Marina Gardens Lane GLS site: A leap of faith or first-mover advantage?
By Elizabeth Choong
/ EdgeProp Singapore |
View of Marina Bay and the Singapore skyline from Marina Bay Residences (Photo: Samuel Isaac Chua/EdgeProp Singapore)
SINGAPORE (EDGEPROP) - URA recently launched a 99-year leasehold site along Marina Gardens Lane for tender under the 2H2022 Government Land Sales (GLS) programme. The outcome of the tender is highly anticipated because of the site’s prime downtown location and it is the first of multiple sites that will be launched for tender in the Marina South precinct.
The Marina Gardens Lane GLS site is zoned residential, with commercial on the first storey. It can yield 790 residential units and 750 sq m (8,073 sq ft) of commercial space.
A leap of faith?
Paying over a billion dollars for a site that lacks existing amenities such as schools may be a leap of faith for some developers. Nevertheless, this is mitigated by the possibility that the development could be a new iconic building that becomes part of Singapore's extended city skyline.
The URA tender documents state that the development on the Marina Gardens Lane site must be integrated with the Marina South MRT Station. Hence, its future residents will benefit greatly from the close proximity to public transport. They will also be able to enjoy beautiful views of the Straits of Singapore, the Marina Reservoir and Gardens by the Bay, because the site overlooks both water bodies and the horticulture showpiece.
More importantly, the Marina Gardens Lane site is in the Marina South precinct and URA has transformative plans for the currently undeveloped precinct. The Marina Gardens Lane site is the first land parcel in the precinct to be launched for tender. As such, the successful bidder has a first-mover advantage to kickstart the development of this prime area.
URA announced that another site in Marina South will be launched for tender next June under the GLS programme for 1H2023. The white site at Marina Gardens Crescent is located beside the Marina Gardens Lane site. The Marina Gardens Crescent site can yield 775 residential units and 6,000 sq m (64,584 sq ft) of commercial space. (Find Singapore commercial properties with our commercial directory)
Developers need to have faith that URA’s plans for the Marina South precinct will come to fruition, especially since development cost for the Marina Gardens Lane site is expected to be high because of its land size and downtown location. Developers will also have to take the risk that potential buyers are willing and able to look beyond the current undeveloped state of the area and believe in URA’s vision for the precinct.
However, URA and the Singapore government have an excellent track record in the implementation of their development plans and transformative visions. The neighbouring Marina Bay area serves as an excellent testament.
URA’s vision for Marina South
The 45ha Marina South precinct is located beside Gardens by the Bay and Marina Barrage. The precinct is envisioned by URA to be a mixed-use neighbourhood with residential, retail, office and hotel uses. Upon completion, Marina South is expected to have 10,000 homes.
Marina South is well-served by numerous MRT stations including Marina South, Gardens by the Bay, Marina Bay, Downtown and Shenton Way. This aligns with URA’s vision for Marina South to be a sustainable and car-lite precinct that is pedestrian-friendly with lots of landscaped public spaces and cycling paths.
The precinct is also planned to be a 10-minute neighbourhood where residents can meet their daily needs via a short walk from their home. Amenities will be nestled within mixed-use developments and be easily accessible via public spaces or key pedestrian routes.
Lack of existing amenities, especially schools
The Marina Gardens Lane GLS site is largely surrounded by empty land because it is the first plot launched for tender in the Marina South precinct. With the exception of Marina South MRT Station, there are few existing amenities within a 1km radius that cater to families.
There are no supermarkets, food courts or shopping malls within walking distance, and no schools within a 2km radius. However, the successful bidder for the Marina Gardens Lane site must build an early childhood development centre of at least 500 sq m (5,382 sq ft). The gross floor area (GFA) of the childcare centre need not be computed as part of the 750 sq m (8,073 sq ft) cap for commercial space.
Marina Bay Sands, Marina Bay Financial Centre and Gardens by the Bay are the nearest neighbours. Marina Bay Residences, which is about 1km away, is the nearest condominium. Other condominiums with a 2km radius include Marina Bay Suites, Marina One Residences, One Shenton, Robinson Suites, Lumiere and 76 Shenton.
However, the empty plots are expected to be gradually launched for tender as part of URA’s plan for the precinct. A white site along Marina Gardens Crescent, which is beside the subject site, will be launched for tender next June.
Recent regulations on unit size for Central Area
URA recently introduced new regulations to align with its aim of creating a more vibrant Central Area (which includes the Marina South precinct) by encouraging more live-in families. Under the new regulations, a minimum 20% of the units in a new non-landed residential development in the Central Area must have net internal area of at least 70 sq m (753 sq ft). This includes the residential component of a mixed-use development. The new regulations will take effect from Jan 18, 2023.
The downtown core tends to attract investors instead of owner-occupiers due to the current lack of family-friendly amenities. As such, developers tend to build more one-bedroom or studio units in their downtown projects.
However, the new regulations will restrict the number of small units that developers can build on the Marina Gardens Lane site. As such, developers must ensure that the future development on the site can also attract owner-occupiers. The mitigating factor will be URA’s overarching aim to have more lived-in families in the Central Area. Thus, URA has put in place measures to encourage the development of more mixed-use projects in the area.
Large site means higher development risk for developers
The Marina Gardens Lane site is a large land parcel of 12,245 sq m (131,805 sq ft) with a maximum GFA of 68,573 sq m (738,120 sq ft).
