SINGAPORE – The public tender for a plum site in Marina View closed on Tuesday (Sept 21) with just one bid, as developers turned cautious due to its hefty land and development costs and uncertainty over office and hotel sectors in the Central Business District (CBD), analysts say.
Boulevard View put in a bid price of $1,508,000,101, just $101 above the $1.508 billion minimum price that triggered the tender launch. That works out to $1,379 per sq ft per plot ratio (psf ppr) – which many analysts noted was “on the low side”.
They said Boulevard View, an entity linked to IOI Properties Group, is most likely the party that triggered the release for the site’s sale. IOI Properties did not respond to The Straits Times’ queries by press time on Tuesday.
The Malaysia-listed group is developing another white site in Central Boulevard which it acquired for $2.57 billion in November 2016 after triggering its release with a minimum bid of $1.536 billion. That worked out to a land rate of $1,689 psf ppr.
“The hollowing out of the CBD during the pandemic, and the slow and interrupted return to CBD offices may have dampened the confidence in city living by developers,” Ms Tricia Song, CBRE’s head of research for South-east Asia, noted.
The bid from Boulevard View is lower than the most recent Government Land Sales residential sites sold in the CBD, Ms Song pointed out.
In September 2019, One Bernam’s site in Tanjong Pagar received four bids, with a top bid of $1,462 psf ppr, while Midtown Modern’s site in Tan Quee Lan Street received two bids, with a top bid of $1,535 psf ppr, she said.
Ms Song said Tuesday’s lone bid is also in “stark contrast to the competitive bidding in five suburban or city fringe residential sites” so far this year.
“The sites in Lentor Central, Tampines Street 62, Tengah Garden EC (executive condominium), Ang Mo Kio Avenue 1 and Northumberland each garnered seven to 15 bids, and the bid prices were above expectations,” she said.
She attributed lacklustre interest for the Marina View site to competition from unsold residential units in the CBD and potential new supply from redevelopment there.
The white site – intended for a mixed-use development with residential, hotel, commercial and/or serviced apartments – was released under the reserve list of the first-half 2021 Government Land Sales programme.
It can yield 905 private homes, 2,000 sq m in gross floor area of commercial space, and 540 hotel rooms.
The tender could have been affected by very high total development costs, which could pose significant risks to the developer.
While the economy is recovering, the pandemic still poses uncertainties, Mr Ong Teck Hui, senior director of research and consultancy at JLL, said.
Developer participation was “below expectation”, due in part to uncertainty over the resumption of global travel and the ongoing manpower crunch in the construction sector, Mr Wong Xian Yang, head of research for Singapore at Cushman & Wakefield, said.
Mr Calvin Li, head of transaction advisory services, hotels and hospitality at JLL Asia-Pacific, said the absence of more bidders suggests that “most investors continue to be cautious about… potentially high development costs associated with an upscale or luxury hotel”.
ERA’s head of research and consultancy Nicholas Mak flagged higher development risks due to the expected longer development timeframe, and potential fallout from the financial troubles of Chinese property giant Evergrande Group.
“This may have put some developers off gigantic-ticket projects,” he said.
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