Community spaces in mixed-use projects are great, but who pays?

Cost of community, green spaces partly 'paid' by state through lower land cost, say analysts. Buyers, tenants also inclined to pay more for amenities

Sep 17, 2021

Singapore

WITH developers incorporating greenery and community spaces in upcoming mixed-use developments, the question begs to be asked - who ultimately foots the bill for such features?

Notably, Far East Organization and sister company Sino Group recently snagged the 99-year leasehold commercial and residential site at Jalan Anak Bukit for S$1.028 billion in a state tender which ran under a dual-envelope tender system.

Located at the junction of Upper Bukit Timah Road and Jalan Jurong Kechil, the 3.22 ha land parcel adjacent to Beauty World MRT station can be developed up to a maximum gross floor area (GFA) of 96,555 square metres (sq m), translating to a bid price of about S$989.4 per square foot (psf).

In line with tender requirements outlined by the Urban Redevelopment Authority (URA), the proposed mixed-use development will feature an integrated transport hub with a bus interchange on the second floor, as well as civic and commercial spaces across the first three storeys.

Features include about 20,000 sq m of retail, food & beverage and office space in a podium, centred around an 1,800 sq m plaza which can host community events, while the communal gardens on the third storey will be open to the public.

But will all this eventually come at a cost to home buyers and commercial tenants at the upcoming development?

Analysts say that developers already factor in the costs when crunching the numbers and submitting their land bid.

According to ERA Realty's head of research and consultancy Nicholas Mak, the cost - in the case of a state tender - is shared between the state, home buyers and commercial tenants.

"For mixed-use developments where the community and green spaces are open to the public, the projects are usually meant to be part of the town centre," said Mr Mak.

"The cost of the community and green spaces are partly 'paid' by the state in terms of lower land cost. Furthermore, the cost of the community space is also partly paid by the buyers of the residential units and the tenants of the commercial space."

While it is difficult to ascertain if all the additional costs can be passed through to buyers, head of research & consulting at Edmund Tie & Co, Lam Chern Woon, said a dual envelope tender usually faces less bidding pressure than a pure price tender as the concept is evaluated first.

"(This) is necessary because by imposing additional requirements above and beyond the usual ones, the government is involving the private sector to partake in the provision of a public good for the wider community," said Mr Lam.

In such a tender, bidders submit their concept proposals and tender prices in separate envelopes; only concept proposals which are shortlisted go on to the second stage, which is then based on price.

"We do expect prospective residential unit buyers and commercial space tenants to be willing to pay a premium for the enhanced lifestyle," Mr Lam went on to say, adding the upcoming bus interchange and links to Beauty World MRT station will improve transport connectivity, while the vicinity will be refreshed by new commercial spaces and amenities such as cycling paths.

Cushman & Wakefield's head of research Wong Xian Yang reckons the price tag of residential units ultimately depends on the prevailing market conditions at the time of launch. "Such amenities can have a positive impact on the selling price of the units as it adds to the attractiveness, convenience and vibrancy of the development," he said.

However, Mr Wong added that the tender bid price would generally take into account the expected selling price, development costs as well as a buffer for any unexpected costs that may crop up.

At the same time, a well designed, mixed-use development could ultimately deliver a win-win situation for all, especially in the case of the Jalan Anak Bukit site, which is expected to act as a catalyst to rejuvenate the Beauty World precinct.

"It benefits everyone if the developers do a good job with this space," pointed out Tricia Song, CBRE's head of research (South-east Asia). "In the future, all the stakeholders, including neighbouring commercial sites, could benefit as the value and accessibility of the whole area is uplifted."

Similar requirements have emerged in past Government Land Sales (GLS) tenders. Another mixed-use GLS site that was envisioned as an integrated community hub - featuring public transport facilities, a community club, childcare centre and play areas - is the 99-year leasehold commercial-and-residential site at Sengkang Central that was secured by CapitaLand and City Developments.

Located next to Buangkok MRT station, units transacted year-to-date (as at Sept 12) at the residential component, Sengkang Grand Residences, worked out to a median price of S$1,705 psf, according to ERA estimates.

"Even for non-GLS residential sites, greenery and community spaces can be seen as an added attraction and form of differentiation among competing projects," said Ms Song, pointing to developments such as Amber Park and Leedon Green. The 638-unit Leedon Green, for example, emerged the top seller among the freehold projects in prime District 10 last year, partly due to the fact that nearly 70 per cent of its sprawling 326,764 sq ft site is dedicated to green spaces, facilities and landscaped areas.

Mr Mak said the perks of having greenery and landscaping in pure residential projects - which aren't open to the public - are eventually paid for by buyers of the residential units.

"As the provision of (community and green) spaces creates an enhanced, flexible living environment for residents, shoppers and the commuting public, developers have increasingly opted to incorporate such spaces regardless of whether these have been prescribed by the government," said Leonard Tay, head of research at Knight Frank Singapore, adding that homebuyers who are drawn to integrated developments are typically prepared to fork out a premium.

Where prices are concerned, analysts expect the residential units at the future Jalan Anak Bukit development to cross the S$2,000 psf mark. Far East has said previously that the development will yield about 700 residential units and 150 serviced residences.

Mr Wong estimates prices will surpass S$2,000 psf, while Mr Lam puts the price tag at S$2,100 to S$2,200 psf.

Mr Tay estimates prices for the residential units at S$2,300 to S$2,500 psf, as buyers would be attracted by attributes such as retail outlets and community spaces as well as the site's proximity to national parks and tertiary institutions.

Similarly, Mr Mak reckons the residential units could be sold at around S$2,300 to S$2,600 psf, depending on market conditions at the time.

Nearby, units at the fully sold, freehold 120-unit The Linq @ Beauty World went at a median price of S$2,171 psf, while freehold project Forett at Bukit Timah has sold 450 of its 633 units at S$1,955 psf (as at July). The 99-year leasehold View at Kismis in Lorong Kismis has sold 182 of its 186 units at a median price of S$1,708 psf.