Published 3 March 2011
The Business Times
By Jacqueline Wong, Claire Gent
Offering unique differentiators helps developments stand out from the competition
THE luxury prime residential market in Singapore taps into the demands of high net worth individuals (HNWI) looking for spacious, decadent properties offering ancillary services that add to the luxurious quality of life demanded by such individuals.
To qualify as a luxury prime condominium, the project should be located within a distinctively unique lifestyle precinct such as Orchard Road in Singapore, Knightsbridge in London and the Central Park vicinity in Manhattan, New York. The entire development must portray a feeling of luxury and space from the ground up. With luxury comes spaciousness, both within the unit and externally and while most developments would offer some larger units, these are mainly penthouses, but in a true luxury project all units are sizeable.
Internally, the built-up area must be large, with tenants typically requiring units of 3,500 square feet and above, although the market at the moment typically provides units of around 2,800 sq ft to 2,900 sq ft. The layout must be well thought out, with separate family areas provided, as well as en-suite bathrooms and areas for entertaining guests.
The site must also be large enough to provide sizeable facilities for residents to luxuriate in. The design of the condominium is also important, for both the external architecture and internal finishes, with quality internal furnishings by renowned architects all adding to the appeal of a development. A luxury property should have a differentiator, such as a concierge service, to appeal to potential occupiers in this market.
Existing properties offering a combination of large luxurious units and ancillary services such as a concierge include Draycott 8, BLVD and Ritz-Carlton Residences. From the owners’ perspective, such services enable them to achieve a premium on rentals, with developments such as 21 Anderson achieving premium rents (about 15 to 20 per cent above comparable average) as a result of the additional services on offer.
Overview of luxury market
There are currently around 2,380 luxury condominium units in Singapore. These are located primarily in the prime districts of 9 and 10 (up to Cluny/Nassim area) and command rents of anywhere from $5.00 to $6.50 per sq ft per month (or about $14,500 to $19,000 per month) on average in Q4 2010. At the peak of the market in Q1 2008, rents for luxury prime condominiums reached $7.00 to $7.50 per sq ft per month (about $20,000 to $22,000 per month) on average. The supply of Good Class Bungalows (GCBs) for lease in this locality on the other hand is limited and they generally command rentals of $28,000 to $38,000 per month in Q4 2010, some 13 per cent from the peak of $35,000 to $40,000 per month recorded in Q1 2008.
Occupancy costs for these luxury prime properties rose in 2010, mainly due to a lack of supply of both large condominium units and GCBs in the Orchard and Grange Road vicinity.
The exodus of expatriates seen in late 2008 and early 2009 as a result of redundancies and lack of new job opportunities in the wake of the global financial crisis has eased, following the recovery of the economy in 2010. Talent is being retained in Singapore as expatriates look to extend lease terms and stay on to take advantage of Singapore’s growing economy. Many expats were also able to remain in Singapore due to the introduction of the Personalised Employment Pass resulting in the outflow of expatriates being less severe than expected.
Figures from the Singapore Department of Statistics indicate that the number of foreigners employed in Singapore in 2010 increased by 58,300, after declining by 4,200 in 2009 and foreigners’ share of total employment in December 2010 increased to 31.4 per cent from 30.7 per cent in December 2009. More specifically, the financial services and professional services sectors have enjoyed employment growth of between 2.8 per cent and 5.5 per cent per quarter up to Q3 2010, boosting the demand for high-end properties from senior executives in these industries. The growth in expatriate arrivals has helped to push up rents as new supply has been limited, especially for large four-bedroom condo units in the $18,000 to $22,000 per month rental bracket.
The growing demand is emerging in Singapore for large units of 3,500 sq ft and above in luxury prime condominiums offering additional services that differentiate them from other typical prime developments as wealthy expatriates remain in, and return to, Singapore looking for the best residential space on offer.
Rents in the luxury prime condominium market especially for larger sized units have rebounded, registering a year-on-year growth of about 10 to 12 per cent at end 2010 compared to a drop of 26.2 per cent in end 2009. In 2011, 11 residential projects are scheduled to be completed in the prime districts providing 1,134 units. However, only two of these projects would be classified as luxury prime, The Marq on Paterson Hill by SC Global Developments and Cliveden at Grange by City Developments Ltd (CDL), which between them will yield just 176 new luxury prime units, or 15 per cent of the total new supply being completed in 2011 in the prime districts.
