Zero Bids For Hotel Site Is First In Seven Years

Source : The Business Times, May 22, 2008

Consultants cite weak economic sentiment, large site for 500 rooms

A HOTEL site at Race Course Road has failed to receive a single bid. According to the Urban Redevelopment Authority, not since February 2001 has there been a launch of a development site through the Government Land Sales Programme (GLS) that did not take off.

The 0.9 ha site at the junction of Race Course Road and Bukit Timah Road has a maximum permissible gross floor area (GFA) of 338,417 sq ft, and is next to Little India MRT station. It was launched for sale by public tender through the confirmed list under the GLS programme for the first half of 2008.

While sites on the confirmed list are generally thought to have the potential to be developed faster than those on the reserve list, developers obviously did not think so.

Knight Frank director (research and consultancy) Nicholas Mak said that the poor showing could be 'a signal to relook the quantum of land for hotel use in the confirmed list of the next GLS programme'.

In April, the government released another site on the confirmed list for sale at Balestier Road and Ah Hood Road.

In addition, there are also eight hotel sites on the reserve list currently.

Mr Mak said there could be three reasons for the Race Course Road site not receiving any bids: location; weak economic sentiment; and oversupply. He also said it was more likely to be a combination of the latter two reasons.

Jones Lang LaSalle Hotels executive vice-president and head of corporate advisory (Asia) Chee Hok Yean believes that the sheer size of the site could have put potential bidders off.

Earlier estimates had put the range of bids at between $400 - $700 per square foot per plot ratio (psf ppr).

Estimating that the site could yield 500 rooms for a three-star hotel at a possible bid price of $500 psf ppr, Ms Chee believes that land price of $170 million would have been too hefty for a potential hotel developer of this category to bear. 'Construction costs have also gone up,' she added.

While Ms Chee also added that investor sentiment is generally weak at the moment, she said that average room rates and occupancy levels in Singapore have remained high, suggesting that there is no issue with an oversupply of hotel rooms here yet.