Perennial-led consortium to sell Chinatown Point for S$520m

The Business Times – April 23
Activity in the commercial property investment segment appears to be picking up, with Chinatown Point mall becoming the latest to change hands this year.

A consortium of investors led by Perennial Real Estate Holdings and its consortium of investors is selling its stake in Chinatown Point for S$520 million in total, the group of listed companies announced on Monday morning.

This includes the divestment of their entire interests in the retail mall, and four strata office units in the building, an integrated development within Singapore's central business district (CBD).

Tricia Song, Head of Research:
Recently, there’s been a flurry of investment activity in the commercial property market. This activity is typically the result of months of negotiations and due diligence. The increasing views of the recovery of the prime office market since second half of 2017 spreading to the suburban office market, as well as a bottoming retail market could have also helped close the price gap between buyers and sellers, and prompted the recent deals such as Rivervale Mall, Tampines Grande and Chinatown Point Mall. 

As the interest rate hike cycle appears to have halted, investors’ appetite for risk assets has returned. The recent URA Draft Master Plan also offered thematic opportunities for in-city retail and decentralised office.  As the underlying leasing markets show more signs of sustainable growth, we expect to see more commercial (office, retail) deals to be concluded in the next few quarters. 

In addition, we also note more new-to-market investors into the Singapore commercial investment market such as the Metro-Evia JV investing in Singapore office property; Mitsubishi Estate-CLSA partnership into a retail mall asset. This illustrates the breadth and confidence of the investor community in Singapore’s commercial property market.   

WeWork pulls out of talks to take on more Hong Kong space

The Business Times - April 18
US shared workspace group WeWork has pulled out of at least five negotiations to take on new space in Hong Kong this year, sources said, highlighting a cooling down of the co-working industry because of financing constraints.

Two sources with direct knowledge of the matter said WeWork in Hong Kong pulled out of talks on most of the space it had planned to secure after failing to get budget approval.

WeWork was not immediately available to comment.

Separately, real estate group Savills said in a release on Wednesday a major Chinese co-working space group, KR Space, had pulled out of three leasing deals in Hong Kong with a total floor area of 160,000 square feet, all in prime business locations.

Tricia Song, Head of Research:
We estimate flexible space operators currently make up around 5% of the total CBD office stock in Singapore, and there is still room to grow. WeWork will open its 12th centre in Singapore by end-June 2019, having grown at breakneck speed since its first centre in second half of 2017. Other market leaders such as IWG, JustGroup, The Great Room, Campfire, and landlord-operator The Work Project look set to continue building their presence here for the rest of 2019. However, we expect growth could start to slow down in 2020, given the higher base and limited large contiguous space.     

UBS Singapore to take up entire office space at redeveloped Park Mall

The Business Times - April 18
Developer SingHaiyi Group and its joint-venture (JV) partners - Suntec Reit and Haiyi Holdings - on Wednesday announced that UBS Singapore has signed on to take up all the office space at the redeveloped Park Mall building, confirming a report by The Business Times (BT) on Apr 1 that the Swiss lender was mulling a consolidation of its Singapore office footprint.

Located at 9 Penang Road, the property is currently undergoing redevelopment and is on track to be completed in the fourth quarter this year, SingHaiyi said.

UBS Singapore will take up 381,000 sq ft of net lettable area which spans eight levels across two towers. It plans to move to the 10-storey Grade A office building in the second half of 2020.

Tricia Song, Head of Research:
This highlighted the attractiveness of large floor plates and space scalability for large occupiers such as UBS. We believe this could firm up the Orchard Road prime office market, while landlords in the Premium and Grade A office micro-markets at Raffles Place/New Downtown and City Hall, from which UBS is vacating, look to backfill the space. Nonetheless, CBD Grade A supply should remain tight averaging 614,000 sq feet per annum over 2019-2021. This should keep CBD Grade A vacancy tight, below the 10-year average of 6.2%.  We expect CBD Grade A office rents to grow 8% in 2019 and 5% in 2020, moderating from a strong 15% in 2018.