Aljunied Temp Office Plot Draws Single Bid

Source : The Strait Times, Jan 17, 2008

A TEMPORARY office site in Aljunied Road has attracted only one bid - and a far lower-than-expected one at that.

The $7.8 million sole offer that came in for the 1.88ha site by the close of its tender yesterday represented only a quarter of the $30 million or so that experts had predicted.

This follows similarly cool responses for other transitional office sites released recently. Property consultants said it could signal that such plots - introduced last year to relieve the severe shortage of office space - are no longer necessary.

All eyes are now on whether the Urban Redevelopment Authority (URA) will award the 15-year leasehold site to Mezzo Development, a small development and construction firm that was the sole bidder.

A related firm, Mezzo Properties, turned in the top bid for a transitional office site in Mountbatten Road last week. Although the offers for the Mountbatten parcel also came in lower than predicted, the site drew a better response with three bids.

URA awarded the site to Mezzo the day after the tender closed.

But the offer for the Aljunied site is only about half the top bid for the Mountbatten plot.

The Aljunied bid works out to just $38.37 per sq ft of gross floor area - close to the level of some industrial space, said Mr Nicholas Mak, director of research and consultancy at Knight Frank.

He said the market may have reached a saturation point for such transitional office space. 'All these temporary sites attract only certain types of tenants', who may have had their fill of the four short-term sites that URA has pushed out to date.

Besides the Aljunied and Mountbatten sites, URA released a plot in Tampines late last year that drew only one bid. The first such site, in Scotts Road, elicited a strong 11-bid response.

Mr Mak added that market uncertainties arising from the recent stock-market turbulence could also be a reason for the cool response.

Another factor could be that construction costs have gone up more quickly than the expected rise in office rentals in Aljunied, making this site less attractive as an investment, suggested Mr Ku Swee Yong, director of marketing and business development at Savills Singapore.

He also agreed that 'we probably do not need any more transitional office sites'. Any new sites released in the coming months are unlikely to help relieve the current space crunch anyway, Mr Ku said. Construction on them will be finished only in late 2009 or beyond - when a flood of office space is already expected. 'You don't want your transitional building to be competing with a whole lot of new Grade A premium space,' he added.

URA said yesterday that it would 'consider releasing more transitional office sites if there is demand for such office space'. It also said the last time it did not award a tender for a sale site was in 2001, for a white site - where developers can choose whether they want to put up a residential or commercial building - at Central Boulevard.