Few bids for Mohd Sultan site?

Source : Straits Times - 20 Aug 2008

RESPONSE is likely to be tepid for a tender for a transitional office site in Mohamed Sultan Road, given the large supply of space coming onstream in 2010.

The 0.62 ha site has a maximum gross floor area of 9,265 sq m and is being sold on a short-term lease of 15 years with a price tipped at anything from $10 million to $18 million. A block of about four storeys could be built in around a year, said the Urban Redevelopment Authority (URA) yesterday.

But Mr Nicholas Mak, Knight Frank’s director of consultancy and research, said the development period for such projects could take up to two years.

This would mean the development will be completed in 2010, just when a large supply of about four million sq ft of office space will be ready. ‘This would result in a significant amount of competition in the office property market,’ said Mr Mak.

He thinks the uncertainty will mean a cautious approach by developers with fewer than five bids likely, including the opportunistic ones. Mr Mak said the land price for the site is expected to come to between $10 million and $13 million, or from $100 to $130 per sq ft (psf) of potential gross floor area. Office rents in the Mohamed Sultan area are now going at $5 psf to $7 psf.

Mr Donald Han, managing director of Cushman & Wakefield here, is tipping higher bids of $150 psf to $180 psf. He believes there will be interest in the site as it is just outside the Central Business District.

The land is one of three commercial plots slated for sale through the confirmed list in the second half of the year. Confirmed list sites go up for tender at scheduled dates, regardless of developer interest.

When the availability of this and another transitional site was announced in June, some market watchers questioned the need for them.

Colliers International’s director of research and consultancy, Ms Tay Huey Ying, said at the time that the market was already seeing dwindling interest in such transitional sites in the wake of subdued sentiment in the economy and property market.

The URA also launched tenders for two industrial sites on the reserve list yesterday. This came after developers applied for the 60-year leasehold sites. The firm that is keen on a Kallang Pudding Road site committed to bid at $10.8 million or above while the party eyeing the Ubi Avenue 4 site will bid $21.6 million or more.