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Rejuvenating CBD with new integrated buildings 'visionary': JLL
MORE than 20 ageing office buildings in Singapore's CBD, currently housing some 6 to 6.5 million sq ft of office space, could be redeveloped to make way for state-of-the-art buildings under the CBD Incentive Scheme as part of the recently released draft Master Plan 2019. This is the number of buildings JLL Research estimates could satisfy the criteria set under the scheme, which offers higher plot ratios for owners who convert older office buildings to other complementary uses.
In their place, we can expect brand new buildings potentially yielding some four to five million sq ft net floor area of office space and injecting over 3,000 new homes and over 3,000 hotel rooms in the heart of CBD.
In our view, the benefits of this visionary initiative are multifold.
Firstly, we believe the scheme will transform Singapore's downtown CBD to meet modern demands. From our work with global corporate clients, we know that employees of today prioritise hospitality, health and lifestyle amenities in their choice of office locations. The scheme can reinvigorate the CBD to meet these needs by encouraging new mixed developments, bringing together new residents, tourists and digital nomads of all ages into the district, and allow for more 24/7 social activities and events.
Secondly, we foresee that the CBD Incentive Scheme could accelerate the decentralisation strategy to enhance sustainability and reduce commuting. As older office stock is withdrawn and redeveloped, office occupiers displaced by the withdrawal of older stock in the CBD will need new premises, giving the government scope to release more land parcels in decentralised gateways, such as Jurong East, Woodlands and Tampines to expedite the development of these hubs.
Thirdly, with limited new supply of office space in the CBD and potential initiation of redevelopment projects over the next five years, we expect office rents to continue to rise, barring any demand shocks. This would likely widen the rental gap between CBD and suburban hubs, and motivate more businesses to consider moving some operations out of the CBD.
Granted, not all owners who qualify for the scheme will immediately jump on the incentives and redevelop their properties. After all, we recognise that time is needed to evaluate the financial feasibility of the conversion, especially at a time when the office market is enjoying an upcycle amid healthy demand and tight supply, while the residential market is facing a challenging environment weighed down by July's cooling measures, as well as a long pipeline supply. Besides, hotel and residential properties do not fit the investment profile of some of the existing landlords, and redevelopment could likely take place only when the assets change hands.
Nonetheless, the CBD Incentive Scheme could kickstart urban renewal momentum and could be extended beyond the initial five-year implementation period, giving owners and investors more time to take advantage of it.
To help foster a vibrant city centre, the planning authority is also studying the possibility of transforming Robinson Road into a transit-priority corridor for public transport and active mobility, providing more scope for wider sidewalks and for ground-level activities such as al-fresco dining to spill into the streets.
Singapore is already the location of choice for most regional headquarters. We believe the CBD Incentive Scheme proactively catalyses the reshaping of our CBD to address transport concerns and plants the seeds for more integrated live-work-play developments. This will likely uplift Singapore's downtown CBD and further widen our lead as a top global city for talent, companies and capital.
- Regina Lim is Head of South-east Asia Capital Markets Research, and Michelle Tee is Director, JLL Singapore Research.