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Published December 22, 2006

New office site coming up at Marina Bay
Decision hailed amid space crunch in Grade A office space


(SINGAPORE) A new development site at Marina Bay has been activated - and more sites could be on their way.

In a move that is widely seen as a reaction to the space crunch in the Grade A office sector, the Ministry of National Development yesterday said it would put a site at Shenton Way/Central Boulevard on the confirmed list of the Government Land Sales (GLS) programme for the first half of 2007, potentially activating a whole corridor of new sites at Marina Bay.

And in the light of the tight supply of new Grade A office space, most analysts welcome the move.

DTZ Debenham Tie Leung executive director Ong Choon Fah says she was not surprised that the site - a white site with primarily office space - had been put on the confirmed list and expects more sites in the future. 'You need that momentum to keep (the market) going,' she said.

She did, however, caution that the release of sites there had to be 'measured'. 'The plot ratio there is high, so the quantum of space is also high,' she added.

With the prime office sector buoyant, due primarily to a lack of new supply, there is concern that there may not be sufficient new demand for more prime office space.

Savills Singapore marketing and business development director Ku Swee Yong, however, sees the Marina Bay site sparking a lot of interest from investors and developers, especially because little has been said by the owners about the prospect of Phase Two of the Business Financial Centre.

Savills projects the Shenton Way/Central Boulevard site could go for as much as $1,200 per square foot (psf) per plot ratio (ppr) or over 200 per cent more than the $381 psf ppr for the Business and Financial Centre at Marina Bay in 2005.

Indeed, the burgeoning demand in the office sector appears to have been particularly targeted in the H1 2007 GLS programme with new sites at Shenton Way, Outram Road and Anson Road added.

Whether the geographical spread of these sites was planned to shift focus away from the CBD is hard to say but interest is also expected to be high.

For the Outram Road/Eu Tong Seng site, Savills expects prices to hit $700 psf ppr, while for Tampines Grande at Tampines Regional Centre, prices could be between $500 and $600 psf ppr.

CBRE Research executive director Li Hiaw Ho recalls that there was only one commercial site for office development six months ago. For H1 2007, Mr Li estimates that the three sites on the confirmed list - Beach Road/Middle Road, Shenton Way/Central Boulevard, Tampines Grande - could yield a possible combined gross floor area (GFA) of up to 2.4 million square feet.

The Beach Road/Middle Road site, which includes the former NCO Club, was slated for launch on the confirmed list this month but will now be released in March 2007 as Urban Redevelopment Authority needs more time to work out the details for a two-envelope tender. The impact of all this space coming on stream in the future could, of course, dampen rental rates in areas like Raffles Place.

Chesterton International head of research and consultancy Colin Tan believes that the release of office sites could indicate that planners are concerned about Grade A office rents rising too high. 'The priority appears to be to keep Singapore competitive.'

Mr Tan also notes that demand could be exacerbated by tenants 'hoarding' existing space even though they have leased newer premises because of the fear that office space will simply not be available in the future.

Overall, analysts have reacted positively to the new sites on the GLS programme.

DBS Vickers analyst Wallace Chu lauds the 'variety' in the choice of sites. For instance, Mr Chu highlighted that Tampines Grande recognises that businesses will increasingly want to relocate backroom operations to sub-regional centres to keep operating costs down.

'The government will want to push certain areas but I don't see problems in absorbing these sites,' he added.

Other prime sites that will be targeted by developers include a residential site in the city on Handy Road and a suburban site near Ang Mo Kio MRT Station on Ang Mo Kio Avenue 8. Savills estimates prices to reach $800 psf ppr and $350 psf ppr respectively.

CBRE's Mr Li said: 'Going by the depleting stock of 99-year leasehold sites that are held by developers, and a gradual shift in buyers' focus to non-prime residential projects, we expect to see more activity in GLS programme in 2007.'