Singapore land fetches record price as office market recovers

Enjoying the sights: Tourists visiting Merlion park in Singapore.

SINGAPORE: Guocoland Ltd submitted the winning bid of S$1.62bil (about RM5bil) for a site earmarked for office development in Singapore’s central business district, the highest price per square foot for land in the city. 

The bid from Singapore-listed Guooland translates into a price of S$1,706 per square foot of gross floor area, according to a statement from the Urban Redevelopment Authority. The price beat the previous record, set for a Marina Bay site in November 2016 when IOI Properties Group paid S$2.6bil, or S$1,689 per square foot of gross floor area.

“The bid is a record for land in Singapore’s history, reflecting developers’ optimism over the recovery of the office market,” said Christine Li, director of research for Singapore at Cushman & Wakefield Inc. 

Located at the edge of Singapore’s business district, the plot is bordered by Beach Road, Nicoll Highway and Rochor Road. The buyer is required to use at least 70% of the site’s 950,592 square feet of gross floor area for offices, with a smaller area reserved for residential housing, a hotel or serviced apartments.

Office prices he remained resilient despite a record four million square feet of prime office supply and a 19% drop in rents over the past two years, according to Cushman. Total investment sales rose to S$15.2bil in the first half of 2017, equal to two-thirds of the total volume in 2016. Sales are expected to remain robust for the rest of the year and reach about S$30bil, Cushman said earlier when the tender was announced.

The bid is a clear reflection of the bidders’ confidence in the office market, which is in its initial phase of recovery,” said Desmond Sim, head of research for Singapore and Southeast Asia at CBRE Group Inc. Grade A office rents were at S$9.10 per square foot per month, as of the third quarter, the first increase in 10 quarters, CBRE said.

A possible disadvantage of the Beach Road site is the projected construction time frame. With the development expected to be completed in 2022, it’s likely to face competition from the next wave of supply totaling two million square feet at the Marina Bay site and the Golden Shoe car park redevelopment, which will be completed in 2021, according to Cushman.

An unidentified buyer committed to bid the reserve price of S$1.14bil, or S$1,197 per square foot of gross floor area, the Urban Redevelopment Authority said in June. - Bloomberg