More mixed-use developments to rise in CBD in next few years
In a bid to rejuvenate the CBD, the latest URA Master Plan 2019 encourages conversions to mixed-use developments through incentives such as the CBD Incentive Scheme and Strategic Development Incentive (SDI) schemes.
With the COVID-19 pandemic amplifying the need for more mixed-use developments within the Central Business District (CBD), Colliers International expects more such developments to rise up in the CBD in the next few years.
The latest URA Master Plan 2019 introduced incentive schemes – the CBD Incentive Scheme and Strategic Development Incentive (SDI) schemes – encourage conversions to mixed-use developments in a bid to rejuvenate the CBD.
It noted that more than 20 buildings with about 5 million sq ft, or almost 50% of the total private office space within the Shenton Way/Tanjong Pagar precinct, have been identified to qualify for the CBD Incentive Scheme.
Office buildings that are 20-years or older on Robinson Road, Cecil Street, Anson Road, Shenton Way and Tanjong Pagar, with a minimum site area of 1,000 sq m could be eligible for 25% to 30% gross plot ratio increases if they convert into commercial and residential, residential with commercial at first storey or pure hotel use.
Colliers underscored that mixed-use developments not only “allow for greater convenience and reduced commute time for occupiers, they also offer potentially higher blended rents and capital values than pure office buildings, while diversifying risks for investors”.
“While the take-up rate has been slow, we believe the changes in activity patterns resulting from the COVID-19 crisis such as more flexible work arrangements and telecommuting further accentuates the need for the CBD to have more mixed uses and a larger live-in population,” said Tricia Song, Head of Research for Singapore at Colliers International.
So far, only a few owners had announced redevelopment plans like Fuji Xerox Towers and AXA Tower, said Colliers International Senior Director for Capital Markets and Investments Services Jerome Wright.
“We expect more could jump onto the bandwagon over the next few years,” he added.
If taken up, Colliers Research expects the schemes to lower the availability of office space within the CBD as well as support overall rents in the near term.
In 2020 to 2025, new CBD Grade A supply is expected to remain tight, averaging 3% of the annual stock compared to the 6.2% 10-year historical average.
“In our view, Shenton Way/Tanjong Pagar is best positioned to benefit from the schemes and undergo rejuvenation. The longer-term Greater Southern Waterfront development nearby could further uplift the Live, Work, Play concept and the precinct,” said Colliers International’s Executive Director for Occupier Services Rick Thomas.
Rents at Shenton Way/Tanjong Pagar area are forecasted to grow the fastest among the micro-markets, at between 2% and 3.4% per annum based on a three- and five-year CAGR, respectively.
Source: CommercialGuru, 25 Nov 2020