UOB Kay Hian Wins Office Site With $242.5 PSF Bid

Source : The Business Times, April 25, 2008

UOB Kay Hian Trading has landed the Scotts Road/ Anthony Road 15-year lease site with a surprising record bid of $242.5 per square foot (psf), double original estimates in a strongly contested tender.

The stockbroker beat seven other bidders for the transitional office site by offering $34 million for parcel A at Scotts Road/ Anthony Road with an area of 8,682.8 square metres (93,461 square feet). It is offered on a short-term lease of 15 years.

The tender surprised consultants who had expected bids to come in between $100 and $130 psf.

UOB Kay Hian's $242.5 psf bid was 16.5 per cent higher than the second bid from Sun Venture (S) Investments.

It is also 11 per cent more than what had been paid for the first transitional office site in Newton in August 2007.

This was awarded to Hwa Hong Corporation and KOP Capital for $37 million, or $219 psf.

The Urban Redevelopment Authority (URA) yesterday released the results of the latest transitional office tender, its fifth. The previous tender for a site in Aljunied Road closed with only one bidder and was withdrawn as the reserve price was not met.

But consultants said that the results of the latest tender does not necessarily signal a turnaround of the moribund property sector. They noted the prestigious location of the site and that it is a hop and skip away from the Newton MRT.

'I think it's too early to pop the champagne yet,' said Nicholas Mak, director of consultancy & research department, Knight Frank.

'As the site is located next to Newton MRT station and proximate to the Central Business District, companies leasing the space here can reduce their occupancy costs significantly yet still have their office located in a strategic location,' said Mr Mak.

Specifically, continued tight office supply and strong demand have sustained the growth in rentals for Q1 2008 in which average grade A office rentals in Raffles Place reached $17.63 psf per month. This rental level is much higher compared with the current monthly gross rent of $6-8 psf in the Scotts Road area.

UOB Kay Hian, consultants speculated, will move its back room offices to the Newton office when it is ready and free up the expensive space it currently occupies in Raffles Place.

Ku Swee Yong, Savills' director of business development and marketing, estimated that after factoring construction and the land costs, UOB Kay Hian will still make a nice profit on the Newton site based on monthly rental of $7 psf.

'Given this bid, the economics makes total sense,' he said.