertainty.The Singaporegovernmenthasforecastedthat theSingaporeeconomywillgrowatmodest ratesofbetween1%and3%in2012. Intandemwiththesubduedeconomic forecastandplausiblecuttingbackof spendingbyconsumers,theretailproperty marketmayalsofaceaslowdowninrent escalationasretailersexpectsmallertakings andfacerisingoperationalcosts.Inaddition, newupcomingretaildevelopmentsslated forcompletioninthenextfewyearssetsthe stageforamorecompetitivelandscape. Barringasignificantshocktotheeconomy, weexpectrentalsisland-widetostay relativelyflatovertheyear.Nevertheless, well-positionedmallswhicharewell managedwillbetterweatheranydownturn.
Source:UrbanRedevelopmentAuthority,Realis,KnightFrankResearch
Table1
Knight Frank Monthly Gross Retail Rents for Prime Spaces in 4Q2011 4Q2011 Monthly Gross Rents for prime spaces* ( $/psf)
Islandwide Orchard(Central) Orchard(Fringe) MarinaCentre,CityHall,Bugis CityFringe Suburban
*
S$29.93 S$41.55 S$24.10 S$29.43 S$22.50 S$32.07
Basedonpre-definedportfolioofproperties;referstoprimespecialtyshopspaceon groundlevelwithgoodfrontageandofupto1,500sqft
Source:KnightFrankResearch
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Oct-dec 2011/4th quarter
real estate highlights
Office Property Market
4Q2011officemarketshowsearlysignsof inflectionwiththeofficemarketturningin favouroftenants.
Despite Moderation of Growth in Fourth Quarter, 2011's GDP Growth in line with Forecast
PersistentweaknessinUnitedStatesand Europedampenedoutputsacrossmost industriesinSingapore,henceresultingina moderatedGDPgrowthof3.6%in4Q2011. Year-on-yeargrowthformanufacturing, constructionandservicesectorsremained subduedat6.7%,1.7%and3.2% respectivelyascomparedto13.4%,0.5% and3.7%inthethirdquarter.Contraction ingrowthwasmostsignificantforthe manufacturingsectoraselectronicsdemand droppedandbiomedicalmanufacturing outputsexperiencedapull-backgrowthfrom lastquarter. Notwithstandingthis,theGDPgrowthfor thewholeyearof2011isstillinlinewith marketexpectationat4.8%.However,going forth,suchlevelofGDPgrowthin2012 maybeunlikelyfollowingthechallenges fromthelack-lustergrowthinUnitedStates andnegativedevelopmentsinEurope. Sub-pargrowthbetween1-3%isexpected forthenexttwoyearsandboththepublic andprivatesectorshaveindicatedlower businessexpectations,netprofitsand fewerhiresin2012.Thebroodingmarket sentimentsareexpectedtohaveanegative trickle-downeffectontheofficesector.
Softening Office Market
Unlikepreviousyears,whereofficesupply wasrelativelylimited,currentofficemarket isswingingtowardtenants'advantagein termsofmoreofficespacesoptions.Since 2009,theannualnewofficesupplyaverage toabout2.06millionsqft,whichisastark differencetothe10-yraverageannualnew supplyprior2009(from1998to2008)of 1.01millionsqft. Thoughtheislandwideoccupancyrate marginallyinchedupby0.4%in4Q2011to 88.7%,theofficemarketespeciallyinthe DowntownCoreAreaisstillabsorbingthe additionalnewsupplythatwasreleasedin thepastthreeyears.Asshowninthechart below,thetotalofficenewsupplyinthelast threeyears(2009to2011)amountstoabout 6.1millionsqft,however,newdemandhas beenlaggingwithonlyatotalof3.7million sqft. Notably,whilesomeofthenewoffice buildingssuchasOceanFinancialCentre andOUEBayfronthaveachievedrelatively highoccupancylevelclosetoorabove80%, suchoccupancylevelsarenotconsistently seenacrossothernewofficebuildings. Occupancylevelsforsomeofthesebuilding weremarkedlylower,rangingbetween30 to60%.Completionofthesenewoffice buildingsalsoresultedinaknockoneffect ontheolderbuildingsastheofficespace usersvacatetonewerbuildings. Thisshiftintheofficedynamicstowards officetenantsismademoreprominentby thewaningofficedemandresultingfrom thesofteningeconomicconditions.While demandfromsmallerofficespaceusers keptup,manybiggerofficespaceusers
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OfficeSpace(sqft)
adopteda"waitandsee"stanceand,some wereevennotedtosub-lettheirexcess officespacetostreamlinetheiroperation costs.Thoughtheemergenceofsuch shadowofficespaceisnotasrampantas 2008/2009,suchphenomenaislikelyto intensifythecurrentchallengesfacedby landlord.
