Transitional Office Site Fetches Just One Bid

Source : The Business Times, January 17, 2008

INTRODUCED as a quick fix to address the shortage of office space, the new transitional office sites may just as quickly become redundant.

The Urban Redevelopment Authority (URA) closed the tender for the fourth transitional office site at Aljunied Road and Geylang East Avenue 1 yesterday with only one bid received.

The bid price was also below earlier market expectations at $7.8 million or a unit land price of $38.35 per square foot per plot ratio (psf ppr).

The bidder was Mezzo Development, which also put in the top bid for the third transitional office site at Mountbatten earlier this month. Only three bids were received then with the top bid coming in at $69.17 psf ppr.

In November 2007, the second transitional site in Tampines also received a single bid of $80.65 psf ppr.

The recent tenders are a stark comparison to the first one, which saw 11 bids received in August 2007 and a top bid of $219 psf ppr.

That the site was next to Newton MRT Station may have had something to do with it.

Cushman & Wakefield managing director Donald Han said that demand (and prices) could increase if the transitional office sites are more attractive. But at the going rate, these sites could well be phased out. Mr Han said: 'At some stage if demand (and prices) drops even further, the government will have to decide if these sites are relevant.'

As at December 2007, the URA had said in its H1 2008 land sales press release that, 'more sites in a number of locations will be made available for the development of transitional offices'.

But as Mr Han notes, the closer in time these sites are released to 2010, when projected new office supply comes onstream, the higher the risks involved in developing them. 'The window of opportunity for whoever buys these sites is getting narrower,' he added.

While Savills Singapore director (marketing and business development) Ku Swee Yong does not believe that there would be an oversupply of office space in 2010, he does feel that transitional offices are not entirely feasible either.

'Especially when you consider construction time and rising construction costs,' he said.

Mr Ku, who estimated that construction time alone could take between 9 and 12 months, added: 'I don't think we need to keep launching these (transitional) sites.'