URA kickstarts development of Jurong business district with launch of 6.5ha master developer site

/ EdgeProp Singapore |

June 22, 2023 7:48 PM SGT

Based on URA’s estimate, the entire development site could yield at least 1.57 million sq ft of office space and approximately 1,700 residential units. (Map: URA)

SINGAPORE (EDGEPROP) - The government has kickstarted the next phase in its planned development to transform the Jurong Lake District into a new business node that would rival the Central Business District.

On June 22, it launched a massive 6.5ha white site for sale by tender.

This tender comprises three plots of land which, when developed, will link the existing commercial centre at Jurong East MRT station, to the new precinct and the future Jurong Lake District station on the upcoming Cross Island Line. (Find Singapore commercial properties with our commercial directory)

A concept-and-price tender approach will be adopted to evaluate the tender submissions and tenderers will submit their selected concept proposals and tender prices separately.

The government says it will shortlist submitted concept plans that feature “a distinctive, highly sustainable mixed-use development with well-designed people-friendly public spaces and amenities to serve the needs of the business and local communities”.

Only “compelling” shortlisted concept proposals will proceed to be evaluated based on their price, URA says.

Based on URA’s estimate, the entire development site could yield at least 1.57 million sq ft of office space, approximately 1,700 residential units, and 785,480 sq ft for complementary uses including shops, restaurants, entertainment, hotels and community uses.

The government expects that after the award of the tender, it could take 10 to 15 years for the whole scale of development to be progressively completed and sustain the burgeoning resident population there.

Though compelling, short-term risks abound

The conditions of the tender will require the successful bidder to develop at least 753,200 sq ft of office space and at least 600 private residential units as part of the first development phase.

Subsequently, the master developers would have the flexibility to phase out the remaining supply based on the prevailing market demand at the time and framed by an option scheme established by URA.

Based on this option scheme, the successful master developer will only have to pay upfront for the land needed to be developed under the first development phase. The master developer will then pay an option fee that corresponds to the option period, which ranges from five years to eight years, for the right to buy the rest of the site.

This option scheme will help developers mitigate the risks of such a long-term project, says Wong Siew Ying, head of research and content at PropNex Realty. “The ability to choose the option period will give developers flexibility in master planning and developing the site, in accordance with their own assessment of risks and market demand,” she says.

details of land parcel - EDGEPROP SINGAPORE

Table: URA

According to Tay Huey Ying, head of research and consultancy at JLL Singapore, the phased development of office space in the Jurong Lake District area will help to alleviate the tight supply of good quality office space that is expected to arise in the area over the next few years.

“The site has garnered substantial interest from developers, both domestic and foreign, since it was placed on the 1H23 GLS confirmed list in December 2022,” says Tay, adding that developers and future occupiers are optimistic about the long-term potential of the Jurong Lake District area to be the largest commercial node in Singapore outside the CBD.

However, she cautions that it could be challenging to attract occupiers to lease the office space that will be completed in the first phase. This is because most of the transport infrastructure such as the Jurong Regional Line and Cross Island Line stations will not be completed yet.

Land cost could exceed $5 billion

The most recent greenfield sites sold by the government that also features a sizeable office component were all in the CBD. The most recent was the GLS site where Guoco Midtown is being built, which was sold for $1.62 billion, or $1,706 psf ppr, in October 2017. This site will yield about 700,000 sq ft of office space.

The upcoming IOI Central Boulevard Tower will inject about 1.26 million sq ft of office supply into the market. The GLS site was sold for $2.57 billion, or $1,689 psf ppr, in November 2016.

According to CBRE, the development land cost for the Jurong Lake District master development site could be at least $1,300 psf ppr. This means that based on a total GFA of approximately 3.93 million, the total land cost could exceed $5 billion.

Chart: CBRE

“We estimate Phase 1’s minimum requirement is about 35% of total space, and hence could cost $1.8 billion to $2 billion. In totality, the office component will make up at least 40% of this development, while residential is capped at 45% of total development,” says Tricia Song, head of research, Southeast Asia, CBRE.

She adds: “With this focus on decentralised office development, we believe there should be limited new greenfield office sites in the CBD made available via the GLS in the near future. Going forward, the CBD will see rejuvenation via ageing office assets being redeveloped into mixed-use developments”.

Stringent development conditions

The long-term plan for the Jurong Lake District is to turn the area into a “model sustainability district” where new developments would have net-zero emissions by 2045. The entire area will have a variety of new mixed-use developments, curated public spaces, and community amenities to serve the business and local communities expected to take root there.

Whoever wins the bid to take on the master development of this site will be responsible to plan and execute the phased developments, as well as adopt district-level urban solutions like a district cooling system and a pneumatic waste conveyancing system.

In addition to these requirements, the master developer will have to grapple with a host of planning requirements such as lower car parking provisions and green building certifications, and this could moderate the eventual bid prices, says Tay of JLL.

“We expect the large investment outlay and the medium to long-term commitment of 10–15 years to limit bidders to experienced large-scale mixed-used developers with deep pockets who are likely to form consortiums to jointly participate in the tender in order to share the development risks,” says Tay.

Map: URA

“With a 20% weight attached to the track record of tenderers in master planning sustainable and mixed-use projects of a similar scale (locally or overseas), the effect is to streamline the competition to all but the most established developers with a strong track record and financial leverage,” says Lam Chern Woon, head of research and consulting, at Edmund Tie.

He shares the sentiment that no more than three or four bids will be submitted, and consortiums or joint ventures are likely a way to pool expertise and mitigate development risk.

However, he still expects bidding to be fierce given the clear first-mover advantage in developing this commercial node. “It will be all the more appealing if prospects brighten for the resumption of a high-speed rail between Singapore and Kuala Lumpur,” says Lam.

The tender for this master development site will close on March 26 next year.

Check out the latest listings near Jurong East MRT station

Tags: