Source : The Business Times, November 7, 2007
Property consultants wonder if caution is creeping into this sector
In a possible reflection that caution among developers may be extending to the office sector, a tender for a transitional office site in Tampines yesterday drew just one bid - from City Developments Ltd's (CDL) unit Glades Properties.
The thin bidding may be due to concern that strong office demand currently outside the CBD is the result of an overflow of demand from the CBD.
And its bid of $10 million, which worked out to $80.65 psf per plot ratio (ppr), was lower than the $100 psf ppr region that most property consultants had expected the 15-year leasehold site to fetch.
The government has indicated recently that it will inject more office space into the market soon - a step that could cool prices. Some felt that yesterday's bidding reflected caution on part of the developers while others suggested Tampines may not be a popular location among office investors.
They pointed out that the next-door 99-year leasehold office site offered through a tender that closed in May this year had also drawn just one bid, again from CityDev, although at a more substantial price of $622 psf ppr.
The maiden 15-year leasehold transitional office plot next to Newton MRT station attracted a whopping 11 bids with a top price of $219 psf ppr in August.
Whether the weaker sentiment among office investors is confined to Tampines or is spreading to the Central Business District (CBD) as well will be seen in a tender closing on Nov 13 for Marina View Land Parcel B, a 99-year leasehold site with stipulated minimum office and hotel components.
Property consultants polled by BT unanimously expect URA to award the 124,000 sq ft transitional office site at Tampines Ave 5 to CDL, despite its bid being the sole offer and that too at a price lower than expected.
'Government should make the award since as a transitional office site, it is part of the interim solution to the acute office shortage here. Otherwise, the government objective would not be met,' Knight Frank managing director Tan Tiong Cheng reasoned.
The Urban Redevelopment Authority said yesterday in response to a query by BT that 'the government will continue to release more transitional office sites to meet business needs; details on these sites will be released shortly'.
Colliers International director (research and consultancy) Tay Huey Ying said: 'If the government releases more transitional office sites in or near the CBD, I believe demand will be healthy.'
She reckons the thin bidding for the Tampines plot yesterday may be due to concern among developers that strong office demand currently outside the CBD is the result of an overflow of demand from the CBD.
'There may be concern that post-2010, when there will be a large influx of new office space being completed within the CBD, the spillover demand for suburban offices may recede,' she added.
'Next week's tender for Marina View Land Parcel B will be interesting to watch, to see whether developers are also concerned about office supply in the CBD itself,' she added.
CB Richard Ellis executive director Li Hiaw Ho said: 'That is a much better site (than today's Tampines plot), although I do not expect a lot of bidders because it is a huge site with a substantial outlay.'
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