GuocoLand bids $1.62 bn for Beach Road site
By Cecilia Chow
/ EdgeProp |
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The URA tender for the commercial site at Beach Road closed on Sept 28 with five bids received. The top bid came from GuocoLand, which submitted a bid of $1.62 billion ($1,706 psf per plot ratio).
The four other bidders for the Beach Road site were Chinese developer Kingsford Development ($1.57 billion, $1,636 psf ppr); companies linked to OUE Ltd ($1.45 billion, $1,526 psf ppr); Japura Development, a unit related to Hong Kong tycoon Li Ka-shing’s Cheung Kong Property Holdings ($1.4 billion, $1,477 psf ppr); and entities related to Far East Organization ($1.29 billion, $1,362 psf ppr).
Tay Huey Ying, JLL head of research & consultancy, was not surprised by the bids received for the 99-year leasehold site. “The aggressive bids are likely to have been fuelled by developers’ expectation of keen competition for the site given that optimism is riding high in the office investment sales market on the back of the nascent recovery in the leasing market,” she says.
The bullish bids submitted for the site also reflect developers’ confidence in the Beach Road-Ophir Road-Rochor area’s potential as an office cluster that will complement the existing financial district at Marina Bay and Raffles Place, says JLL’s Tay. It has become more developed with the completion of DUO by M+S and South Beach mixed-use developments with Grade-A office towers.
(Image source: URA)
“A possible reason for the bullish bid is that the developer may be of the opinion that when the new commercial building on this new site is completed in about 2022, the office leasing market could be in the middle of the recovery phase,” says Nicholas Mak, executive director of ZACD Group.
However, Christine Li, director of research at Cushman & Wakefield observes “a clear lack of participation” by major developers such as CapitaLand, Keppel Land and City Developments. She sees it as a sign of caution, with “local players less confident of their winning chances, and deterred by the aggressive land bidding behaviour of some foreign parties”.
There could also be divergent views on the prospect of the office market over the medium- to long-term, reckons Li. “While Beach Road site will only be completed in 2022 and beyond, it could face stiff competition from the Central Boulevard site in Marina Bay and the redevelopment of Golden Shoe carpark in Raffles Place slated for completion in 2021.”
The 99-year leasehold site at Beach Road is made up of two plots: a 2,26332 sq ft site and a subterranean stratum with a site area of 12,648 sq ft. The former Beach Road Police Station sits on this site and occupies approximately 24,757 sq ft of Plot 1. The maximum permissible gross floor area (inclusive of the old police station) is 950,593 sq ft, of which a minimum 70% is designated for office use. The balance can be allocated for additional office space, retail (subject to a maximum GFA of 32,292 sq ft), commercial school, hotel, serviced apartment or residential uses.
As at 3Q2017, the Beach Road-Ophir Road-Rochor corridor has more than 1.6 million sq ft of Grade-A office space, with average monthly gross rents of $8.50 psf per month, according to JLL.
The monthly rents of newer developments in the Beach Road area have an average rate of $10.30 psf per month based on REALIS data, according to Lee Nai Jia, head of research at Edmund Tie & Co. This brings it on a par with office rents in the Raffles Place area, where rents average $12.30 psf per month, he adds.
Developers and investors picked up close to 50% more office investment properties including land (in terms of sales value) compared to a year ago, estimates JLL. “This, in turn, has been underpinned partly by the strengthening CBD Grade A office leasing market,” says Tay. JLL’s preliminary estimates show that the average monthly gross rent of Grade-A office space in the CBD strengthened by 4.3% q-o-q to $8.86 psf per month in 3Q2017, following the modest 0.7% q-o-q uptick recorded in 2Q2017 that ended eight consecutive quarters of rent decline.
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