Islandwide New Demand, New Supply (2009 to 2011)
3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 -500,000 2009 NewSupply(sqft) Source:UrbanRedevelopmentAuthority,KnightFrankResearch 2010 NewDemand(sqft) 2011
Chart1
Office Market Shows Early Signs of Inflection
Narrowingmarginalquarter-on-quarter growthinofficerents,emergenceofshadow spaceandgenerousrentsrebatefrom landlordsrevealearlysignsofinflection pointinofficemarket.BasedonURARental IndexofPrivateSectorOfficeSpacein CentralRegion,quarter-on-quarterchange inofficerentshavebeennarrowingsince3Q 2010from6%thentoamarginalgrowthof 0.3%in4Q2011. KnightFrank'sdatabaseshowsgreater downsidethisquarterasageneraldecrease inofficerentswasfeltacrosstheisland. Amongstthevariousgeographicalsectors, averageofficerentsforBeachRoadand OrchardRoadregisteredthegreatest quarter-on-quarterdropof2.4%and 1.7%;followedbySuntec/Marina/CityHall, RafflesPlace,andShentonWay/Robinson Road/TanjongPagarwithaquarter-onquarterdecreaseof0.9%,0.8%and0.7% respectively. ExpectationsforGradeA+officebuildings inRafflesPlacehavemoderatedasmonthly grossofficerentsdropped3.9%quarteron-quarterfrom$13.50persqftinprevious quartertoabout$13.00persqftin4Q2011. Astheofficependulumswingstofavour tenants,varyingincentives(depending
Chart2
URA Rental Index for Central Region
Q-o-QChangeinURARentalIndex ofPrivateSectorOfficeSpace inCentralRegion(%) URARentalIndexofPrivateSector OfficeSpaceinCentralRegion 250 200 150 100 50 0 15.0% 10.0% 5.0% 0.0% -5.0%
-10.0% -15.0%
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
URAOfficeRentalIndex (CentralRegion)
Q-o-QChangeinURAOfficeRentalIndex (CentralRegion)(%)
Source:UrbanRedevelopmentAuthority,KnightFrankResearch
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Oct-dec 2011/4th quarter
real estate highlights
ontheleasingstrategyfromthedifferent landlords)wereofferedtoattracttenants. Whilesomelandlordsloweredtheiroffice rentsexpectation,othershavekeptupwith higherrentallevelsbutprovidegenerous rentsrebatessuchassix-monthfreerents. Thesamehasbeenseenforthetraditional GradeAofficespacesinRafflesPlaceas averagemonthlygrossofficerentsdropped from$10.50to$10.25persqft.Someof theseolderofficebuildingswerenotedto lowertheirrentsby10to15%astheiroutgoingtenantsvacatetonewerneighbouring officebuildings. Suburbsofficerentsremainedthemost resilientduetotheattractivenessofoffice spacesintheWest(i.e.MapletreeBusiness CityandHarbourfrontTower).Similartothe CentralArea,officerentsintheNorthand Eastexperiencedaquarter-on-quarterdrop of2.3%and0.6%respectively,howeverthe averagesuburbsofficerentswasbolstered bya1.5%quarter-on-quartergrowthinthe West.OfficebuildingssuchasHarbourfront Tower1andTower2havebeengaining prominenceandattractingtenantstothe area.
Chart3
Effective Gross Office Rents
EffectiveGrossRents($psfpermonth) 20 18 16 14 12 10 8 6 4 2 0 4Q10 1Q11 2Q11 3Q11 4Q11
RafflesPlaceGradeA OrchardRoadGradeA Source:KnightFrankResearch
ShentonWay/RobinsonRoad/TanjongPagarGradeA SuburbanAreas Suntec/Marina/CityHallGradeA
Table1
Knight Frank Monthly Gross Office Rents in 4Q 2011
Location Effective Monthly Gross Rentals (psf)
CBD (Grade A) RafflesPlace Suntec/MarinaCentre/CityHall ShentonWay/RobinsonRoad OrchardRoad Non-CBD BeachRoad/MiddleRoad Suburban(North) Suburban(East) Suburban(West)
Source:KnightFrankResearch
S$10.25-S$13.00 S$8.90-S$10.20 S$7.60-S$8.10 S$9.00-S$10.20 S$6.90-S$7.50 S$6.90-S$7.40 S$4.70-S$5.20 S$6.50-S$7.00
Outlook
Theemergenceofshadowspace,generous rentsincentivesfromlandlordsanddropping officerentsseemtoindicateearlysigns ofinflectionpointfortheofficemarket. Whilst2012lookstobetestingforboth landlordsandtenants,landlordsmaysee greaterchallengesastheofficemarket turnsinfavouroftenants.Inviewofthe widerchoicesofofficespace,tenantsin generalaremorelikelytocommandgreater bargainingpower.Landlordsontheother handmayfacegreatercompetitionfrom theadditionalsupplyreleasedsince2009, upcomingnewsupplyofabout1.7millionsq ftin2012anddecliningofficedemand. WithabackdropofworseningEuroand USmarketconditioncoupledwiththe availableandupcomingnewofficesupply, officerentsareexpectedtoexperiencea
year-on-yeardropofupto15%.However, unlikethe2008/2009globalfinancialcrisis, theexpectedcorrectionislikelytobemore gradual.Nonetheless,suchcorrectionisstill largelypendingtheresolutionoftheEuro debtissueandrecoveryofUSeconomy. Anyquickrecoveryoroptimisminthese economiesislikelytoencouragegreater businessexpansionandimprovecurrent officemarketcondition.
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Industrial Property Market
Industrialpropertymarketremainsstable withhealthyoccupancyratesdespiteglobal uncertaintyandmoderategrowthinthe manufacturingsector.
Modest Economic Growth
2011hasbeenestimatedtoendwitha modestGDPgrowthof4.8%from2010. In4Q2011,althoughtherewasa3.6% increasefromtheprecedingyear,thiswasa 4.9%dropfrom3Q2011.Thismoderationof growthwascontributedbythemanufacturing sector.Acrossallmanufacturingclusters, adeclineingrowthfor2011wasobserved intwoareas;theelectronicsandgeneral manufacturingclusters.Stellarperformance inthebiomedicalclustersupportedthe electronicscluster'sdecline. InDecember2011,therewasa111.6% surgeinpharmaceuticaloutputinthe biomedicalclusterascomparedwithayear ago.Overthesameperiod,outputinthe electronicsclusterdeclinedby22.8%dueto weaknessinglobaldemand.
Sustained High Occupancy in the Industrial Sector
Whilethemanufacturingsectorsawmodest growthin2011,therealestatesectorhas remainedresilientwithallindustrialproperty typesperformingbetterthan2010.Overall occupancyoffactoryspaceremainedhigh at93.2%fortheentireyear.
