Source : Business Times - 22 Oct 2008
THE Urban Redevelopment Authority has rejected the sole bid - submitted by RSP Architects Planners & Engineers - for a transitional office site in Mohamed Sultan Road, as the price offered was too low. The tender for the site closed a week ago, with RSP bidding $4.65 million.
Based on the 66,482 sq ft site and maximum permissible gross floor area (GFA) of 99,727.5 sq ft, RSP’s bid equated to $46.67 per sq ft per plot ratio (psf ppr).
Only one other transitional office site, at Aljunied, has drawn a lower bid - of $38.37 psf ppr in January. This site was also not awarded.
DTZ senior research director Chua Chor Hoon said: ‘URA’s decision not to award is expected because of the very low and lone bid. The low bid reflects the poor sentiment in the office sector, which is facing weakening demand and substantial supply in the pipeline.’
According to DTZ, island-wide average office occupancy eased 0.6 of a percentage point in the third quarter of this year to 96.3 per cent on a quarter-on-quarter basis.
The average office rent also peaked in Q3, with no rental growth during the quarter, DTZ noted.
On the need for alternative office space, Ms Chua said: ‘Transitional office sites are like Executive Condominiums. They have a part to play only during certain stages of a property cycle, when office rents and residential prices rise too much and become out of reach for some occupiers. Now the office sector is weakening and the concern is about falling rents and prices, transitional office sites would not be relevant.’
The rejection of RSP’s bid does not bode well for the future of transitional office sites.
‘The sale of transitional office sites, which started last year, was a novel idea but has less relevance today,’ said Cushman & Wakefield managing director Donald Han. ‘The operating environment has changed from one that is of a supply crunch to one of sustainable demand - all within the past 18 months. That being said, for demand to sustain, business costs, such as occupancy costs, should be kept affordable to ensure the viability of businesses.’
Asked to comment, a URA spokesman said yesterday: ‘There is an ongoing tender for another transitional office sale site in Mountbatten Road, which closes on Nov 18. The government will be evaluating the market response to recent tenders and the demand for transitional office sites as part of the process of planning the next Government Land Sales programme.’
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