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THE government’s ambitious plan to create Singapore’s second Central Business District in the Jurong East region has hit a snag. A five-member consortium’s bid for a mega white site that would kickstart development of the upcoming Jurong Lake District (JLD) has been rejected as it was “too low”, and the tender will not be awarded, the Urban Redevelopment Authority (URA) said on Friday (Sep 13).

The tender for the 6.5-hectare site closed on Mar 26 with a sole bidder submitting two concept proposals. The heavyweight consortium comprised five major players: CapitaLand Development, City Developments Ltd (CDL), Frasers Property, Mitsubishi Estate and Mitsui Fudosan (Asia).

The master developer project encompassed three plots of land to be built up over 10 to 15 years, which would house at least 1.5 million square feet (sq ft) of office space, up to 1,700 residential units, and close to 800,000 sq ft of space for other uses such as retail and food and beverage.

“After evaluating both concept proposals, one of the proposals was thereafter shortlisted,” said the URA. “However, the tender has not been awarded as the shortlisted concept, at the tendered price of S$6,888.90 per square metre (sq m) of gross floor area (GFA), was assessed to be too low.” This works out to around S$640 per square foot per plot ratio (psf ppr), which would imply a price tag of about S$2.5 billion for the land.

Substantial risk

The URA announcement came almost six months after the tender closed. At the time of the tender’s close, analysts had pitched bids in the range of S$900 to S$1,000 psf ppr. Market talk subsequently picked up that the bids submitted were low, reflecting the substantial risk that developers would be taking on in an area untested as a major commercial district. But those in the industry had expected the tender to be awarded nonetheless, so as to kickstart development of the JLD.

A spokesperson for the consortium said in a statement issued on Friday night: “The tender for the master developer site at (JLD) marked the first strategic partnership among five of Asia’s leading developers.

“Although our consortium may not have the opportunity to realise our vision for the site at this time, we have gained invaluable insights and learnings throughout the process of developing our concept proposals for JLD’s transformation. We appreciate the support and dedication of all collaborators involved and look forward to future partnership opportunities.”

CapitaLand, CDL and Frasers Property had each taken a 25 per cent stake in the joint-venture bidder, while the two Japanese companies held a 12.5 per cent stake each. 

The URA said in its statement that the government is committed to building JLD as a model for sustainable development, integrating business, residential and recreational spaces, outside of the city centre. The agency will continue to engage with industry stakeholders for feedback on JLD and “review the approach for the master developer site”, it added.

The JLD site will be put on the state’s reserve list, where it can be activated for tender subject to a minimum price that is acceptable to the government.

The tender outcome showed that developers’ confidence in the Jurong area and the government’s expectations for the JLD vision were “not aligned, especially in such a tough environment”, said Desmond Sim, chief executive officer of Edmund Tie & Co.

He suggested that smaller plots could be carved out for sale in the future.

“JLD is a viable project. But the timing is off for now,” said Alan Cheong, Savills Singapore executive director of research and consultancy. 

“If the intention is to develop it within the current time frame, then the risk would warrant a conservative bid price. However, to kickstart this monumental project, that risk of a low bid may be warranted, ” Cheong added.

Tricia Song, CBRE research head for South-east Asia, said: “We understand that URA had deliberated on this for a long time and after considering many factors, including the soft office market, relatively volatile interest-rate expectations between March and now, construction cost uncertainties, and developers’ low risk appetites, pushing through the decentralised vision regardless of land pricing may not be the best idea for now.”

Wong Siew Ying, head of research and content at PropNex, pointed out that the consortium’s bid for the JLD tender was lower than the price of two other white sites sold earlier in Jurong East.

A Boon Lay Way plot that is now Westgate mall was awarded for S$1,012 psf ppr in May 2011, and a Jurong Gateway Road site that was developed into Jem was awarded for nearly S$650 psf ppr in June 2010.

Appropriate price tag

Huttons Asia chief executive Mark Yip believed the S$640 psf ppr price tag was appropriate in the current market. Developers not only face high costs and huge uncertainties in developing the site, but also a “long gestation period to (recoup) the huge outlay”, he said. 

He added that demand in the office market has yet to turn a corner since the pandemic, and it is unclear if there is sufficient demand for the site’s immense office space in the next decade. Should the proposed Kuala Lumpur-Singapore high-speed rail project restart, progress on that front may help with accelerating JLD’s development, he pointed out. 

PropNex’s Wong also noted that this is the second state land site that has not been awarded this year. In February, the sole bid of nearly S$770.5 million, or S$984 psf ppr, for a Marina Gardens Crescent white site was rejected as it was also “too low”, URA said.

The delay in new office space coming onstream in Jurong would bring “medium-term relief to the islandwide office supply, as some 0.7 million sq ft of potential JLD Phase 1 office stock will be pushed back beyond 2030”, said CBRE’s Song. But the pressure is “unlikely to go away totally as the government remains committed to JLD”.

Largest business district outside city centre

Spanning a massive 6.5 hectares, the white site that was put up for sale is the first to be launched in the JLD, which will be Singapore’s largest business district outside the city centre. 

It comprises three plots of land between Jurong East MRT interchange station and the future Jurong Lake District MRT station, to be built up to a maximum GFA of 365,000 sq m. 

In the dual-envelope tender, bidders submitted concept proposals and tender prices in separate envelopes. Only concept proposals that are shortlisted go on to the second stage, which is based on price. This was done to ensure that the selected proposal aligns with the vision for the JLD, URA said. 

Under the master developer approach, a single developer would have free rein to draw up the master plan, phase it, and carry out the entire development, including district infrastructure, provision of connectivity and public spaces. 

In the first phase of the development, the successful tenderer would be required to build at least 753,473 sq ft of office GFA and about 549,000 sq ft of residential GFA.

The developer would, however, have options to phase out the remaining supply according to market demand.