Chart1
Demand and Supply of Factory Space (Private and Public Sectors)
16,000 FloorSpace(`000sqftnett) 14,000 OccupancyRate 12,000 10,000 8,000 6,000 4,000 2,000 0 2007 2008 2009 NewSupply 2010 OccupancyRate 2011 90.0% 92.0% 91.0% 94.0% 93.0% 95.0%
NewDemand
Source:UrbanRedevelopmentAuthority,KnightFrankResearch
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real estate highlights
Island-widesupplyofindustrialfactory spaceincreasedby6.5milsqft,ofwhich 55%wascontributedby35.5milsqftof newdevelopmentsintheWesternregionof Singapore.ThiswasfollowedbytheCentral regionwith11.7milsqftofnewfactory spacein2011.Alargeproportionofnew supplyintheWestwasfromSingleUser andMulti-Userfactoryspacewhilesupplyin theCentralregionstemmedfromMulti-User andBusinessParkspace. Onthedemandfront,atotalof7.4millionsq ftofindustrialfactoryspacewastaken-up in2011.Warehousespacealsoretaineda healthyoccupancyratewith94.3%in2011. Thewesternregionremainspopularwith some2.9millionsqftofadditionalspace beingoccupied. OccupancyofBusinessParkspace improvedfrom2010toachieve82.8%in 2011.Overall,BusinessParkssaw1.25 millionsqftnewtakeupofspace.Ofthis, 645,800sqftwasfromtheCentralregion makingup52%ofthetotalfor2011. In4Q2011,11conventionalfactory developmentsweregrantedTemporary OccupationPermits(TOPstatuses),of whichsevenoftheseweresingle-user developments.DevelopedbySingapore RefiningCompanyPteLtd,1MerlimauRoad comprising234,000sqftofconventional factoryspace,wasthelargestSingleUser developmentfor4Q2011. Thelargestmulti-userfactorydevelopment completedin4Q2011wasWestPark BizcentraldevelopedbytheSoilbuildGroup Holdings.LocatedatPioneerCrescent,the propertyhasagrossfloorareaof1.4milsq ftwhichcomprisesofasixstoreystack-up factoryandan11storeyflattedfactory.
Chart2
2011 New Supply of Factory Space (Private and Public Sector)
2,500 2,000 NewSupply(`000sqft) 1,500 1,000 500 0 -500 -1,000 Central East North West North-East SingleUser MultiUser BusinessPark Warehouse
Source:UrbanRedevelopmentAuthority,KnightFrankResearch
Industrial Rental and Price Index
9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 4Q10 1Q11 2Q11 3Q11 RentalIndexq-o-qchange 4Q11
Chart3
PriceIndexq-o-qchange Source:UrbanRedevelopmentAuthority,KnightFrankResearch
Rental Stabilization and Price Growth
Conventionalfactoryspacerentsremained flatwithamarginal0.4%quarter-on-quarter (q-o-q)increasefrom3Q2011basedonthe IndustrialRentalIndex.Onayearonyear (y-o-y)basis,rentsin2011grewby15.5% from2010.
Onthebuyingfront,demandremained healthywiththeIndustrialPriceIndex achievingaq-o-qgrowthof4%and27.2% y-o-ygrowth.388stratatitledproperties exchangedhandsin4Q2011downfrom497 transactionsin3Q2011.Geylang,Clementi andBishanplanningareaswerethemost popularareasthisquarterwith95,75and44 stratatransactionsrespectively.Collectively, theymadeup55%ofstratatransactionsfor thequarter.
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Table1
Rentals of Sample Factory/Warehouse and Business Park Space in 4Q2011 Locality Monthly Gross Rentals (Upper Floor, $psf) Capital Values (psf)
Conventional Industrial Space MacPherson KakiBukit-Ubi PayaLebar BukitMerah Serangoon-AngMoKio Clementi-BukitBatok Woodlands-Admiralty High-tech Factory Space Islandwide Business Park Space Islandwide
Source:KnightFrankResearch
S$1.68S$2.02 S$1.69S$2.14 S$2.05S$2.50 S$1.95S$2.33 S$1.60S$2.19 S$1.69S$2.34 S$1.23S$1.45
S$389S$980 (Freehold) S$172S$624 (60-yearleasehold) S$585S$664 (Freehold) S$550S$873 (Freehold) S$205S$494 (60-yearleasehold) S$190S$524 (60-yearleasehold) S$125S$358 (60-yearleasehold) N.A. N.A.
Onthesupplyside,fourindustrial governmentlandsalesites,whichincludes twoBusiness1sitesatGambasAvenueand KallangAvenueandtwoBusiness2sitesat SoonLeeStreetandKakiBuki,weresold TheBusiness1siteswereawardedatlevels between$136to$238psfperplotratio, ofwhichtheparcelatKallangAvenuewas awardedatahigherpriceduetoitsmore prominentlocationandtheBusiness2sites wereawardedatlevelsbetween$114to $118psfperplotratioasshowninthetable below:. Ascomparedtofirsthalfof2011,responses forindustrialsitesarerathertepid.While asiteatKakiBukitRoad4thatawarded inFeb2011at$157psfperplotratiodrew 18bidders,anadjacentsitewhichwas releasedin4Q2011,onlydrewonly9 biddersandawardedat$118psfperplot ratio. Intheprivatesector,AscendasRealEstate InvestmentTrustpurchased2properties; 2CorporationPlaceand3Changi BusinessParkVistafor$99miland$80 milrespectively.SabanaREIThadalso purchasedNo.6WoodlandsLoopfor$14.8 mil.
S$3.06S$3.53 S$4.00S$4.49
Table2
Awarded Industrial GLS Sites in 4Q2011 Location (Allowable Development) Site Area `sq ft (Plot Ratio) Max. GFA `sq ft Tender Award Total No. of Bids
LavenderSt/KallangAve (Business1White) GambasAve/GambasCres (Business1) SoonLeeST (Business2) KakiBukitRoad4 (Business2)
305,135 (3.0) 231,000 (2.5) 211,000 (2.0) 279,000 (2.0)
915,000 577,000 422,000 559,000
$218.3mil PLC8DevelopmentPteLtd $78.2mil HLSDevelopmentPteLtd $48.1mil KNGGroupPteLtd $660.0mil NSSPropertiesPteLtd
6 5 3 9
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Oct-dec 2011/4th quarter
real estate highlights
Additional Conditions for Government Land Sale (GLS) Sites
Fastrisingindustrialpricesobservedover thepastyearhavebeenattributedto investorsthathaveshiftedtheirinterestfrom residentialpropertiesinlightofadditional stampduties.Therehasalsobeenatrend ofshoeboxindustrialdevelopmentswith smallishstrataunits(sizeslessthan1,600 sqft).Thisresultedinrisingbusinesscost fortrueblueindustrialistsanddevelopments thatdonotnecessarilycatertotheirneeds. Assuch,theMinistryofTradeandIndustry (MTI)hasplacednewconditionson industrialGLS(IGLS)sitesfrom1H2012 onwards. Atotalof16industrialsiteshavebeen placedintheconfirmedlistandanother12 inthereservelistfor1H2012.Ofthe28 sites,23ofthesearezonedBusiness2 and18ofthemhaveatenureof19years. Historically,IGLSsiteshavecommonly beenawardedwith30to60yearstenure. Comparatively,theserelativelyshortlease sitesof19yearsaretargetedatend-user developers.Theirsiteareasrangefrom 32,300sqftto108,700sqft. Inadditiontothis,allstrataunitsmusthave aminimumgrossfloorareaof1,600sq ft(150sqm).Forselectedsites(typically thosenearMRTstations),subdivisioninto strataunitsarepermittedonlyafter10years. Technicalprovisionsofelectricalprovision, floorloading,floortoceilingheightand GoodsLiftandLoadingBayhavealsobeen specified. Thenewregulationsaimtoslowdownrising businesscostsfromtheconsumptionof industrialspaceandensurefutureindustrial developmentsarecateredtotheneedsof enduserindustrialistsratherthaninvestors.