A large site will require more capital due to higher land and construction costs. This will increase development risk for developers who might manage the risk by seeking a joint venture with another developer or a construction firm. Although joint ventures will lessen development risk, it could result in different problems and risks.
Market observers have estimated the winning bid for the site to range from $1,360 to $1,490 psf per plot ratio, which translates to a land price of $1.003 billion to $1.1 billion. Assuming a top bid of $1.05 billion and profit margin of 20%, the residential units on the Marina Gardens Lane site have an estimated selling price of about $2,600 psf.
Tender documents by URA state that the design of the future development must be reviewed by the Design Advisory Panel. As such, an iconic and outstanding design befitting its prominent location can be expected. Such a unique design will push up construction cost and complexity, which will increase development cost and risk.
Developers must complete and sell all residential units in their project within five years of purchasing the land. If they are unable to do so, they will have to pay additional buyer’s stamp duty of 35% on land price. The site can yield 790 residential units, which means that there will be much pressure on the successful bidder to sell all units before the deadline.
However, the site’s location in the heart of the prestigious Marina South precinct could make the residential units in the upcoming development status symbols.
Competition expected to heat up
Currently, there are four empty sites beside the Marina Gardens Lane GLS site. The four land parcels have the same plot ratio of 5.6 as the subject site, as well as the same zoning of residential, with commercial on first storey.
The successful bidder for the Marina Gardens Lane site can expect fierce competition when URA launches the four plots for tender. Intensity of competition will depend on timing and frequency that URA launches the four sites.
However, the subject site has the advantage of being integrated with Marina South MRT Station, unlike the other four sites which are not located beside an MRT station. As such, future developments on the four sites are less likely to be integrated with an MRT station.
In addition, URA just announced that a white site – Marina Gardens Crescents GLS site – located just across the road from the subject site will be launched for tender in June 2023. Due their tender launch dates being separated by a mere six months and locational proximity, developers for both sites can expect potential buyers and tenants to do comparison shopping.
Another site in the vicinity - Marina View GLS site - awarded to IOI Properties in September 2021 may be another rival for tenants. Completed condominiums located within a 1km radius of the subject site could pose some competition for tenants too.
Only one bid for Marina View GLS site
The Marina View site is the last GLS site in the neighbourhood that was awarded. The site is within a 2km radius of the Marina Gardens Lane site.
IOI Properties submitted the sole bid for the Marina View site and was awarded the site for $1.508 billion ($1,379 psf ppr) in September 2021. The mixed-use site can yield 905 residential units, 540 hotel rooms, and maximum commercial space of 2,000 sq m (21,528 sq ft).
The lack of interest in the Marina View GLS site could be attributed to its large land size and developers’ low risk appetite for hotels on the back of uncertainties about international travel and tourism post-pandemic.
Some developers may choose to wait and see the sales performance of residential units from the Marina View site, before deciding if they wish to bid for GLS sites in Marina South precinct. Moreover, there are a number of empty plots that will be launched for tender, so there is less urgency for developers to make an immediate decision.
Weak price growth for nearby existing condominiums
The nearest completed condominium to the Marina Gardens Lane site is Marina Bay Residences. The 99-year leasehold condominium is about 1km away from the GLS site. The 428-unit condominium obtained temporary occupation permit (TOP) in 2010.
Average resale price for Marina Bay Residences declined by 9%, from $2,542 psf in 2012 to $2,311 psf in 2022. In contrast, average resale price for 99-year leasehold condominiums in District 1 grew by 6% over the same time period, while average resale price for 99-year leasehold condominiums islandwide surged 36%. Current average resale prices for 99-year leasehold condominiums in District 1 and islandwide are $2,060 psf and $1,401 psf respectively.
Marina Bay Suites and Marina One Residences are 99-year leasehold condominiums located within a 2km radius of the subject site. The 221-unit Marina Bay Suites and 1,042-unit Marina One Residences obtained TOP in 2013 and 2017 respectively.
Average resale price of Marina Bay Suites fell 29% from $2,699 psf in 2014 to the current $1,910 psf. In contrast, the younger Marina One Residences fared better, with a slight increase of 8% from average resale price of $2,291 psf in 2019 to the current $2,477 psf.
Conclusion
The prime location of the Marina Gardens Lane site and URA’s exemplary track record are factors favourable to the site, which could make residential units in Marina South trophy homes that are much sought after by the well-heeled.
However, buyers will have to overlook the capital depreciation for the nearby Marina Bay Residences and Marina Bay Suites, as well as believe in URA’s ability to deliver on their vision for the Marina South precinct.
Specifically, buyers will have to believe that amenities in the area will improve sufficiently under URA’s plan, so as to attract demand from tenants and lived-in families. Additionally, buyers will have to believe that the increased demand will give a boost to resale prices and capital appreciation of condominiums in the precinct.
The current undeveloped status of the Marina South precinct is not expected to deter far-sighted developers and buyers from taking a risk. Moreover, URA’s excellent track record in implementing long-term development plans would go a long way to assure developers and buyers that taking such a risk on the Marina Gardens Lane GLS site is not a leap of faith but a mere hop.
Check out the latest listings near Marina bay, Marina Bay Residences, Marina Bay Suites, Marina One Residences, Marina View, One Shenton, Robinson Suites, Lumiere, 76 Shenton
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