New residential units in CBD seeing brisk sales

Property
Published September 28, 2006

New residential units in CBD seeing brisk sales

Redevelopment of old office buildings set to slow with rebound in sector

By ARTHUR SIM

WITH the rebound of the office property sector, redevelopment of old office buildings is likely to slow down with the few new residential apartments in the CBD becoming highly sought after.

One, The Clift, by Far East Organization (FEO) on the former NatWest Centre site, is already close to 50 per cent sold, and it has not yet even been officially launched.

FEO began preview sales of the 312-unit, 99-year leasehold development in July at between $1,050 and $1,100 per square foot, and sales have been so brisk that prices are expected to be jacked up when the project is officially launched.

The current average selling price is $1,200 psf with some units going for about $1,350 psf.

BS Capital will also launch Lumiere, formerly HMC Building, soon.

Its chief executive Chin Teck Chuan noted that the office market has picked up much more quickly than the residential one, making redevelopment of old offices unfeasible.

'I have heard that there are a few office buildings which are being rented out on short leases, but there is no news that they will be redeveloped,' he added.

HMC Building, which is opposite the MAS Building, was bought about a year ago when it seemed that inner-city living would be all the rage. But when the Lumiere is launched in the fourth quarter of this year it will be pitched at the 'dual usage' home-office market.

The 168-unit Lumiere will have small studios, one- or two-bedroom units of 499 to 906 square feet, priced at $1,200-$1,500 psf. Eighty per cent of the units will be studios or one-bedroom units. Mr Chin said smaller units are more cost effective especially if the owner or tenant intends to use the apartment as a home office.

Under Urban Redevelopment Authority guidelines, home offices cannot have more than six non-resident employees.

BS Capital has done feasibility studies on the use of space, and Mr Chin said a home office with a staff of four can fit comfortably in a space of about 500 sq ft.

Mr Chin also said that investors can expect rents of $5-$6 psf, which is the asking price for similar units at Spring leaf Tower next door.

With rental returns likely to rise with the completion of the integrated resorts, Mr Chin said BS Capital may even keep 30-40 per cent of the units for the rental returns.

Other CBD residential developments that will be launched in the fourth quarter include City Developments' 351-unit One Shenton Way (formerly Robina House) and the 428 residential units at the Business Financial Centre (BFC) by Keppel Land, Hong Kong Land and Cheung Kong, built on a greenfield site.

BFC development head of residential marketing Kan Kum Wah said that its marketing agents have received offers ahead of the project's launch from buyers who want to buy entire floors at prices expected to be between $1,400 and $1,700 psf.

The BFC site was bought over a year ago.

Any new development, commercial or residential, will now be subject to the latest development charge (DC) rates.

Chua Yang Liang, associate director and head of research at Jones Lang LaSalle, said: 'All things being equal, the prevailing DC rates may have some bearing on the financial attractiveness of a redevelopment site, be it residential or commercial.'

He also noted that DC rates for commercial uses are up to $250 higher than that for non-landed residential uses in areas like Raffles Place, Cecil Street, Robinson Street and China Square.

'This was unlike a couple of years back when DC rates for commercial uses heavily outweighed DC rates for residential (non-landed) uses,' Dr Chua added.

DC rates, which are revised every six months, were last revised on Sept 1.

For the prime Raffles Place/Golden Shoe area, DC rates for commercial developments rose by about 10 per cent year-on-year while DC rates for non-landed residential properties in the same area increased by 40 per cent.

For the Cecil Street/Robinson Road area, the increase was 15 per cent and 30 per cent respectively.

Developers will also have to consider current capital values. According to JLL, luxury residential capital values for the third quarter of 2006 are $1,662 psf. This represents a quarter-on-quarter increase of 6 per cent and a year-on-year increase of 33 per cent.

For prime Grade A office, the current capital value is $1,280 psf, a quarter-on-quarter increase of 5.8 per cent and a year-on-year increase of 28 per cent.