Outlook
MTIestimatedGDPgrowthfor2012at1 to3percent.Thisisinlightoffinancial volatilitystemmingfromtheEuropeandebt crisisandeconomicslowdowninadvanced economies.Whilegrowthisexpectedinthe biomedicalcluster,theexternaloriented electronicsclusterislikelytoexperience slowgrowth. Assuch,industrialbusinessesarelikely toconsiderconsolidationofspacerather thanexpansions.Leasingactivitywillbe focusedonrenewalsratherthanexpansion. Thus,growthinindustrialrentsisexpected toremainmarginalinthecomingquarter. HighSpecandBusinessParkbuildingsare athigherriskastheirtenantshavegreater internationalexposure. Whilenewconditionshavebeeninplace toregulatefutureindustrialdevelopments, thereareseveraldevelopmentswith smallishstrataunitsthathavebeen approvedpreviouslyandarecurrentlyunder construction.Capitalvaluesareexpectedto bestableinthecomingyearwithupcoming IGLSsitesexpectedtoattractmoreenduser developers.
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Investment sales Property Market
Totalinvestmentsalesvaluefor2011 increased13.06%year-on-year(y-o-y)to $25.08billion.Publicsectoraccountedfor 52%ofthesalesor$13.14billion,28.9%y-o-y increasewhileprivatesectorsawmarginal increaseof2%y-o-y.
Total Investment Sales
2011wasaturbulentyearfortheglobal economy.Thishadaknockoneffecton thelocaleconomywhereeconomicgrowth sloweddown.Despitetheuncertainty,total investmentsalesincreasedby13.06%ona yearlybasis,totallingto$25.08billion.This ismoderatetomassivey-o-yincreasein 2010whichwasinexcessof200%. Withthecoolingmeasuresimposedonto theresidentialsectoron13thJanuary2011, investoranddeveloper/investorinterestwas generallydivertedtothecommercialand industrialsectorsfortherestofyear.The starperformeroftheyearwastheindustrial sector,particularlyingovernmentlandsale sites.Meanwhile,activityinthehotelsector wassupportedbythegrowthinthetourism industry.Onayearlybasis,theproportion oftransactionsbyvalueandnumberof transactionsforthenon-residentialsectors increased.However,itisnottosaythatthe residentialsectordidnotperform.Despite fewerandsmallerresidentialsitesbeing transacted,someplumresidentialsiteswere highlycontested.Thegeneraltrendforthe yearwasthatmoreactivitywasfocused in1H2011-investmentsaletransactional valuedecreasedin2H2011by29.30%.
Chart1
Total Investment Sales
TotalValueofInvestmentSales(Billions) $30 $25 $20 $15 $10 $5 $0 2008 Residential Source:KnightFrankResearch 2009 Commercial Industrial 2010 Mixed Hotel 2011 Others
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real estate highlights
Public Sector Investment Sale Still Healthy
Totalvalueinvestmentsalesinthepublic sectorincreasedby28.91%y-o-yto$13.14 billion.Onahalfyearlybasis,totalvalue transacteddecreasedby30.60%.Although moresitesweresoldin2H2011,the totalvalueofsitestransactedin1H2011 exceededthatof2H2011.Thisboostwas contributedbythehighvaluedJTCTranches ofindustrialpropertiesandmixedusesite soldin2H2011. Duringtheyear,severalsitesintheOCR werereleasedandwellabsorbedinthe market.Thesesitesgenerallyperformed wellasthissegmentofthemarketis supportedbygenuinelocalhomebuyers. Therefore,landvaluesofsitesintheOCR haveheldgenerallyup.Althoughthenonresidentialsectorssawlargerincreasesin totalvaluetransactedandtheirmarketshare ofactivitygrewmarginally,theresidential sectorhaditsfairshareofhype.The residentialsectorrecordedacollective32 transactionsin2011.Despitethefirstround ofcoolingmeasuresfortheyearon13th January2011,somewelllocatedand/or largesitespulledinhightopbidsofabove $400million-BishanStreet14,Bendemeer RoadandBartleyRoad.In2H2011, notabletransactionsincludeacondominium siteonAlexandraRoadandtwolanded residentialsites.TheAlexandraRoadsite pulledinatopbidof$396million($754 psfppr)exceedinganalysts'expectations. Meanwhile,thetwolandedresidentialsites onSerangoonGardenWayandChestnut
Chart2
Public Property Investment Sales
TotalValueofInvestmentSales(Billions) $8 $7 $6 $5 $4 $3 $2 $1 $0 1H10 Residential Source:KnightFrankResearch 2H10 Commercial Industrial 1H11 Mixed Hotel 2H11 Others
Avenue/AlmondAvenuewerewellreceived morethan10bidderseach.Thesesites garneredstronginterestasthissubsector islessaffectedbytherigorousgovernment coolingmeasureswhichhavealarger impactonnon-landedsiteswhichforeigners andspeculatorstypicallyandareableto investin. Despitetheslowdowninthemanufacturing industryin2011,theindustrialsectorstill performedexceptionally.Theoptimismin theindustrialsectorpartlystemmedfrom thediversionofinvestorinterestintostrata industrialpropertiesfromtheresidential sector,thuscausingdeveloperstobidhighly forindustrialplotsofland.Momentumfor industrialplotspickedupstronglyin1H 2011continuedwellinto2H2011.1H2011 sawthesaleofsitesoldatmorethan$300 psfpprwhichisequaltothatofsomeOCR residentialsites.
