Jurong Lake District. Examining the Master-Developer Model
Precedents
Potential bidders could learn from the master-developer-led past projects. The government launched several large integrated project for master developers who will take the lead on designing and developing these projects. Suntec City’s current site, 11.7 ha in size, was developed with the intention of positioning Singapore to be an international exhibition and conference hub.
Suntec City, which was completed when the project was complete, included five office towers as well as a retail and entertainment center, a convention and exhibit centre and a total GFA of 339,000 sq.m. The master-developer strategy was also used on the 3.55 ha Marina Bay Financial Centre(MBFC) site. It had a total GFA area of 438,000 m2 and was launched in the year 2005. The MBFC property was developed by a Consortium comprising Cheung Kong Asset Holdings Hongkong Land & Keppel. This consortium acquired the site for S$1.91B or S$405 psf ppr.
CBRE’s data indicates that as of the end of 2009, this megadevelopment increased office space by 43 percent in the Grade A CBD and 6 percent on the entire island. Tricia Song is the CBRE head of Singapore and South-east Asia’s research. She said that MBFC did add a significant amount to the CBD but it was not deemed an “oversupply,” as the demand for CBD properties was increasing at the same time.
The MBFC has increased the quality of stock available in the office segment. This will improve the overall outlook for the market. Office rents nearly doubled, as vacancies in CBD Grade A central buildings fell below 1% from Q3 2006 to Q2 2008. Most office space had already been reserved for Towers 1&2 prior to their temporary occupation permit (TOP). Tower 3 had a 70 percent occupancy rate upon TOP in 2012. It reached 100% occupancy the following summer.
C&W has estimated the monthly gross rent for each tower at S$13.50, up by 24 percent from S$10.50 during Q4 of 2015. Suntec City MBFC have been successful mega integrated construction projects that have helped to transform the Marina Centre & Marina Bay district into thriving hubs.
They were the first critical mass to initiate the transformation. This means that the impact of both projects on rents or values goes beyond their immediate surrounding.
The tender to sell a 6.5 hectare white site located in Jurong Lake District, which was advertised for sale last June under the Government Land Sales scheme using a master-developer model, will be closed next Tuesday (March 26, 2019).
The proposed development will begin JLD’s transformation in the next 10-15 years with 146,000 square metres of office and residential space. The development is also expected to include 73,000 m2 of retail space and other food and beverage uses.
JLD was designed to be Singapore’s main business district.
Master-developer would help the Government to reach its goals and achieve the development of a Second Central Business District (CBD).
This allows for a single developer the freedom to plan and design a more seamless and integrated project.
The master developers will also be motivated to ensure success in the integration of the development rather than having separate developers competing on different sites.
The JLD-white site, which is currently up for bidding, consists three adjacent plots to be developed multiple times.
The first phase requires the successful bidder to construct at least 70,000 sqm office space, 51,000sqm (about600 units) for homes, and 2700sqm for complementary usage. A developer is allowed to divide the remaining stock according to market demands.
The state sells land on a lot-by-lot basis.
The impact of the JLD
Prof Sing emphasized for the JLD that the options scheme used during the land bidding is similar to the MBFC bid.
The master developer will have up to eight-years to begin Phase II development following the completion of Phase 1.
Option schemes give developers the assurance of land. The options help to reduce upfront land costs and the developers must carefully manage their timing through the options. The option feature will also set a cap on future land price increases.
On the negative side, large-scale projects are usually more complex. Unpredictable events can cause construction delays and cost increases, as well as affect the returns on the project.
The bidder who wins this tender may be able to have a greater impact on pricing.
The completed development is expected to contribute more than ten per cent of JLD’s planned office supplies.
Phase 1 is estimated to have 70,000 sqm (or 640,000 sqft) of net-leasable office space. It could be finished in 2029.
We are positive about the taking up of office space, especially in JLD. It is planned to become the second CBD for Singapore.
The JLD’s scale and risk will make it necessary to limit the number bids.
If we have any bidders at all, they are expected to form one or more joint ventures in order to submit a bid. The highest bid would be approximately S$1,000 per sq ft ppr in order to reflect the high risks associated with undertaking this project.
This rate has been reduced from the initial S$1,300 psf forecasted by CBRE to June 2023.
The sentiment since then has deteriorated, with macroeconomic headwinds increasing, construction costs rising and longer-term interest rates impacting the cost of financing.
The property value in the surrounding area could be increased if development at the JLD is carried out well.
J’den’s launch in Singapore last weekend saw an 88% average sales rate at S$2,451/sqft. This project was the best performer on a difficult residential market.
It shows that the developer is confident in this location, despite knowing that JLD could have at least 1,700 units of residential space in the coming 15 years.
Kampong bugis, a site in Kallang, is another master-developer project that’s currently in the pipeline. The 8.29 ha land plot was supposed to be the next waterfront residential precinct. However, its launch has been pushed back because soil remediation is still not complete.
JLD is a 410-hectare development that will include a remodeled Chinese and Japanese Garden, as well as a new Science Centre. The JLD will create between 2040-2050 100,000 new jobs as well as 20,000 new houses.
Bids received for the JLD Site will be evaluated in accordance with the concept and pricing-revenue tendering approach. This means that bidders must submit separate concepts and prices.
