The land sales market has been springing to life since end 2016, with developers growing increasingly bullish on the prospects for the Singapore property market.
In this post, we look at the Beach Road prime commercial land tender that is closing on 28 Sept. With the backdrop of market conditions turning bullish, the results for this land tender is expected to be healthy, even fully valued. We’ll have to wait and see how the results come out before we can get a read on how developers are looking at the property market.
Beach road site location
First up, the site is located along beach road, Nicoll Highway and Rochor Road. The location is prime and walking distance from Bugis MRT station and Suntec City Mall. The site will also be indirectly connected to DUO. Other office buildings in the area include Shaw Tower. Bidding for the site is expected to be strong given the shortage of commercial land supply.
Site conditions
The government has laid out the following conditions for the site
- At least 70% of the maximum 88,313 sqm of GFA for offices
- This is comparable in size to the nearby developments DUO and South Beach tower (570,000 and 510,000 sqft net lettable area respectively)
- Remaining 30% can be used for hotel, serviced apartments, residential units or retail space
- Maximum 3,000 sqm for retail uses
Pricing
A survey of property consultants by The Straits Times showed that bids are expected to come in a S$1,262 to 1,400 psf.
Save for the Central Boulevard site bought by IOI properties in 2016, the pricing exepcted by consultants is higher than the prices of all office units sold for the last 10 years.
Valuation
Maybank Kim Eng has a valuation scenario for the Beach Road site as follows
- Rents of new office buildings today are about S$9.5 psf. Older offices commanding S$4.5-8
- MBKE expected rents to reach S$11 psf in 2022 completion
- Cap rates expected to stay at 3.5%
- Estimated office capital value of S$3,000 psf
- Accordingly, gross development value of S$2.4b for office + retail
