Commercial land market in a mellow state

With the uncertain economic outlook already moderating the bids for Government land sales, analysts expect a continued decline if the economic situation turns dire.

Mr Ku Swee Yong, chief executive of International Property Advisor, told Today it is “possible” for commercial land bids to fall by 5 to 10 per cent in the next year, depending on the employment situation in Singapore.

SLP International executive director of research and consultancy Nicholas Mak estimates a 5-per-cent drop. “The office market demand depends on the economy, especially the business sector. If it is slowing down, the demand for such property will slow down.”

But Mr Mak does not foresee a sharp dip in prices going forward. “Singapore has not entered a recession. Depending on the economic situation, and if it becomes dire, the Government may even suspend or slow down the land sales drastically. So the demand and supply will both be low.”

An Urban Redevelopment Authority land tender for a commercial site along Robinson Road and Cecil Street closed last month with only three bidders at a winning bid of $311.8 million.

This was below market expectations: Experts had expected bids of between $325 million and $530 million when the 0.29 hectare site was launched in June.

Jones Lang LaSalle head of research and consultancy Chua Yang Liang said that while the winning bid is “reasonable”, he noted at the peak of the market in 2007, the two land sales sites within the vicinity fetched $941 and $1021 per sq ft per plot ratio respectively.

The lukewarm response could be attributed to a few factors, according to analysts Today spoke to. Chesterton Suntec International research and consultancy director Colin Tan felt the land is “not a suitable site for a trophy building” as it is odd shaped and sandwiched between existing buildings.

He added that the site’s location is not in the prime office district of Raffles Place and with more office land sites coming up for tender, the site “would not attract the major office players”.

The recent stock market crash and uncertain economic outlook have also created a cautionary mood, analysts said.

Mr Ku said: “That the site received only three bids showed that some interested parties could not get support from banks or chose not to bid for the land at the last minute.”

Source : Today – 3 Oct 2011

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