In2H2011,thetotalvaluetransactedin theindustrialsectorwasfurtherboosted bythedivestmentoftwoJTCtranches totallingto$688.63million.Theclustersof industrialpropertiesscatteredinareassuch asKallang,Ubi,ChaiChee,TaiSengand KolamAyerweretakenupbyMapletree IndustrialTrustandSoibuildGroupHoldings Limited. Thecommercialandhotelsectors performedwell.Table1belowindicatesthe sitessold.2011sawthesaleofcommercial andhotelsitesarelocatedincentraland/ orstrategiclocationstotouristspots,thus attractingstronginterestfromdevelopers/ investors.Formixedusesites,thetotal valueofmixedusesitestransactedin2011 decreasedcomparedto2010asthere weremoretransactions.Nonetheless,the performanceofmixedusesitesfor2011 wasstillhealthyas2011sawthesaleof somewelllocatedsuburbansiteswitha goodresidentialcatchment.
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Table1
Commercial, Hotel and Mixed Use Site Transactions
Sector Half Site Top Bid (Million) Top Bid (psf/ppr) Top Bidders
Commercial H1 PayaLebarRoad/ EunosRoad8 RobinsonRoad/ CecilStreet MountbattenRoad GopengStreet/ PeckSeahStreet OgilvyCentre RobertsonQuay (HotelParcel) JalanBukitMerah/ AlexandraRoad PunggolCentral/ PunggolWalk HillviewAvenue BoonLayWay JelebuRoad/ PetirRoad $585.59 $872 SiongFengDevelopmentPrivateLimited, Guthrie(PLC)PrivateLimitedand SunVentureCommercialPrivateLimited FarEastOrganisation PrivateInvestor-ChenChewYen FarEastOrganization RoyalBrothersGroup CityDevelopmentsLimited CELDevelopmentPrivateLimited
H2 H2 Hotel H1 H1 H1 H2 Mixed Use H1 H1 H1 H2
$311.78 $15.01 $194.77 $86.00 $127.76 $189.00
$882 $119 $932 $1,072 $938 $789
$1,021.00 $289.78 $969.00 $492.88
$753 $673 $1,012 $805
FraserCentrepoint,FarEastOrganisationand SekisuiHouse TuasTechnologyParkPrivateLimited CapitalMallsAsia SimLianLandPteLtdandSimLian DevelopmentPteLtd
Source:KnightFrankResearch
TotalValueofInvestmentSales(Billions)
Slow Down in Private Investment Sales
Comparedto2010,privateinvestment salesin2011increasedbyamarginal 2.00%.Similartothepublicsector,private investmentsalesin2H2011droppedby 59.36%reflectingstrongeractivityin1H 2011.Onayearlybasis,transactionalvalue activitydecreasedacrossallsectorsexcept thecommercial,mixedusedsectorsand otherscategory,whichinthiscaseinvolved ahospital.Meanwhile,onahalfyearly basis,activitydecreasedacrossallsectors.
Chart3
Private Property Investment Sales
$10 $9 $8 $7 $6 $5 $4 $3 $2 $1 $0 1H10 Residential Source:KnightFrankResearch 2H10 Commercial Industrial 1H11 Mixed Hotel 2H11 Others
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Oct-dec 2011/4th quarter
real estate highlights
Theseveralroundsofgovernmentcooling measureshaveprogressivelyreduced theattractivenessofresidentialunits asaninvestmenttoforeignbuyerswho traditionallylikedtoinvestintheprime districts9,10and11.Meanwhile,cashrich privateinvestorsandfundshavealsoshied awayfrombulkpurchasesofresidential units.Thishasinturn,significantly dampenedtheactivityofcollectivesales andbulkpurchaseswhichisthekeydriver totheprivateresidentialsalesmarket. Similarto2010,collectivesalesiteswhich weresuccessfullysoldduringtheyearwere confinedtoasmalltomediumsizeprice quantum.Unlikethepublicsectorresidential sites,thepriciestcollectivesalesitedidnot breachapricetagof$200million.However, therewereanumberofnotabletransactions inexcessof$150millionsuchasHenry Park,St.Patrick'sGarden,HongLeong Garden,AmberTowersandWhitleyHeights. Despitetheuncertaintyintheglobal economyandslowdowninthelocal economy,thecommercialsectorperformed consistentlyfortheyeartotallingto$6.62 billionandreflectinganannualgrowthof 21.80%in2011.AmidsttheUSdebtceiling crisisandongoingeurozonecrisis,the performancein2H2011remainedstrong reflectingahalfyearlymarginalincrease of0.36%.Nonetheless,2011sawthesale ofseveralcentrallylocatedofficebuildings andsomeretailproperties.Thebuyers includedowneroccupiersandREITplayers, investmentfundsandwealthyindividuals/ familieslookingforyieldaccretive properties.
Table2
Commercial Sector Transactions above $100 million
Half Property Address Price (million) Purchaser
H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H2
CapitalSquare PSABuilding BankofAmerica MerrillLynch Illuma OneFinlaysonGreen Pomo FormerHBRobinson AnsonHouse Singapore TechnologiesBuilding PrudentialTower (Levels26to29) OceanFinancial Centre(87.5%) LippoBuildingand CommercePoint Chijmes RCLCentre BedokPoint MidlinkPlaza UpperPickeringStreet (OfficeComponent)
21ChurchStreet 460AlexandraRoad 2HarbourfrontPlace 201VictoriaStreet 1FinlaysonGreen 1SelegieRoad 112RobinsonRoad 72AnsonRoad 3LimTeckKimRoad 30CecilStreet 10CollyerQuay
$889.00 $401.40 $311.00 $295.00 $227.00 $225.00 $168.00 $148.00 $146.00 $125.10 $2,010.00 IncludingRental IncomeSupport $283.00 $177.00 $175.00 $127.00 $126.80 $127.20
AlphaInvestmentPartnersandNTUCIncome MapletreeCommercialTrust MapletreeCommercialTrust CapitaMallTrust KerisvalePteLtd(BritishVirginIslandsvehicle) CLSACapitalPartners GraceGlobal(HighNetWorthFamily) PropertyFundmanagedbyINGRealEstate GentingGroup K-REIT K-REIT
H2 H2 H2 H2 H2 H2
1and3PhillipStreet 30VictoriaStreet 11KeppelRoad 799NewUpper ChangiRoad 122MiddleRoad UpperPickering Street
RoyalBrothersGroup PRE8Investments(includesPuaSeckGuan's PerennialRealEstategroupandOSIMbossRonSim) PrivateIndonesianInvestor FraserCentrepointTrust LianBengGroupLimited GovernmentofSingapore
Source:KnightFrankResearch *Pricepsf/strataarea
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Intermsofthemixeduseproperties,this yearsawthesaleofalargeamalgamated mixedusesite-LionCityHotel&Hollywood TheatreSitefor$313million.Meanwhile, therewasthesaleofAdamRoadHospital (Otherscategory)for$33million. Thetotalvaluetransactedforhotelsand industrialdecreasedby24.16%and36.55% y-o-y,respectively.Transactionalactivity andthepricequantumofpropertiessold decereased.Thehotelpropertiessoldwere scatteredinlocationssuchasClarkeQuay, RobertsonQuay,NovenaandChangi. However,sometransactionssuchasthe saleofParkRegisandCrownPlazaChangi Hotelgrabbedheadlineattentionasthe priceperturnkeywascloseto$1million. Theindustrialsectorsawthebulkof acquisitionsbyREITSsuchasCache LogisticsTrust,CambridgeIndustrial Trust,AscendasREIT,AIMSAMPCapital IndustrialREITandSabanaREIT.Whilst therewereahandfulofprivateinvestorsand owneroccupiers.Belowisatablewiththe largertransactionsthattookplace.
