GuocoLand (Developer for Sims Urban Oasis and newly launched Martin Modern) submitted the highest bid of $1.62 billion to the Beach Road commercial site whose URA tender closed on September 28. The bid translated to $1,706 psf ppr.
The 99-year leasehold site had 4 other bidders that included Kingsford Development (Developer for Kingsford Waterbay) at $1.57 billion, OUE Ltd at $1.45 billion, Cheung Kong Property (Developer for Stars of Kovan) at $1.40 billion and Far East Organization at $1.29 billion.
“The bids the site received did not surprise me. They may have been fuelled by the expectation of developers that the site would have received keen competition due to the optimism in the office investment sale market amid the growing improvement in the leasing market,” said JLL head of research and consultancy Tay Huey Ying.
Tay added that the bullish bids were also a reflection of the confidence of developers on the potential of the Beach Road area as an office cluster to complement Raffles Place and Marina Bay. The area has grown with the completion of Grade A office towers at the South Beach and at DUO.
Nicholas Mak, ZACD Group executive director is of the opinion that the bullish bid could be due to the developer anticipating that by the time the commercial building is complete in about 2022, the market in office leasing might be at the centre of a recovery stage.
On the other hand, Christine Li, Cushman & Wakefield director noted that major developers such as City Developments (Developer for New Futura and Gramercy Park), Keppel Land, and CapitaLand (Developer for Victoria Park Villas) did not participate. This could be a caution sign with local players being less confident of their chance to win and being discouraged by the behavior of some foreign developers to aggressively bid for the land.
Li also noted that there could be differing views on the medium to long-term prospects of the office leasing market.
The Beach Road site consists of 2 plots, a subterranean stratum of 12,648 square foot site area and a 226,332 square foot site. The site is also occupied by the previous Beach Road Police Station taking 24,757 sqft of plot 1.
The site has a maximum permissible gross floor area of 950,593 sqft, which includes the former police station. At least 70 percent of the area is set for office use. The remainder can be used as retail, additional office space, hotel, commercial school, residential uses or serviced apartment.
As at the third quarter of 2017, the corridor of Beach Road – Ophir Road – Rochor had over 1.6 m sqft of Grade A office space.
According to JLL, the average monthly gross rent is $8.50 psf.
“As per the REALIS data, newer developments in the area average at $10.30 psf in a month. The rate is close to that of Raffles Place area at $12.30 psf per month,” said Lee Nai Jia, Edmund Tie & Co.