Keen Interest In Toa Payoh Commercial Site

Source : The Straits Times, Oct 17, 2007

Plot in Lorong 6 draws nine offers; Sim Lian puts in highest bid of $38m

A SMALL commercial site in Toa Payoh has reaped an offer of $38.2 million after ‘aggressive’ bids by nine companies.

Sim Lian Development lodged the top bid for the 99-year leasehold plot in Lorong 6 but it was only a whisker ahead of its next closest rival.

Hersing offered $37.34 million for the 1,396.8 sq m plot, United Engineers Developments bid $36.1 million while HSR International Realtors came in with $35.5 million.

‘The bids are aggressive, which is reflective of current market conditions,’ said Mr Donald Han, managing director of Cushman & Wakefield.

Sim Lian’s bid works out to $847.5 per sq ft (psf) of potential gross floor area. It plans to build an office block to ride on the red-hot office market, which is seeing rising rents amid an acute shortage.

If it is awarded the site by the HDB, the firm - wholly owned by privately held Sim Lian Holdings - will proceed quickly.

Sim Lian Holdings director Ken Kuik said the company hopes to complete construction in two years, before more supply comes on stream elsewhere in Singapore. The first phase of the mega Marina Bay Financial Centre will be ready around 2010.

The block, which can be built up to a gross floor area of 4,190.4 sq m, could be 10 to 13 storeys with some retail shops on the ground floor, said Mr Kuik.

Office space will be aimed at smaller firms, particularly those forced out of the Central Business District (CBD), he said.

CBD buildings have been registering record rents and the sharpest increases recently.

‘It’s for long-term investment,’ said Mr Kuik. ‘We should be able to achieve rents of $7 to $7.50 psf on average.’ That is the level HDB Hub offices are commanding, he added.

Mr Han said: ‘If Sim Lian can rent out the space at about $7 psf, it would justify a net yield of about 4.5 per cent, which is the prevailing market yield for suburban offices.’ He added that further upside is likely.

Rental hikes in the office market have prompted more firms to consider cheaper locations further from town, in business parks or in other industrial space.

‘Suburban offices will continue to enjoy spillover demand,’ said Mr Han.