Government Land Sales Programme 1H 2012
TheGLSprogramme1H2012has41sites available.Theestimatedyieldofresidential units,commercialspaceandnumberof hotelroomsfor1H2012areasshowninthe followingtable,whichislessthanwasmade availableintheGLS2H2011Programme (refertolastrow). Althoughtheestimatedyieldofresidential units,commercialspaceandnumberof hotelroomsfor1H2012islessthanthatof 2H2011,theamountofsupplyisconsidered healthycomparedtopreviousyearswhere thegovernmentwaslessaggressive inpushingoutsupplyintothemarket. AccordingtotheURA,thelatestGLS programmehastakenintoconsideration variousfactorssuchasthenewcooling measuresimposedonthe7thDecember 2011,currentsupplyinthepipelineand existingmarketconditionsarisingoutofthe economyandsoforth.
Weunderstandthatthegovernmenthas madeitaprioritytomeettheneedsof genuinelocalhomebuyers.Thus,many oftheresidentialsitesarelocatedinthe OutsideCentralRegionandRestofCentral Regionwhereaffordablehousingistypically built.Thisworkshandinhandwiththelatest coolingmeasureswhichinhibitsforeign buyersfrominvestinginsuchpropertiesto preventaspeculativerunupinprices. Landforcommercialbuildingsandhotels haveallbeenplacedundertheReserveList. Thesupplyputoutforcommercialspaces hasbeenmoderaterelativetotheresidential supplyofland.Thisisinlightoftheparcels whichweresoldin2010and2011and slowdownineconomicgrowth.Notable parcelsarethesitesownedbyM+SPrivate LimitedinMarinaBayandOphirRoad/ RochorRoad,PayaLebar/EunosRoad8 andtwositesinJurongGateway.Similar to2H2011,allthehotelsiteswereparked undertheReserveList.Combinedwiththe remainingreservelisthotelsitesandtwo newsites,thereisatotalof8hotelsites yieldingmorehotelroomscomparedtolast
Table3
Industrial Sector Transactions
Half Property Address Price (million) Purchaser
H1 H1 H1 H1 H1 H1 H1 H2 H2 H2 H2
Neuros&Immunos HendersonIndustrialBuilding NorthTech MandaiEstate UEPrintMediaHub PetersPolyethyleneIndustries HoeLeong NordicEuropeanCentre 3ChangiBusinessParkVista 3AJooKoonCircle 2TohTuckLink
8&8ABiomedicalGrove 201HendersonRoad 29WoodlandIndustrialParkE1 WoodlandsRoad 61TaiSengAvenue 60TuasSouthStreet1 4&6ClementiLoop 3InternationalBusinessPark 3ChangiBusinessParkVista 3AJooKoonCircle 2TohTuckLink
$125.60 $99.30 $72.00 $67.00 $51.00 $47.50 $40.00 $121.55 $80.00 $40.20 $39.80
AscendasREIT YiKaiandFissionGroup AIMSAMPCapitalIndustrialREIT LianBengGroupLimited CrescendasGroup CambridgeIndustrialTrust CambridgeIndustrialTrust AscendasREIT AscendasREIT SabanaREIT SabanaREIT
Source:KnightFrankResearch
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real estate highlights
Table4
GLS Programme 1H 2012
List Residential Commercial Commercial & Residential White Site Hotel Yield
2011 Totalfor 1H2011 Totalfor 2H2011 2012 Confirmed Reserve 14 (including5ECsites) 15 (including1ECsites) 29 (including6ECsites) 0 2 0 0 0 2 0 8 i) 7,020residentialunits i) 7,120residentialunits ii) 218,120smcommercialspace iii) 4,750hotelrooms iv) 14,140residentialunits v) 218,120smcommercialspace vi) 4,750hotelrooms 28 (including4ECsites) 29 (including4ECsites) 5 2 1 8 i) 14,310residentialunits ii) 317,860smcommercialspace iii) 3,375hotelrooms i) 14,195residentialunits ii) 279,640smcommercialspace iii) 3,750hotelrooms
4
1
2
7
Totalfor 1H2012
2
0
2
8
Source:UrbanRedevelopmentAuthority
half.Mostofthesitesarelocatedstrategic locationswithintheCentralRegion,except forone.ThissiteislocatedinJurongEast whichthegovernmenthasplanstocreate asaregionalhubintheWesternRegionof theisland.
4.8%in2011.Thus,wethinkoverallgrowth weexpectfortheinvestmentsalemarketto bestabletomoderate.Thenon-residential sectorswillgenerallyremainsubdueddue totheeurozonecrisis,whilstweexpect activitiesintheresidentialsectortobe mostlydrivenbydomesticdemand. Theoutlookforthevarioussectorsis outlinedbelow.
