Jurong Lake District might be more appealing to developers if it were divided into smaller sites

However, the government needs to act fast because creating a second CBD will have many advantages.

September 17, 2024

It is a loss for Singapore as well as developers that the tender for a 6.5 hectare (ha) white site in Jurong Lake District (JLD) was not awarded.

In June 2023, the Urban Redevelopment Authority (URA) put the white site up for sale as a master developer site. One consortium submitted two concept proposals by the time the tender closed on March 26.

Although one proposal was shortlisted, the URA announced last Friday (September 13) that the site's tender was not awarded because the tendered price, which amounts to roughly S$640 per square foot per plot ratio (psf ppr), was judged to be too low.

With a maximum gross floor area of more than 3.9 million square feet (sq ft), the site's land cost comes to roughly S$2.5 billion.

Subject to a minimum price that the government deems acceptable, the site will be put on the reserve list, where interested tenderers can initiate the site's launch under the concept and price revenue tender approach.

No winners

The consortium of CapitaLand Development, City Developments Limited (C09 -0.19%), Frasers Property (TQ5 +0.56%), Mitsubishi Estate, and Mitsui Fudosan (Asia) has suffered a setback as a result of the unsuccessful bid. The partners would have spent a lot of money assessing the project, creating concept proposals, and figuring out how to collaborate.

Additionally, the opportunity to make a sizable profit and produce a remarkable development is lost.

Is it possible that the consortium regrets not placing a higher bid that would have won the site? Perhaps the consortium overestimated its profit projection or included too much buffer for a project that is comparatively high risk.

This exercise also costs the government money.

It would have taken ten to fifteen years to develop the site. Up to 1,700 residences, at least 1.5 million square feet of office space, and nearly 800,000 square feet of space for retail and food and beverage operations would have been housed there when it was finished.

Now, the financial and other advantages of this will not be realised.

Most importantly, URA's decentralisation strategy is harmed by the JLD white site ban.

To accommodate a range of business requirements, JLD is intended to be gradually expanded into Singapore's largest business district outside the city centre. Achieving net-zero emissions for new construction by 2045 is another objective, making it a model sustainability district.

The significance of an additional CBD

Indeed, there are persistent issues with the demand for office space. With the development of technology, remote working may become more popular. Companies may slow down their efforts to establish a significant regional presence here and become more inward-looking.

Additionally, companies in JLD might find it difficult to draw in talent from across Singapore. Would people in the east be reluctant to go to Jurong?

Nevertheless, there are strong arguments in favour of making JLD the second CBD (Central Business District).

The ongoing need for people to gather together to form relationships and co-create will support the demand for office space in the long run.

Positive growth prospects for South-east Asia, Singapore's capacity to provide value to companies from a wide range of industries and nationalities, and the country's excellent standard of living all point to the Republic's potential as a business hub.

Public transport will serve JLD well. It is close to Tuas Port, research facilities, and important universities. Additionally, JLD may become very appealing to office workers as a result of place-making initiatives.

It is imperative that JLD be developed as a second central business district. To spread their risks, some companies that are based in the current CBD might also wish to be in JLD. Other companies might want to consider relocating to JLD from the CBD, where they might be able to find first-rate office space at significantly cheaper rates.

Additionally, new companies that thrive on the green transition may look to locate in JLD's highly sustainable new developments.

Give up using the master developer model

Would the advantages of awarding the site outweigh the expenses of selling it at a "low" price if the proposal that made the short list for the JLD white site is exceptional? The consortium might have been asked to increase its bid price by the URA.

The goal of transforming JLD into a thriving second central business district is considerably delayed by placing the JLD white site on the reserve list. It is unclear, after all, whether or not a party will initiate the sale of this site from the reserve list.

There are undoubtedly compelling reasons to sell the three-plot JLD White site to a master developer. In order to integrate the different uses, coordinate development implementation, and implement district-level urban solutions, the developer can master plan the entire site.

Developers may become more interested in large-scale projects as interest rates decline. Additionally, since the Singapore station will be close by, interest in the JLD White site may increase if the proposed Kuala Lumpur-Singapore high-speed rail project is restarted.

However, the URA should immediately abandon the master developer model for the JLD white site and divide the 6.5 ha site into multiple smaller sites for sale, considering the developers' risk appetite and the potential rewards of making JLD the second CBD.

Developers may be more willing to participate in sites with more manageable total dollar amounts and shorter gestation periods, such as a few years. Some developers might be willing to bid for a portion of the master developer site, for instance, even though they avoided it.

It is possible to enforce guidelines to ensure that developers create the most sustainable developments possible. To the advantage of individual developments, the authorities can also collaborate with different developers of different sites to make sure that various developments are well-integrated with one another.

Singapore is known for its resiliency and pragmatic approach. Whether the proposed high-speed rail project is restarted or not, it is the responsibility of the URA and the many top local and international developers working here to continue transforming JLD into a thriving second central business district.