Published June 19, 2008

CBRE S'pore earnings up 130% last year

Property consultancy sets up new business units for luxury homes, residential agency and hotels


CB RICHARD Ellis Singapore has set up three new businesses this year - luxury homes, a residential agency of associates to market projects for developers and a hotel business - to provide a stable and broader business platform, after record revenue and net earnings last year.

The property consultancy company's managing director Pauline Goh would not give absolute figures but said revenue was up 84 per cent and net profit up 130 per cent in 2007. The gains easily exceeded a 55 per cent jump in revenue and a 56 per cent increase in net profit in 2006.

'It's very, very hard to improve on 2007 numbers. Last year has to be taken as an extraordinary year,' Ms Goh said.

'Residential sales volume is down fairly significantly this year. Office leasing is still active and rentals are still increasing, though at a slower pace. We expect fees from investment sales to be very close to those last year, thanks to a pipeline of properties we've been working on since last year.'

Despite the tough market, CBRE has brokered 62 per cent of the overall $4.9 billion of private-sector office investment sales here so far this year.

Elaborating on the challenges facing the Singapore market, Ms Goh, said: 'The lack of consensus of when the US sub-prime crisis will stabilise is a good indicator of uncertainty regarding the direction the Singapore market will take this year. Asia has not been hit to the same degree as US and European markets, so Asia - basically India and China - will provide a counterbalance.

'In Singapore, I think we are not so reliant on the US situation improving. We are now struggling with the wait-and-see attitude adopted by many investors. But Asia is still a sweet spot for many foreign institutional investors.'

Before 2005, foreign buyers accounted for a relatively small portion of Singapore real estate investment deals above $5 million. In 2003, foreign investors bought $53 million of such real estate in Singapore. In 2007, this increased to $4.94 billion. So far this year, the figure is about $2.7 billion.

With the onset of the US sub-prime crisis, the profile of foreign institutional investors in the Singapore market has changed since Q4 last year, according to Ms Goh. 'There are fewer opportunistic funds in the market now,' she said. 'These days we're seeing more the core and core-plus funds.'

Opportunistic funds typically gear much higher and have a bigger risk appetite in exchange for higher returns, whereas core and core-plus funds have a lower risk appetite and use a higher proportion of equity.

Elaborating on the new businesses CBRE Singapore has entered this year, Ms Goh said the luxury homes business was set up to focus on the top-end of the residential market in a 'systematic and structured manner' rather than pursuing it ad hoc and risking 'some of the opportunities falling between the cracks'.

CBRE's luxury homes business is headed by Douglas Wong, formerly with Knight Frank Regal Homes.

CBRE has also built up a team of 180 associates under a residential agency business to help out when it clinches residential project launches for developers. These associates are not salaried. Instead they receive commissions on sales.

'The associates can do the ground sales, and this frees our core residential project marketing team to focus on more strategic matters like working with developers on project concepts, unit size mixes and marketing, recommended pricing and launch strategy,' said Ms Goh.

She acknowledges that CBRE's pool of associates is small compared with competitors. 'But our associates, unlike the competition's, don't focus on the HDB resale market,' she said.

'We brought them in with a very clear mandate to do project marketing. We hope to eventually grow the associates team to 400-500. But we're taking it easy. We want to hire selectively and discriminately, rather than hire for the sake of hiring.'

The firm's hotel business, set up earlier this year, is CBRE Hotels' South-east Asia hub. This complements a North Asia hub based in Hong Kong which opened last year. CBRE Hotels began its business in the Pacific (Australia/New Zealand) in 2001 and expanded to Europe, the Middle East and Africa, as well as the Americas in 2003.

'Currently, the South-east Asia hub focuses on providing hotel consultancy work, but we're gearing up to handle hotel transactions,' Ms Goh said.

'In Singapore, I think we are not so reliant on the US situation improving. We are now struggling with the wait-and-see attitude adopted by many investors. But Asia is still a sweet spot for many foreign institutional investors.'

- CBRE managing director Pauline Goh