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(SINGAPORE) All eyes in the property market are on next week's state tender for the Somerset Central site above the Somerset MRT Station.

Most property consultants and observers expect the 99-year leasehold commercial site to fetch a top bid 5 to 15 per cent more than the $1,085 per square foot per plot ratio that Far East Organization paid for the nearby former Glutton's Square site in January. But some industry watchers reckon that risk factors could rein in exuberant bidding.

Some consider Somerset Central a superior site to the Glutton's Square site, as a development on the former will be directly connected to Somerset MRT Station. As well, it is touted to be the last major site in Orchard Road available for a sizeable retail project - although Singapore Tourism Board has designated two other smaller sites for sale on short-term leases.

Factors such as these are expected to drive up bidding for the 78,702 sq ft site that can be built up to 424,205 sq ft gross floor area (GFA). At least 60 per cent of the GFA has to be for retail, food and beverage or entertainment use.

Market watchers expect mostly the same bidders who contested for the Glutton's Square site to bid for Somerset Central when the Urban Redevelopment Authority's tender for the latter closes on Wednesday next week.

These would be Far East Organization, Frasers Centrepoint (possibly in partnership with Far East), Lippo, Pacific Star group, City Developments and Hong Kong's Park Hotel Group (the owner of Crown Hotel at the corner of Orchard and Bideford roads). Other bidders could include United Overseas Land, which owns the former UOL Building plot behind Somerset Central, which it is redeve loping into a serviced apartment project, and property giant CapitaLand.

'The benchmark has been set by Far East's bid for the Glutton's Square site, and anyone who wants the Somerset Central plot will have to bid higher,' a potential bidder said.

The inevitable bidding war is expected, but some bidders may be more restrained because the site is not without risks, some analysts say.

First, there will be competition from bigger mall developments.

Farther down Orchard Road, CapitaLand and Sun Hung Kai are developing a mall with about 600,000 to 700,000 sq ft net lettable area, above Orchard MRT Station. It is slated to open by Christmas 2008. 'The area around Somerset MRT Station will still play second fiddle to the Orchard MRT Station location, which is superior in terms of pedestrian traffic circulation and street activity,' says a developer who is in the running for Somerset Central.

And then there will be about 1 million sq ft of retail space at the Marina Bay Sands integrated resort (IR) development to be completed in late 2009. 'One has to come up with a concept for Somerset Central that does not clash with the Marina Bay IR,' reckons a top executive with a major mall developer.

Retail market watchers generally expect the retail component of Marina Bay IR to feature more high-end names, like luxury brands, watches and fine dining.

The developer of the Somerset Central site could try to differentiate its mall by capitalising on the youth theme along that stretch of Orchard Road, as seen at Orchard Cineleisure, The Heeren and Youth Park.

'Hopefully, the IR will bring the intended tourism spin-offs so that the Singapore retail cake will get bigger, instead of the same cake being sliced into smaller pieces,' is how a market watcher put things.

The successful bidder for the Somerset Central site may also have to contend with competition right next door if it can't strike a deal to cooperate with the owners of two neighbouring properties - Specialists' Shopping Centre, held by OCBC, and the Glutton's Square site sold to Far East Organization. Far East and OCBC are said to have formed some sort of alliance to cooperate - involving either a massive retrofitting of Specialists' Centre or a total redevelopment of the more than 30-year-old complex along with the development of Far East's site - although details will only be finalised after Somerset Central is awarded.

If Far East or Frasers Centrepoint (part of the OCBC stable) clinches Somerset Central, the cooperation will be extended to include the latest site, market watchers say. However, if another party bags the plot, Far East and OCBC may decide not to team up with it. If this is the case, the Somerset Central project risks being dwarfed by a bigger project next door that will compete with it for both tenants and shoppers.

Interesting forces could be at play at next week's tender.