Commercial site in Jurong East draws strong interest

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http://www.straitstimes.com/archive/wednesday/premium/money/story/commercial-site-jurong-east-draws-strong-interest-20130313

Commercial site in Jurong East draws strong interest

Response 'indicates potential demand from investors seeking alternatives'

Published on Mar 13, 2013

By Cheryl Ong


A TENDER for a commercial site at Venture Avenue that drew nine bids outstripped market expectations.

Experts said the keen response to the Jurong East site could signal that developers are responding to potential demand from investors looking for alternatives to residential property.

Colliers International director of research and advisory Chia Siew Chuin added: "The commercial sector has not yet been affected by the Government's property measures, although the planning authority is likely to be monitoring the unit sizes of planned commercial developments.

"As a result, interest from both investors and end-users is expected to be robust."

Sim Lian JV (Vision) lodged the top bid of $701.1 million - or $1,009 per square foot - which was nine per cent above the $643 million offered by Capitaland unit Victory One.

Sim Lian's $1,009 psf bid easily exceeded market expectations of $800 psf ppr, said CBRE research associate director Desmond Sim.

The Sim Lian offer makes the expected breakeven price of the commercial property to be about $1,700 to $1,750 psf, said Mr Nicholas Mak, head of research at SLP International.

Jones Lang LaSalle national director of research and consultancy Ong Teck Hui also noted that the highest bid exceeded the top offer for Paya Lebar Square at $872 psf ppr in April, 2011.

"Since the Paya Lebar Square tender, demand for strata offices has surged tremendously resulting in optimistic bidding in today's tender," he said.

Jurong East is seen as a key commercial hub in the west, and includes existing and upcoming retail and lifestyle offerings like JCube, JEM and Westgate, said Mr Sim.

Ms Chia added: "With the prospects of growth for the entire Jurong East area as a regional commercial hub, a new project on the subject site would enjoy steady demand for its office units when completed."

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http://www.businesstimes.com.sg/archive/wednesday/premium/top-stories/venture-ave-plot-draws-strong-response-20130313

Published March 13, 2013

Venture Ave plot draws strong response

Top bid in Jurong East site far exceeds expectations at $1,009 psf ppr

By ong chor hao


[SINGAPORE] The top bid for a 99-year leasehold commercial site at Venture Avenue in Jurong East has far exceeded consultants' expectations, demonstrating a pent-up demand for strata titled offices.

The 1.2-hectare site, with a maximum permissible gross floor area (GFA) of about 650,000 square feet, drew a top bid of $701 million, or $1,009 per square foot per plot ratio (psf ppr), from Sim Lian JV (Vision) under the Sim Lian Group.

This was well above the range of $700-$800 psf ppr predicted by analysts The Business Times spoke to earlier. The number of bidders, at nine, also exceeded earlier forecasts of between five and eight.

"The bid price sets a new benchmark for suburban commercial land," said Desmond Sim, associate director at CBRE Research.

Sim Lian's offer was 9 per cent higher than the second-highest offer from Victory One of $643 million, or $925 psf ppr, and 10.6 per cent higher than the third-highest bid of $634 million, or $912 psf ppr from Harvestland Development.

The top bid compares with the $872 psf ppr for Paya Lebar Square in April 2011, said Ong Teck Hui, national director for research and consultancy at Jones Lang LaSalle (JLL).

The lowest offer for Venture Avenue came from New Empire Investments and Intrepid Investments. They bid $353 million, or $508 psf ppr.

The Venture Avenue site has to be 90 per cent developed for office use and can yield about 25 storeys.

Analysts believe the potential for strata subdivision may have driven the aggressive bidding.

Nicholas Mak, head of research at SLP International, said the strong bids are contributed by "the very strong demand for strata-titled commercial property among investors".

JLL's Mr Ong noted that there were 518 strata office transactions in 2011 but this more than doubled to 1,062 last year. He cited a lack of strata office supply as well as reduced investment opportunities in the residential sector due to cooling measures.

Chia Siew Chuin, director of research and advisory at Colliers International, said the winning developer may strata-subdivide the development - selling either the entire project or selling a portion and retaining the balance for recurring income.

She added: "Should strata-titled office units be launched for sale at this site at around $2,000 per square foot (psf), businesses would be attracted to purchase, say a 1,000 sq ft unit, at a fairly affordable amount of $2 million. Such a purchase for an SME (small and medium enterprise) would provide a hedge against rental increases."

Developers may also have been attracted by the future potential in the Jurong East area.

"The plot is located within Jurong Gateway, identified to be a key commercial hub in the west," said CBRE's Mr Sim.

Upcoming developments include the JEM and Westgate retail and office developments, and the site is located near the International Business Park and is a short distance from Jurong East MRT station.

The breakeven price is expected to be between $1,700 and $2,000 psf, consultants said.

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