Tuesday, December 26, 2006

[RealEdge] BT : More office & hotel sites may go on offer in H1 next year

Published December 21, 2006

GOVT LAND SALES 2007
More office & hotel sites may go on offer in H1 next year

Ministry seen continuing with Reserve List system as mainstay

By KALPANA RASHIWALA

(SINGAPORE) The widely watched Government Land Sales (GLS) programme for the first half of 2007 could see more office and hotel sites being offered, according to property market watchers.

"I think the government will have to do something given that office rents are shooting up.'
- Knight Frank managing director Tan Tiong Cheng

Most expect the Ministry of National Development (MND) to continue using the Reserve List as the mainstay of its programme for private residential, commercial and hotel sites, since it has worked well.

Under this system, sites are released only upon application by a developer with an undertaking to bid at a minimum price acceptable to the state.

However, within the reserve list, MND could offer more office sites, particularly in the Marina Bay area. This, according to several property consultants, would go towards addressing the shortage of offices that has sent office rents soaring 45 per cent this year.

MND is also expected to offer more hotel sites, given bullish bids seen lately and the rosy tourism numbers, says Colliers International director (research and consultancy) Tay Huey Ying.

As for the private residential sector, she suggests the government could offer a couple of sites in prime districts to ride the current luxury housing boom and maximise returns from its land stock. Ms Tay suggests the former Raffles Institution site at Grange Road as a candidate.

Many developers and property consultants hope the government will not offer prime district residential sites, given the already substantial supply in this segment generated by the private sector over the past two years through collective sales. However, Ms Tay thinks that even if the government offers one or two prime sites - and through the reserve list at that - it will not have any big impact on the overall supply of such sites.

'It wouldn't be so much of an attempt to cool the high-end property fever, but more like maximising returns on state assets. There's no better time for the government to offer prime residential sites than when the luxury market is doing well,' she explains.

None of the 14 predominantly suburban residential sites currently available in the H2 2006 reserve list have been triggered for tender. While this could reflect the still tepid demand for mass-market homes, Ms Tay suggests that another factor could be that developers don't exactly find the currently available sites appealing - a point that might induce MND to add a few choicer suburban sites to the H1 2007 reserve list.

CB Richard Ellis (CBRE) executive director Li Hiaw Ho expects the residential sites on the H2 2006 reserve list to be carried over to H1 next year. He expects some of the existing sites to interest developers next year because of their location. These sites include Enggor Street near Amara Hotel in the city, Bishan St 22 and Dakota Crescent (in the Old Airport Road vicinity) relatively close to the city, and Simei St 4 and Simon Road (in the Upper Serangoon area) in the suburbs.

'Each of these sites is fairly close to an MRT station and basic amenities like foodcourts and markets,' says Mr Li.

Knight Frank managing director Tan Tiong Cheng disagrees with suggestions that MND should release more land for residential development in the vicinity of the two integrated resorts in Marina Bay and Sentosa, given the strong demand for homes in those areas.

His reason? 'Sentosa Cove Pte Ltd is still releasing land on Sentosa Cove and don't forget Keppel Bay (Phase 2) will have about 1,200 homes which will be released starting from early next year,' he says.

Mr Tan also notes that the string of office blocks in the existing CBD slated for residential developments will create new homes in the city not too far from the Marina Bay area.

Mr Tan argues there's a stronger case for the government to release office sites in its H1 2007 programme.

'I think the government will have to do something given that office rents are shooting up,' he says.

Agreeing, CBRE's Mr Li says: 'In addition to the existing site in Anson Road, some new sites in the Marina Bay area - Singapore's new downtown - will likely be added to help ease the shortage of office space.' Average prime Grade A office rentals have surged about 45 per cent this year to $8.50 psf a month currently, according to Jones Lang LaSalle (JLL), which is forecasting a further 25 to 30 per cent hike next year.

According to JLL's regional director and head of markets Chris Archibold last week, rental growth through 2007 to 2009 will be supported by several factors. These include the shortage of office space that's building up on the island - and the strong demand coming from banks seeking to locate their hubs in Singapore, and from MNCs and domestic firms.

A seasoned market watcher says that even the first phase of the Business & Financial Centre slated for completion in 2010 will have only 1.65 million sq ft of offices - 'not the mountain of space some had expected'. That space is expected to be pre-leased before the project's completion, still leaving the market with an office shortage.

'We've been wooing global financial groups to expand in Singapore. So we've got to create the space for them,' he says.


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