Demand For Commercial Buildings Expected To Strengthen

The Singapore government has rolled out further property cooling measures with effect from 30 September 2022, which are largely targeted at moderating housing demand and encouraging greater prudence among home buyers in view of rising interest rates.

With the latest round of cooling measures, more real estate investors may now turn their gaze towards the commercial property segment which has been performing well this year, noted PropNex's investment and collective sales team ahead of its plans to put a commercial site on the market in November.

Two buildings (built in 1959) in Hoe Chiang Road and Lim Teck Kim Road have recently achieved 80% majority consent and will be launched for collective sale together when the verified gross floor area (GFA) is complete. Currently, PropNex is carrying out the verified GFA exercise to give developers further clarity on the land betterment charge for this site.

The amalgamation of the two sites and a piece of remnant land between them will take the total land area to 1722.6 sq m (18,542 sq ft) - forming a relatively squarish plot that would be ideal for a Grade A office development amid the ongoing transformation in Tanjong Pagar in the vibrant District 2.

Currently at only 5 storeys high, the buyer can transform this site to a 35-storey building to realise potential gains from the plot ratio of 5.6 under the URA Masterplan. The future development will enjoy views of the waterfront and is within walking distance to the Tanjong Pagar MRT station, as well as two upcoming stations, Cantonment and Prince Edward Road stations on the Circle Line. In addition, the redevelopment projects - including Newport Tower and Keppel Towers - that are underway around Hoe Chiang Road and Lim Teck Kim Road also provide more upside for future growth.

The site has a 999-year leasehold land tenure, and presents a rare investment and redevelopment opportunity. We anticipate that a 999-leasehold Grade A office building in the CBD and near the future Greater Southern Waterfront precinct has the potential for healthy capital appreciation in the years to come. Samsung Hub, a 999-year Grade A office, located In Church Street has seen prices appreciated from the pre-Covid days. Recent transactions at Samsung Hub were trading at prices of $4,050 to $4,150 psf this year, compared with the $3,300 to $3,356 psf in 2019 - representing a price growth of about 23%.

The first project that kick started the transformation of the Tanjong Pagar precinct was Guoco Tower and Wallich Residences, which garnered the highest average PSF price sold for a 99-year leasehold residential project based on caveats lodged in 2013.

Notwithstanding the quietness of the CBD at the height of the Covid-19 pandemic where many workers work from home, offices with a 999-year land tenure remain in demand amongst foreigners and family offices. In addition, the commercial zoning of the site also does not attract the additional buyer's stamp duty (ABSD).

Interested parties can contact our Investment and Collective Sales team for more details on the Hoe Chiang Road investment opportunity.