Outlook
Weexpecttheperformanceofthevarious sectorsbetweenthepublicandprivate segmentstobepolarised.Eachsector isdrivenbysectorspecificfactorsasthe demandandsupplyforeachsectorcomes fromvaryingdrivers/sourcesandpolicies imposedbythegovernment.Nonetheless,a keyfactorwhichwillaffectallthesectorsis theGDPgrowthfor2012.Thegovernment expectsGDPgrowthtoslowdownto1% to3%for2012,comparedtoanestimated
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Table5
Outlook for Various Sectors
Sector Residential Public Investment Sales Moderate to Positive Outlook Private Investment Sales Subdued Outlook
· · ·
Demandwillcontinuetobedrivenbydomesticfirst timehomebuyers. Amplehousingsupplyfromupcominglaunchesand GLSprogrammewillkeeppricesfromrocketing. Westillexpecttoseestronginterestforwelllocated sites(closetoMRTstations)anduniquesitessuch aslandedhousingsites.
·
Weexpectactivitiesinthissectortotakeabighit duetosubduedbuyinginterestarisingfromthelatest ABSD Wethinkanyactivitywillbeconfinedtowell-located sites,withfreeholdtenureandmanageableprice quantum(below$200million).
·
Commercial Office
Stable to Moderate Outlook
Stable to Moderate Outlook
· ·
TheGLSprogrammefor1H2012hastwo commercialandtwowhitesitesontheReserveList.
·
Highcapitalvaluesachievedduring2011and softeninginofficerentshascompressedrentalyields. Strongeconomicfundamentalswillcontinueto supportpurchasesbyowneroccupiersorlong-term investors
Someofthesesiteshavestrongcompetingsupplyin · thepipelineand/oraretechnicallychallenging.Thus, wedonotforeseestronginterestforthesesites,if any.
Commercial Retail
Subdued Outlook
Subdued Outlook
·
CPIinflationisexpectedtobeintherangeof2.5% to3.5%for2012.Wethinkspendingwillbedriven byneedsratherthanluxurysplurges.
·
Retailrentshavestabilisedoverthelasttwoquarters andwedonotseealargeupsideinthecoming monthsduetotheglobaluncertainty. Thus,weexpecttransactionalactivityandsalesof largecommercialretailmalls(excludingstrataretail spaces)tobeslow.
·
ThecommercialandwhitesitesontheGLS · Programme1H2012ReserveListarelocated outsideoftheOrchardshoppingbelt.Thus,we expectthesesitestobedirectedmoreforofficeuses withminimalretailspace.
Hotel
Moderate Outlook
Stable Outlook
·
Singaporetourismisexpectedtoremainhealthy despitetheglobaleconomicslowdown,benefiting fromthetwointegratedresorts,GardensbytheBay, andgoodinfrastructureforMICEevents Weexpectactivitiestoslowdownandtotalvalue transactedtodecreaseastheeighthotelsonthe GLSReservelistarenotincentralregion.
·
Withaggressivepricesachievedin2011coupled withtheslowdownintheglobalandlocaleconomy, weexpectinvestorstobecautiousmovingforward.
·
Industrial
Moderate Outlook
Relatively Quiet Outlook
·
Industrialsitesin1H2012GLSareofsmallersizes · andshortertenures,cateringtosmallindustrialists withconcernsoverincreasingoperationcosts.Thus, weforeseetransactionalactivitytoincreasebut transactionalvaluetoslowdown. However,weexpectlessinterestforthesesitesdue torulesonthestratificationofindustrialspacefor specificsites.
REITsarecontinuouslylookingtoexpandtheir portfolios.However,capitalvaluesforprivate industrialpropertieshaveandcompressedindustrial rentalyields.Weforeseeactivitytoslowdown.
·
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Oct-dec 2011/4th quarter
real estate highlights
auction Property Market
Totalnumberofpropertiesin2011putup forauctiondecreasedby21.37%to504. Inlinewiththeslowdownofboththeglobal andlocaleconomyandfewerpropertiesbeing auctioned,thetotalvalueofpropertiessold decreasedby53%to$95.93million.
Total Number of Properties Put Up for Auction
Theplethoraofeventsin2011,suchasUS debtcrisis,ongoingeurozonecrisisandthe governmentcoolingmeasures,dampened marketsentimentsintheauctionssector. Forthewholeyearof2011,totalnumberof propertiesputupforauctiondecreasedby 21.37%to504. Duetothesofteningofeconomyinthe secondhalfofthisyearandthehungry ghostfestivalandyear-endholidayseason, numberofpropertiesputupforauctionin 2H2011decreasedby25%from1H2011. Intermsofthesplitbetweenmortgageeand ownersales,thetrendofmoreownersales beingputupforauctionhascontinuedwell into2011asshownintheChartbelow.
Chart1
Total Number of Properties Put Up for Auction
3,000 NoofPropertiesPutUpforAuction 2,500 2,000 1,500 1,000 500 0 2006 2007 1H Source:KnightFrankResearch 2008 2009 2H 2010 2011
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Chart2
Percentage Share of Mortgagee and Owner Sales Put Up for Auctions
%ShareofPropertiesputupforAuction byVolume 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2006 2007 2008 2009 2010 Owner'sSale 2011
propertiesupforauction,approximately 22%arelandedproperties.Theresidential propertiessuccessfullysoldweretypically locatedinareassuchasDistrict9,East Coast,Sentosa,HarbourviewandBukit Timah.
Decrease in Activity in the Office Sector, Shops and Shop Houses
Activityredirectedslightlyintothe commercialsectorsarisingfromthecooling measuresimposedontheresidentialsector. In2011,movementintheofficesectorwas moreconcentratedintheprivatetreaty market,wheretradingvolumeandtotal valuetransactedincreasedsignificantly, siphoningactivityawayfromtheauctions market.Thus,therewasa24%decreasein officepropertiesputupforauctionandonly onesuccessfulsale.Thetotalvalueofoffice propertiessolddecreasedsignificantlyby 92%. Suchtrendisalsonotedinthestratashop sectoraswell.Shophouseshaveseena runupinprices,particularly,conservation shophousesduetothescarcity.Therefore, thecollectivenumberofshopsand shophousesputupforauctionsin2011 decreased.Thetotalvalueofproperties soldalsodecreasedby39%.Despitethe decreaseinactivity,someconservation
Mortgagee'sSale Source:KnightFrankResearch
Types of Properties Put up for Auction
Notwithstandingthetwocoolingmeasures imposedduring2011,theresidentialsector maintaineditsmarketshareasthestar performerintheauctionsmarketintermsof numberofpropertiesputupforauctionand sold.
