As part of the recently released Draft Master Plan 2019, the scheme offers higher plot ratios for property owners who convert older office buildings to other complementary uses. The scheme could also accelerate the government’s “decentralisation strategy to enhance sustainability and reduce commuting”.
The government’s CBD Incentive Scheme is a visionary initiative that could bring about multi-fold benefits, revealed property consultancy JLL.
As part of its recently released Draft Master Plan 2019, the scheme offers higher plot ratios for property owners who convert older office buildings to other complementary uses.
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“Firstly, we believe the scheme will transform Singapore’s downtown CBD to meet modern demands,” said Regina Lim, JLL’s head of South-east Asia capital markets research, and Michelle Tee, director of JLL Singapore Research.
“From our work with global corporate clients, we know that employees of today prioritise hospitality, health and lifestyle amenities in their choice of office locations. The scheme can reinvigorate the CBD to meet these needs by encouraging new mixed developments, bringing together new residents, tourists and digital nomads of all ages into the district, and allow for more 24/7 social activities and events.”
In fact, JLL believes that over 20 ageing office buildings within Singapore’s CBD could yield some four to five million sq ft of office space as well as more than 3,000 new homes and 3,000 hotel rooms.
The scheme could also accelerate the government’s “decentralisation strategy to enhance sustainability and reduce commuting”.
This comes as office occupiers displaced by the withdrawal of older stock will be on the lookout for new premises, providing the government scope to release more sites in decentralised gateways like Woodlands, Tampines and Jurong East.
The hike in CBD office rents is also expected to continue, given the limited new supply of office space within the CBD and potential initiation of redevelopment projects in the next five years.
This would eventually lead to wider rental gap between suburban and CBD hubs – encouraging more businesses to move out of the CBD.
However, JLL acknowledges that not all owners who qualify for the scheme will immediately take up the incentives and redevelop their buildings.
“After all, we recognise that time is needed to evaluate the financial feasibility of the conversion, especially at a time when the office market is enjoying an upcycle amid healthy demand and tight supply, while the residential market is facing a challenging environment weighed down by July’s cooling measures, as well as a long pipeline supply,” said Lim and Tee.
“Besides, hotel and residential properties do not fit the investment profile of some of the existing landlords, and redevelopment could likely take place only when the assets change hands.”
But with the scheme expected to kick-start urban renewal momentum, it could be extended beyond the initial five-year implementation period – providing investors and owners more time to take advantage of it.
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Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
