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MOST property consultants are all agog about an office site in the Marina Bay area coming onto the market, despite the headwinds of an imminent glut from new completions in the next couple of years amid weakened demand. This is because those bidding for the site will be eyeing an office rental recovery beyond 2020, when any project on the plot will be completed.
The Urban Redevelopment Authority (URA) on Wednesday released the detailed sales conditions for the 1.1-hectare white site along Central Boulevard opposite Asia Square Tower 1 which is now available for application on the reserve list. It will be launched for tender only upon successful application by a developer.
The 99-year leasehold site can be built up to 50 storeys, with a maximum gross floor area (GFA) of 141,309 sq m (1.52 million sq ft), of which at least 100,000 sq m or 70.77 per cent must be put to office use. In addition, up to 5,000 sq m GFA can be set aside for retail use. The balance may be utilised for additional office, hotel, serviced apartment or residential uses. The entire development, excluding the GFA for hotel, serviced apartment and residential use, can have no more than three strata lots.
"This is the most prime office site that has come on the market since 2007, when the Asia Square sites were sold," said CBRE managing director, brokerage, Singapore, Moray Armstrong. "The chances of this site being triggered are quite high; it will plug a gap that will come in at the end of this decade and provide continuity of Grade A office supply in the longer term."
The successful bidder for the site will be given up to seven years to complete development of the land parcel.
Desmond Sim, head of Singapore and SE Asia at CBRE Research, said the prime site is "very much welcomed" despite concerns of impending supply in 2016. "Post 2016/2017, there remains very limited new supply in the CBD Core. Should this new site be triggered for launch and awarded, earliest by end-2016/early-2017, the new development should be completed only in early 2020/2021."
Knight Frank executive director Tay Kah Poh, who noted that the "whole Marina Bay cluster is fast becoming the centre of gravity for Singapore's CBD", suggested that by the time the site's tender closes, it could be the second half of 2016, by which time the office market could be at a point in the cycle where prices should be more attractive to bidders.
Karamjit Singh, international director at JLL, thinks that the site could be triggered for release as early as the next quarter. "This will be the hottest office development site in many years to come on the market. It ticks all the boxes in terms of MRT connectivity, the scale of the development and being a strategic linkway between the old and new CBDs."
URA said that the land parcel has prominent frontages along both Central Boulevard, one of the two main roads within the area connecting to the Central Business District (CBD), and Raffles Quay. The future project on the site will offer "excellent views across Marina Bay and the CBD", it added.
The project will also be directly and seamlessly connected to the adjacent Downtown MRT Station (on the Downtown Line) in addition to being linked to Raffles Place Interchange MRT station (North-South/East-West lines) and the future Shenton Way MRT station (Thomson-East Coast Line), providing all-weather connections to the public transport nodes. Morever, the development will be linked to the surrounding developments, including One Raffles Quay, Asia Square Towers, Marina Bay Financial Centre and the existing office clusters in Raffles Place and Shenton Way through a network of elevated and underground linkages, URA added.
R'ST Research director Ong Kah Seng's advice is that after the minimum office and maximum retail allocations, the balance GFA is best used for a hotel rather than for development into apartments - given the large stock of unsold residential units in the vicinity as well as softening rents. "Generally, rents of completed condo units in the CBD have been easing for the past three years and this is set to continue with the high volume of private home completions islandwide, reduced intake of foreign professionals who these days also tend to lease apartments in the city-fringe rather than the CBD because of crimped rental budgets."
Mr Ong said that the site was likely to be triggered from Q2 2016 onwards and can be expected to draw five to eight bids at tender. "The top land bid is likely to be about S$1,100 to S$1,250 per square foot per plot ratio (psf ppr)."
This translates to a lumpsum price of S$1.67 billion to S$1.9 billion for the site. Based on the scheme envisaged by Mr Ong, the all-in development cost (including construction) would be well over S$2 billion.
Mr Singh of JLL, who also predicts five to eight bids for the site, expects the top bid to come in at S$1,150-1,300 psf ppr. He too suggests that apart from the office and retail components, the rest of the space will go to hotel use given the very limited supply of hotels in the pipeline. "This will make an ideal location for a high-end hotel for business travellers."
Savills Singapore research head Alan Cheong said: "Given the size of this project, it is likely that bidders will be in the form of consortiums. Landlords of substantial acreage of office buildings in the area will benefit if they can secure ownership of this parcel because it will imbue them oligopolistic pricing power, rent wise.
"Although the land price quantum involved is gargantuan, possibly even higher than the S$1.67 billion for the Paya Lebar/Sims Avenue site awarded earlier this year, the developers' sunk capital can still be recycled if they have a symbiotic relationship with office Reits which, with the appropriate rental support provided, part of the asset can be hived off after a relatively short holding period."