New Singapore landmark

The latest tender exercise for a prime plot of commercial land in downtown Singapore has set a benchmark of sorts.

The Beach Road site was clinched by a consortium of the Singapore Kwek family's City Developments and Middle Eastern partners -- Istithmar Beach Road Fze and Elad Group. The new project, called South Beach, on the 3.5 hectare site will house two towers, 45 storeys and 42 storeys tall, plus the original conserved military buildings of the old Beach Road Camp which will be restored. The project will boast premium office space, two hotels, shops and city residences, according to reports.

First, as correctly pointed out by the press, the winning bid of $1.7 billion was not the highest bid. Somebody put in a higher bid in excess of $500 million but the CityDev consortium's design and eco-friendly features was more acceptable to the Singapore government.

Kudos to the Singapore government for accepting a lower bid for the sake of aesthetics and environmentally friendly features. It's quite rare for the government to accept a lower bid although there is a clause in the government tender document which states that it is not obliged to accept the highest bid for various reasons.

But I don't think any newspaper reports gave a comparison for the winning bid, which works out to be S$1,069 per square foot of potential gross floor area. If I remember correctly, the Beach Road site is priced higher than the winning bid of S$1,020 psf per plot ratio for the Orchard Turn commercial site, which is seen to be a better location in Singapore. The Orchard Turn site was clinched by Singapore's CapitaLand and Hong Kong's Sun Hung Kai two years ago.

Of course, the higher price is a reflection of the bullish sentiment in the property market in the last two years. Another argument could be that the Beach Road site is just as good as the Orchard Turn property, which sits directly above the Orchard MRT station. This is because South Beach is located directly opposite the grand Raffles Hotel although it is on the fringe of the prime business district, Raffles Place.

What's next? Higher office and retail rentals but that's another story!