CapitaCommercial says space cunch to spur rents

Singapore’s office rents are set to rise as much as 15% this year on increased demand and a dearth of new developments, said Lynette Leong, chief executive officer of CapitaCommercial Trust Management.

Global companies including Cargill Inc., the biggest U.S. agricultural firm, and Bordier & Cie, a Swiss private bank’s local subsidiary, are driving the recovery as they set up offices in the central business district, said Leong, whose company manages the biggest office trust in Asia outside Japan. “I see an acceleration in rents coming in the second half, as there is no new supply next year and tenants will feel the crunch when they realize there is no new supply,” Leong said in an interview in Singapore on April 21. “Rents for our portfolio have already increased by 5% in the first quarter compared to a year ago.”

Office rents in Singapore, ranked the most affordable of the top five major financial centers by Cushman & Wakefield Inc., is rebounding as robust demand amid high occupancy rates reinforce landlords’ bargaining power. Rents in the island- state’s central business district are expected to rise as much as 15% this year, broker DTZ Holdings Plc said April 3.

CapitaCommercial will review terms for tenants making up 9% of gross rental income this year, Leong said.

“We expect office REITs to surprise on the upside with stronger occupancy and rates,” Regina Lim, the Singapore-based head of Asian property research at Standard Chartered Plc, said in a note to clients April 11.

MARINA BAY

Average rents in the newer Marina Bay area, which holds premium-grade buildings, increased by 4.5% to $11.50 a square foot per month in the three months to March from the previous quarter, according to DTZ. Office occupancy rates in the March quarter rose 0.4%age points to 95.1% from the previous quarter, DTZ said.

CapitaCommercial Trust is partly owned by CapitaLand, Southeast Asia’s biggest developer. It’s the biggest office REIT in Asia by market value after Japan’s Nippon Building Fund Inc. and Japan Real Estate Investment Corp., according to data compiled by Bloomberg. The trust declined 2.2% to $1.57 at 11:47 a.m. in Singapore, paring year-to-date gains to 8.3%. The measure tracking real estate investment trusts in the island-state has advanced 4.3% this year.

The REIT owns a 40% stake in CapitaGreen, a 700,000- square-foot office tower in the older Raffles Place financial district that’s expected to be completed at the end of the year. The trust manager has commitments for about 12% of the 40-story building built on the site of an old parking garage. The landlord, which has three tenants, expects to sign new tenants for half of the space by year-end, Leong said.

Apr 21: Transcu, Olam, SIA

Singapore shares ended flat on Thursday ahead of a three-day weekend starting Friday. The blue-chip Straits Times Index (STI) pared early gains after data showed non-oil exports in March were weaker than expected. The STI gained 0.02% or 0.60 point to end at 3,253.80. Here are some stock to watch this morning:

Transcu Group has signed an agreement for potential reverse take-over of Straits Construction Group for a purchase consideration between $325–$338 million which will be satisfied by issue of new Transcu shares of $0.50 per share, post-consolidation.

The independent directors of Olam International said they view the takeover offer from Temasek Holdings as "fair and reasonable" after taking into account the recommendations of independent financial adviser Rothschild (Singapore).

The Competition Commission of Singapore (CCS) has given the green light for the proposed strategic alliance between Singapore Airlines (SIA) and Air New Zealand to go ahead.

Capitacommercial Trust (CCT) has posted a 7.2% year-on-year increase in distribution per unit (DPU) for the first quarter to 2.08 cents.