Thursday, March 4, 2010

More private addresses in Shenton Way soon!


The Business Times reported that some one million square feet of office space in the Central Business District (CBD) is likely to be converted into at least 1,000 private homes over the next 3 years.

Property analysts say that with the Marina Bay financial district now taking distinct shape, developers are looking to recycle older office buildings in the current CBD in anticipation of business activity moving to the hotspot.

Redevelopment plans are also motivated by climbing luxury home prices which contrast sharply with falling office rents.

Hong Leong Holdings is already redeveloping 76 Shenton Way, which has a net lettable area (NLA) of about 92,700sqft of office space. The 202-unit residential project due to come up on the site is likely to be launched within the next few weeks.

Elsewhere in Shenton Way, UIC has received permission to redevelop UIC Building into a mostly residential project. The property has close to 400,000sqft of office space and conversion could start as early as this year.

Office real estate investment trust (Reit) CapitaCommercial Trust also said in January that it is looking at redeveloping Starhub Centre on Cuppage Road into a residential and commercial project with up to 80% of the gross floor area devoted to residential use. The property currently has an NLA of about 280,000sqft and analysts estimate that 200-300 upmarket homes could be built on the site.

Other office properties that could be converted (either fully or partly) into private homes include KOP Capital’s The Spazio on Cecil Street, and three buildings owned by Fission Group and Yi Kai Group – VTB Building on Robinson Road, Aviva Building and Cecil House on Cecil Street.

In all, around one million square feet of office space could be removed from the market and transformed into upmarket homes.

Such trend is not new. Developers were looking to convert selected office space into residential use as far back as 2007. City Developments, for example, launched its One Shenton residential project in Jan 2007, converting an office block into residential space. Since then, 316 apartments in the 341-unit project have been sold, with many going for more than $2000psf.

But other such plans were put on hold when in May 2007, fearing a shortage of office space, the Urban Redevelopment Authority (URA) called a halt to all conversion of offices in the central area to curb further depletion of existing stock. The ban was lifted in late 2008 as fears of an office space oversupply emerged. With the Marina Bay Sands integrated resort now ready to open its door and the entire Marina Bay area taking shape, developers are now taking another look at their buildings located in the current CBD.

City living has, in recent years, become more popular and luxury home prices are expected to climb this year. With the theme of working, living and playing in 21st century Singapore fast becoming a lifestyle reality, there is a great potential in quality residential developments in the core central region. UBS Investment Research, for example, expects luxury home prices to rise 40% in 2010 to reach $4000psf and maintains that prime home prices (in districts 9, 10, 11) could reach 2007 levels this year.

Falling office rents and an upcoming glut of office supply also means that office rents are widely expected to continue falling. Property firm Savills expects a 20-25% fall in Grade A office rents in Singapore this year. The conversion of some office space into residential units will lend support to rents, analysts said.

UBS Research said in January that it now expects over one million square sqft of office space to be removed in 2010 and 2011, instead of the 550,000sqft expected earlier.

So, developers are converting offices in the current CBD to residential now that luxury home prices are supposedly expected to shoot up the ceiling this year. But the wife and I wonder what will happen once the private property prices head south… another conversion from residential to luxury hotels/serviced apartments or even hostels maybe? :)

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