As such we reckon rental in this particular micro-market is likely to experience further upside of 3 to 5.0 per cent per annum over the next two to three years albeit front loaded, that is, initial years 2011 and 2012 likely to register higher growth. Going beyond that, upcoming supply at potential projects in the prime Ardmore Park/Draycott area will help to keep rental growth in check should these developers choose to build luxury developments.
Wing Tai Asia secured the former Ardmore Point site and is developing a new 43-unit luxury condominium project called Le Nouvel Ardmore, which was designed by French architect Jean Nouvel. Units here will start at 3,500 sq ft to the largest penthouse measuring 12,000 sq ft. Wing Tai, jointly with CDL, is also developing Anderson 18 which reportedly, could provide over 150 units of two, three and four bedroom apartments. Other sites in this area include The Ardmore at 6 Ardmore Park where SC Global will develop a new condominium, Pin Tjoe Court, bought by Pontiac Land in 2006 for $201 million and the Habitat 1 site. No details are available at this point.
In addition, Raffles Girls School could potentially be relocated to Bishan and this would release a prime plot of land in this area. The prized site, which has a land area of 4.5 hectares or 10 times the size of The Ardmore and five times that of Anderson 18, could sell for anywhere from $1.5 billion to over $2 billion, according to estimates, should it be zoned for residential development.
In order to meet the demands of high net worth individuals (HNWI) for residential properties, developments must continue to evolve and offer more differentiators to stand out from the competition.
While new and upcoming developments offer a wide range of services for the high-end occupier, there are still some areas where improvements can be made. As more people buy cars, greater provision of parking lots will be required at condominiums, with tenants needing more than one parking space per unit as is currently the norm in many condominiums.
In addition, the provision of a drivers’ lounge to provide somewhere for them to wait and relax when they are not needed will also add value to the development. The provision of a concierge service is still lacking in many developments and is becoming increasingly popular among high-end tenants.
Services such as indoor, air-conditioned tennis courts and full spa facilities similar to those found in hotels are also services that could be provided in future developments to add to the differentiating factors that will appeal to tenants and also enable owners to achieve a rental premium.
‘Bungalows in the sky’
The concept of ‘Bungalows in the Sky’ is becoming increasingly popular in the luxury market, especially as the supply of GCBs becomes more limited, with such properties offering high-end bungalow living in a condominium development.
SC Global’s The Marq on Paterson Hill is an example of such a property, offering large units with double-volume ceiling space in the living areas and private swimming pools in many of the units, along with the necessary ancillary services to provide a sense of grandiosity to attract high-end occupiers to lease units. Ardmore Park and Draycott 8 also offer such units and the large internal spaces and additional services on offer provide the differentiating elements to attract tenants to these properties and the subsequent high rentals that landlords can achieve.
The concept of branded residences is also a growing trend in Singapore as high-end residential occupiers look for properties offering not just luxurious living spaces but access to services not usually on offer in condominium developments. Branded residences are increasingly being sought by HNWI and provide an assurance of quality and service level that is rarely found in traditional condominiums. Pioneered in Singapore by the Four Seasons Park development, which was completed in 1994, the association with an internationally recognised brand adds an additional appeal to prospective tenants.
This trend is not limited to Singapore, with The Bulgari Residences, Bali, being a prime example of an integrated residential and hotel branded development offering luxurious homes which benefit from the services on offer in the neighbouring Bulgari Hotel and Resort.
More branded residences are entering the Singapore market with developments including Ritz-Carlton Residences, St Regis Residences and W Residences on Sentosa offering residences supported by hotel services. Such branded developments not only provide instant recognition and prestige thanks to the internationally regarded brands attached to them, but the additional round-the- clock services provided by the hotels mean that amenities such as spa facilities, catering services, concierge services, housekeeping and valet parking are readily available to occupiers of the residences.
Over the next five to 10 years, it is likely that we will see more branded residences entering Singapore to meet demand.
The luxury prime market needs to evolve with the demands of occupiers, and the introduction of branded residences and more ancillary services at luxury developments in Singapore will serve to heighten the expectations of tenants and what they require from a residence. The recovering economy and the opportunities to grow businesses in the Asian market will continue to make Singapore an attractive location for expatriates and demand for such high-end residential properties will continue to grow.
Jacqueline Wong is head of residential and Claire Gent is manager of research & consultancy, Jones Lang LaSalle