Jurong East mega white site a bold test of office space demand in vicinity

DESPITE reservations among some property market watchers about the depth of office demand in the vicinity of Jurong East MRT station, the Ministry of National Development has boldly placed a mega white site with a mandatory office component, on the confirmed list of the first-half 2023 Government Land Sales (GLS) programme.

A sale of the site will help position Jurong Lake District as Singapore’s largest business district outside the city centre, say property consultants.

The 6.8-hectare site will be sold to a master developer, which will build the project of up to 375,000 square metres (or slightly over 4 million square feet) gross floor area (GFA). This can be developed in phases over the next five to 10 years.

The Urban Redevelopment Authority (URA), which will launch the tender for the site in June next year, can be expected to offer a flexible payment scheme entailing an options contract; this would allow the master developer to buy – and pay – for the land in phases within a specified time, based on a predetermined pricing formula. This ought to reduce the upfront risk for the master developer.

It is still early days but CBRE’s head of research for South-east Asia, Tricia Song, said: “Pending more details on the site and purchase conditions, we believe the land cost could be at least S$1,300 per square foot per plot ratio (psf ppr). Due to the sheer size of the overall project, we expect developers to form consortiums or joint-ventures to tender for this site.”

JLL’s head of research and consultancy for Singapore, Tay Huey Ying, said the site could draw bullish bids. “Should the economic conditions brighten up by the time the tender for the site closes around late next year, we could expect fairly bullish bids given the potential for the site.”

She added: “The completion of the first phase of the development on the Jurong Lake District white site offering at least 70,000 sq m GFA of office space around the year 2027 will help to alleviate the tight supply of good-quality office space foreseen on the back of Singapore’s rising prominence and popularity as a global office hub.”

Desmond Sim, CEO of Edmund Tie & Company (SEA), too, is sanguine about the site.

“I believe the notion of introducing this white site in Jurong Lake District has been in the plans of URA for a while and it has garnered sufficient interest from developers for it to be placed in the confirmed list.

“The site will also reinforce the plans behind a decentralised workforce and bring jobs closer to homes as more private residential population is expected stemming from the recent collective sale deals in the Jurong area,” he said.

Moreover, the sale of the mega site may help stabilise the pipeline of office supply over the next 10 years, Sim added.

The site comprises three plots of land. The total GFA of up to 375,000 sq m will comprise about 150,000 sq m of offices, 1,760 private homes and 75,000 sq m of complementary uses such as for retail, hotel or community.

As part of the project’s first phase, the successful bidder will be required to build at least 70,000 sq m GFA of office space and 600 private housing units.

Song of CBRE said that based on the site’s target launch in June 2023 and assuming a tender period of three to six months, the earliest offices could be completed on the site in 2028. “With this focus on decentralised office development, we believe there should be limited new greenfield office sites in the central business district (CBD) made available via the GLS in the near future. Instead, the CBD will see rejuvenation via ageing office assets being redeveloped into mixed-use developments,” she added.

A commercial site with 30-year lease tenure and located next to Punggol MRT station may interest some developers. Savills Singapore executive director Alan Cheong, said: “If anyone were to bid, it would likely be those developers that specialise on lands with short term leases. These are yield arbitragers, profiting from the spread between the revenues collected and operating expenses.”

Short-lease site in Punggol

The Punggol Walk site – on the next half reserve list – can potentially yield about 8,400 sq m of office space.

Cheong said: “There should be sufficient demand for offices in Punggol for a smallish office building. The quantum for office use is not imposing and should be easily absorbed by a variety of users, for example, insurance companies, co-working spaces and MNCs with industrial operations in the Seletar area.”

“If this site were on the confirmed list, there should be at least some, but not a lot of, interest from developers for this site. However, if borrowing costs remain high and given that the plot is on the reserve list, it may not be triggered.”

JLL’s Tay, too, said that the niche demand for completed offices on this plot is unlikely to draw sufficient developer interest to trigger this reserve-list site to be launched for tender in 2023 “unless the economy surprises with a V-shape recovery, driving rapid business expansion”.