The first residential site to be auctioned off in the southernmost portion of Singapore’s Marina Bay financial district may fetch bids as high as S$1.2 billion ($880 million), even as escalating costs and interest rates may limit developer participation, according to property analysts.
Singapore’s Urban Redevelopment Authority (URA) on Monday opened a public tender for a 12,245 square metre (131,800 square foot) mixed-use site at Marina Gardens Lane in Marina South precinct, which is planned for development of a 790-unit residential tower with commercial space on the first floor.
The tender, which closes in six months’ time, is likely to attract no more than four bids, according to Cushman & Wakefield, which sees developers becoming more cautious in an increasingly cloudy investment climate.
“The Marina Gardens Lane site would test developers’ appetite for high-end residential homes in the city,” said Xian Yang Wong, head of research for Singapore at Cushman & Wakefield. “Developer bids are expected to be tempered given the sizable site quantum (expected to be around $1 billion) and higher development costs due to heightened financing and construction costs.”
First Mover Advantage
The 99-year leasehold site is approved for development of up to 68,573 square metres (738,114 square feet) of floor area next to the upcoming Marina South MRT station. Located within several blocks of the Marina Bay Financial Centre, the project is within a few minutes’ walk of the Gardens by the Bay tourist attraction and offers unobstructed views of the city’s central business district, Marina Reservoir and the Straits of Singapore.
Cushman & Wakefield predicts bids in the neighbourhood of S$1 billion for the site, but local agency PropNex Realty sees the scale of the project pushing developer offers toward S$1.1 billion to S$1.2 billion with bidders likely to form joint ventures to weather ballooning borrowing costs.
PropNex expects three to four bids for the project at around S$1,500 to S$1,600 per square foot of built area due to the rarity of the location.
“The plot will offer a first-mover advantage to the developer and homebuyers,” Wong Siew Ying, the property agency’s head of research and content. “Despite being hungry for land, we expect developers to move cautiously keeping in mind the high borrowing cost and construction cost, as well as the upcoming supply of new homes in the central business district.”
C&W’s Wong is also predicting limited participation in the tender, noting that developers are likely to assess the sales performance of upcoming project launches in central Singapore when preparing their bids.
Set to close on 27 June 2023, the tender offers developers their first opportunity to build luxury homes in what the URA describes as an emerging “car-lite, community-centric” waterfront neighbourhood. When fully developed, the planning agency expects the Marina South precinct to provide at least 10,000 homes surrounded by amenities such as parks, shops and hotels.
Lam Chern Woon, head of research and consulting at Edmund Tie expressed optimism regarding housing demand in Marina South, predicting that the project is, “likely to be well received by residents who wish to be trendsetters in a new neighbourhood and appreciate a short commute to work in town.”
Singapore home prices have now risen for 10 straight quarters, with new projects quickly selling out in recent months.
Prices for new private homes rose by 3.8 percent in the third quarter from the previous three months, according to URA data, accelerating from 3.5 percent price growth in the second quarter.
Just a few blocks toward the city-state’s central business district from the Marina South plot, IOI Properties Group last year agreed to pay S$1.51 billion for a “white site” in the Marina View area, in the most recent land nearby.
The Malaysian developer’s acquisition valued that plot, which can be developed for a range of uses including commercial, residential and hospitality, at S$1,379 per square foot of accommodation, with IOI making the sole bid for the site.