No bids for Upper Thomson Road housing site at URA tender

Poor showing at the site incorporating serviced apartments marks the first time in over 20 years that a government land sale site has no takers

Jun 19, 2024



A PLOT of state land in Upper Thomson found no takers among developers in a tender that closed on Wednesday (Jun 19). Market watchers had expected to see up to three bids.

Consultants polled by The Business Times before the tender closed had expected the suburban plot to fetch offers ranging from a low of S$750 per square foot per plot ratio (psf ppr) to a high of S$1,020 psf ppr.

Wednesday’s result comes on the heels of the latest data showing developers’ sales of new homes sagging in recent months, with sales numbers sinking to near all-time lows. Recent government land sale tenders have met with little interest and lower-than-expected bids.

This plot in Upper Thomson is the second to be offered in an untested category for which developers are required to incorporate serviced apartments in the project.

A parcel nearby, the adjacent Upper Thomson Road (Parcel B), drew one bid at a state tender that closed in April at S$780 million or S$905 psf ppr. The bid was submitted by a joint venture between GuocoLand and Hong Leong Holdings. This plot is zoned purely for residential use and will house around 940 units.

The Upper Thomson Road (Parcel A) site tendered on Wednesday is expected to yield 540 residential units and 100 serviced apartments. It spans 2.44 hectares with a gross plot ratio of 2.2; the maximum gross floor area (GFA) is 53,729 square metres (sq m), including a minimum 1,000 sq m GFA for a childcare centre and 4,700 sq m GFA for long-stay serviced apartments.

Analysts suggested that developers were deterred by risks attached to the site’s requirement that long-stay serviced apartments be included. This still-untested rental category entails higher land and development costs and requires specialised management expertise.

The first Government Land Sale site to pilot long-stay serviced apartments, located in Zion Road, was a new rental category labelled SA2, and aimed at addressing market demand. The site tender closed in April with a sole bid of S$1.1 billion or S$1,202 psf ppr from a City Developments Limited-Mitsui Fudosan tie-up.

That plot sits on the fringe of the prime River Valley residential district favoured by expatriates, with other serviced apartments nearby. The location “may have led to more confidence for that particular development”, said OrangeTee & Tie chief executive Justin Quek.

The Upper Thomson land parcel, on the other hand, is located in the Springleaf area, which is not typically associated with mid-term tenants, Knight Frank research head Leonard Tay pointed out.

“Developers could have been reticent… as the minimum lease tenure might result in the operator competing with individual private landlords in the same development, as well as in the surrounding landed estate,” he added.

SA2 apartments have a minimum-stay requirement of at least three months, unlike existing serviced apartments, which have a seven-day minimum stay.

“The long-stay serviced apartment concept in the central area of the island has yet to be tested, let alone in a suburban area,” Tay said.

Developers are further required to incorporate biodiversity-sensitive designs and environmental safeguards because of the site’s proximity to a catchment area, which could have added to overall capital outlay, said Chia Siew Chuin, JLL head of residential research, research and consultancy.

“Developers may also be tentative due to the relatively quieter location, and the absence of comprehensive amenities and schools in the neighbourhood may also represent a risk,” she said.

CBRE head of research for South-east Asia and Singapore, Tricia Song, noted that the neighbouring Upper Thomson Road (Parcel B) site and the large competing supply from the nearby Lentor area – over 3,500 units in total – raise the risk for developers.

Since the launch of the first Lentor project in September 2022, developers have collectively sold about 1,844 units at median prices of between S$2,100 and S$2,250 psf as at end-May.

Nicholas Mak, chief research officer at Mogul.sg, noted that this was the first time in over 20 years that a state land tender had closed with zero bids. The last time that happened was in February 2001, for two small land parcels at Geylang Lorong 9 and Lengkong Empat.

The plot in Lengkong Empat was eventually sold to Far East Organization, which later built the 99-year leasehold boutique development, Astor Apartments.

Given the poor showing at this tender close, Propnex head of research Wong Siew Ying said the government could move the Upper Thomson Road plot into the upcoming GLS slate for H2 2024, and review the serviced apartment component.

Lee Sze Teck, Huttons Asia’s senior director of data analytics, said SA2 sites might do better if they are near the city centre or where there are job opportunities.

A third serviced apartment site will be coming up for tender in September. The Media Circle plot in Buona Vista comes with a 60-year lease, and is designated for long-stay serviced apartments only, with commercial use at the first storey. The 5,764.3 sq m site can yield 520 serviced apartments.

https://www.businesstimes.com.sg/pro...ite-ura-tender