Zion Road GLS, Upper Thomson GLS: Expect a cautious response

Analysts predict a cautious reception from developers.

Experts anticipate that developers are likely to be cautious with both Upper Thomson Road Sites. They expect this due to their location, which is relatively less busy than the surrounding landed houses, and because there is a large supply of newly built private homes in nearby Lentor.

The four sites, which will include the new serviced apartments for long-stay, will produce approximately 3,360 residential homes, with two large developments of approximately 1,000 units. The pilot for the inclusion of new categories of serviced apartments at GLS was announced by GLS last week, November 29.

A large residential project will be built on a site along Zion Road. There are up to 1,170 apartments including 435 services, and it is located close to Orchard Road.

The parcel on Upper Thomson Road will yield 640 apartments in total, 100 of which are serviced, and is part of a housing development area.

The Urban Redevelopment Authority (URA), released four sites on Monday, as part of its 2023 Government Land Sales Programme (GLS).

Upper Thomson Road, parcels A andB and Zion Road, parcel A are all confirmed. Zion Road, parcel B can be applied for on the reserve list.

The Myst

As a result of the recent increase in residential rents, it is now necessary to require a stay minimum of three month.

The Zion Road, parcel A plot is a “plum” site but the large size of the project could discourage bidders.

However, developers could be attracted to the project by the separate strata titles that distinguish between residential and serviced flats. They may then look to divest serviced flats to their Real estate Investment Trusts.

As developers have to sell fewer units of residential property within the specified five-year deadline for the Additional Buyer Stamp Duty Remission, the overall risk is reduced.

If you are staying for three months or more, the operating costs will be lower compared to a typical hotel.

Upper Thomson Road is untested as a location for serviced flats and would require developers to add significant risk into their price.

Upper Thomson Road’s parcel A is likely to receive a high bid of S$636-S$723 million, or SS$1,100-1,250 per square foot ppr. Experts anticipated that Upper Thomson Road’s (parcel B), which is larger, would receive bids from S$862 Million to S$948 Million. This equates to S$1,000 up to S$1,100 for a ppr.

In September, the government closed a tender on a Lentor Central land plot for S$435m (S$982 psf per plot). The government sold the site, which was the sixth in the area. Nearly 3,000 new homes will be built.

The two Upper Thomson sites, located near the Central Catchment Nature Reserve, will also require biodiversity-sensitive urban design strategies in their proposed developments.

The Upper Thomson Road, parcel B, development must also integrate the restored building of Seletar Institute.

Due to the release of three large land plots at once, including two with almost 1,000 homes each, the market anticipates a lower number of bidders overall for this round.

In addition to high interest rates and geopolitical developments, developers will be affected by macroeconomic instability, increased construction costs, and the release of three large plots at once. Two of these plots have almost 1,000 units each.

Riviere by Frasers, which has 455 units along Jiak Kim Street was the final GLS site sold in the region. Frasers Property received 10 bids for the site and won it in December 2017 at S$955.4m, or S$1,733psfppr.

This project was launched for sales in May 2019. The project is now sold out. Based on caveat data the average selling prices was S$3,066/sqft. Jiak Kim Street is also home to a 72-unit block of serviced residences.

Developers could partner up in the latest Zion Road bid, possibly with a big group who has hospitality experience like CapitaLand Frasers City Developments Ltd. and Far East Organization.

Developers are not always equipped to manage a serviced residence. In addition, capital expenditures on serviced residences will be heavy and require ample cash flow from the developer.

The hospitality sector is currently experiencing a shortage of staff, which would require “a rethinking” about how the service could be improved with fewer people.

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