Govt halts CBD office redevelopment to curb office space shortage
By Daryl Loo, Channel NewsAsia | Posted: 21 May 2007 2236 hrs
SINGAPORE: The government has stopped allowing building owners to convert offices in the central area to other uses to prevent aggravating the crunch in office supply.
This will affect buildings in the Central Business District, Outram, Newton and Orchard areas for at least the next year and a half.
The space shortage has caused prime office occupancy to hit over 99% and rents to jump by nearly 20% so far this year.
A number of old CBD buildings had been approved in recent years to be converted into condominiums, as owners sought to rejuvenate ageing properties.
But the government has decided not to approve any more such applications, for now.
National Development Minister, Mah Bow Tan, told Parliament: "Many of these buildings are in reasonably good condition and can still meet the needs of most office users, especially in the next 2 to 3 years.
"While the government does encourage building owners to rejuvenate and redevelop their older buildings, such redevelopment is not appropriate at this point in time. It will worsen the office supply shortage and hinder our efforts to attract financial institutions and other businesses."
The new ruling affects UIC Building, Marina House and San Centre whose applications have been turned down.
Industry watchers say this will help to maintain the existing office stock but does nothing to solve the problem of a lack of new supply.
Donald Han, Managing Director at Cushman & Wakefield, said: "The basic problem about the Singapore office market is really the acute supply, and acute supply cannot be solved overnight. You'll need a gestation period of about three years at least, to release the land, for the land to be developed, constructed and to be ready. So I think any alleviation of the problem will only be solved come 2010 or beyond."
Analysts expect residential projects already being sold in the CBD to benefit from the change, although they do not see prices going through the roof.
Nicholas Mak, Knight Frank's Consultancy & Research Director, said: "If home prices in the CBD were to rise too sharply, they will meet some buyer's resistance because there is ample supply of alternative housing just a short drive outside the CBD. For example in the Novena area, the Tanjong Rhu, East Coast areas, and also in the Telok Blangah area."
URA says it is also looking for new sites for low-rise "transitional offices" on short leases of 10 years or less, which can be built in a year. - CNA/ir