Thursday, May 26, 2011

$969m bid for suburban site in Jurong

A PRIME mixed-use site in the Jurong Lake District has shattered price records with a top bid of just under $1 billion - almost $200 million more than the market expected.

The huge offer stunned analysts and dramatically underscored demand for well-located land in the up-and-coming area.

The knockout bid of $969 million - or $1,012 per sq ft (psf) per plot ratio (ppr) - came from heavyweights CapitaMalls Asia, CapitaMall Trust and CapitaLand.

It is easily the highest offer for any mixed-use site outside the city centre and reflects confidence in the suburban office market, the remaking of Jurong and the value that developers see in choice locations near MRT stations, say experts.

The second highest bid - $917 million lodged jointly by United Engineers and Singapore Press Holdings - was also far ahead of market expectations.

A Keppel Land-led joint venture with Perennial Real Estate offered $785 million. Frasers Centrepoint and private fund Phoenix trailed the field of five with a joint bid of $640 million, 34 per cent lower than the top offer.

At least 40 per cent of the maximum permissible gross floor area (GFA) on the site in Boon Lay Way and next to Jurong East MRT station must be for offices.

Savills Singapore's director of commercial leasing, Ms Agnes Tay, said she was 'pleasantly surprised' with the aggressive bids.

They suggest a shift of developers' interest to explore opportunities in suburban commercial land, especially when a substantial amount of office space has been released in the city over the past few years. 'Given limited suburban office supply, the Jurong site might provide good opportunities that developers see value in,' she added.

Experts also weighed in on what the site might be used for apart from offices.

Savills' Ms Tay said the remaining 60 per cent GFA could be used for apartments as there will be a good market for well-located homes.

However, CB Richard Ellis Research executive director Li Hiaw Ho said the project is likely to be a pure commercial development with a high proportion of retail space. Average monthly rents could be around $15 psf a month for retail and $6 psf for offices, he added.

'The successful award of this parcel would hasten the development of Jurong East as a vibrant commercial hub,' said Mr Li. 'Given the sizeable amount of retail pipeline supply from the neighbouring Lend Lease's and JCube projects as well as existing retail amenities in this area, it would offer residents and workers a retail experience rivalling that of Tam-pines in the east.'

SLP International research head Nicholas Mak also noted that CapitaMalls Asia and its partners looked keen to retain their market share of commercial space in the Jurong East MRT Station area. The IMM and JCube malls are both in the area and managed by CapitaMall Trust.

CapitaMalls Asia will hold a 50 per cent stake in the Jurong Lake project, HSBC Trust Services - as trustee of CapitaMall Trust - 30 per cent, and CapitaLand will hold the remaining 20 per cent.

The five bids the tender attracted suggest developers still want relatively big parcels of land, added Mr Mak.

'An estimated 1,000 homes will also be added around Jurong East MRT station to provide more opportunities to live and work in the area,' he noted.

'Office and retail development on the subject site stand to gain ready access to a large pool of labour and customers - of more than one million residents - from the surrounding established towns of Clementi, Bukit Batok, Jurong East and Jurong West.'

In June last year, Australian developer Lend Lease beat five other offers with a bid of $749 million, or $650 psf ppr, for a 1.9ha site in the same area. It has since clinched the National Development Ministry as an anchor tenant, which experts say would have encouraged developers to bid for the second Jurong Lake District site.

The previous record for a mixed-use site outside the Central Business District was for the site of nex shopping mall in Serangoon which sold for $850 psf ppr in 2008.

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