Subdued Residential Sector
Inlightoftheresidentialcoolingmeasures, thenumberofresidentialpropertiesput upforauctionsdroppedby22%to300 residentialproperties.Inaddition,totalvalue ofresidentialpropertiessuccessfullysoldat auctionsalsodecreasedsignificantlyby60% from$107.31millionto$31.27million. Mostoftheresidentialpropertiesputupfor auctionswereeitherintheprimedistricts of9,10and11,areasclosetotheCentral BusinessDistrict(CBD);districts1and2 orsuburbanareassuchasSentosa,Bukit TimahandEastCoast.Amongstthese
Table1
Office, Shops and Shophouse Auctions
Time No. of Office Properties Auctioned Value of Office Properties Sold (million) No.of Shops & Shophouse Properties Auctioned Value of Shops & Shophouse Properties Sold (million)
2010 2011 Year-on-year Change
38 29 -24%
$18.19 $1.40 -92%
93 71 -24%
$66.47 $40.56 -39%
Source:KnightFrankResearch
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Oct-dec 2011/4th quarter
real estate highlights
shophousesthetraditionalareassuchas Chinatown,EastCoastandLittleIndiawere sought-afterandsoldatrelativelyattractive prices.Ahandfulofstratashopsunitsin placeswithcentrallylocatedestablished mallswithhighfootfallandhealthyrental yields,suchasGoldenMileComplexand ConcordeShoppingCentrewerealsosold.
Table2
Industrial Properties Auction
Time Number of Industrial Properties Auctioned Value of Industrial Properties Sold (million)*
2010 2011 Change
Source:KnightFrankResearch *Estimated
102 84 -18%
$9.5 $9.2 -3%
Diversion into Industrial Sector
Thenumberofindustrialpropertiesput upforauctionthisyeardippedby18%to 84properties.However,thetotalvalueof propertiessuccessfullysoldin2011almost equalledtothatof2010.Duetothecooling measuresontheresidentialsector,some investorsbeganbuyingintostrataindustrial propertieswithanaffordablepricequantum andgoodrentalyields. SuccessfullysoldIndustrialpropertieswere locatedincentralindustrialclusterssuchas Eunos,UbiandMacpherson,whilstothers wereinareaslikeTagore,Admiraltyand Woodlands.
Table3
HDB Shops and Shop Houses Auctions
Time Number of HDB Shops & HDB Shop House Properties Auctioned Value of HDB Shops & HDB Shop House Properties Sold (million)
2010 2011 Change
Source:KnightFrankResearch
22 21 -5%
$3.58 $7.63 113%
HDB Shops and Shop Houses Holds
Inthesecondhalfoftheyear,HDBshops andshophousesgarneredsomeattention inthemediawheresixcoffeeshopsinHDB estatesweresoldforacollectivesumof$60 million.HDBshopsandshophousesare generallyperceivedasanalternativeasset classwithgoodrentalyields.In2011,HDB shopsandshophousesdisplayeddecent performance.Whilethenumberofproperties putupforauctionwassimilartothatin 2010,thetotalnumberofpropertiessoldin 2011wasgreateramountingtoatotalvalue of$7.63million.
TheHDBshopsandshophouses transactedduring2011wereeitherlocated inacentralpartofSingapore(Tanjong PagarPlaza)orlocatedinacentrallocation withinthesuburbanlocality(Clementiand JurongWest)wherethereishighfootfall, henceresultinginrelativelyhighrentals. Therefore,thevaluesoftheseproperties werehighandpushedupthetotalvalueof propertiessold.
by53%to$95.93million.Thetotalvalue ofpropertiessoldacrossallthesectors decreasedexceptfortheIndustrialsector andHDBshopsandshophousessector. Otherfactorscontributingtothedecrease includecautiousinvestorsentimentandthe highbasefromthebumperperformancein 2010.Despitethedropinthetotalvalueof propertiestransacted,thesuccessratehas heldconstantat11%,asthepercentage decreaseinpropertiesauctionedandsold werealmostequal.
Total Value of Properties Sold at Auctions and Success Rate
Inviewofthesofteningeconomyand fewerpropertiesbeingauctioned,thetotal valueofpropertiessoldhasdecreased
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Chart3 450 ValueofPropertyType($million) 400 350 300 250 200 150 100 50 0
Total Value of Properties Sold by Property Type ($ million)
Outlook
AsforeignerswillbeleviedanAdditional Buyer'sStampDuty(ABSD)of10%on anyresidentialpurchasesfromthe13th December2011,moreforeigninterest isexpectedtobedivertedintothenonresidentialsectors.LikewisewithPRs (thatownoneresidentialproperty)and Singaporeans(thatowntworesidential properties)whoarelookingtoinvestinreal estatebutavoidtheABSD3%whichapplies totheirsubsequentresidentialpurchase. Weexpectcashrichinvestorstobeonthe prowlforqualityproperties.However,overall marketsentimentwillbesubdued. Ownersaleshasbeendominantinthe auctionssceneforsomeyearsnowas manyownersarebetterinformedofmarket changesandareabletomanagetheir financialcommitmentstoavoidforcedsales. Weexpectthistrendtoholdmovingforward. Itshouldbenotedthattheprivatetreaty marketistypicallythepreferredwayof sellingproperties.Theauctionsmarketis analternativeavenueforownerstosell theirproperty.Hence,activityinauctionsis sometimesnotfullyreflectiveofthemarket. Thisismoreapplicabletothecommercial sectorswhereownersseemtopreferprivate treaty.
2006 Residential
2007 Office
2008 Industrial
2009
2010
2011 HDBShops
Shops&Shophouses
Source:KnightFrankResearch
Chart4
Success Rate of Properties Auctioned
3,000 2,500 No.ofProperties 2,000 1,500 1,000 500 0 2007 Sold Source:KnightFrankResearch 2008 2009 Auctioned 2010 2011 20% 18% 16% 12% 10% 8% 6% 4% 2% 0% SuccessRate 14%
SuccessRate(%)
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ReseaRch
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