SINGAPORE - More sites for commercial and office uses on shorter leases of 15 to 30 years will be introduced in some areas in the near term, as the Government monitors the impact of flexible work arrangements on office space demand.
This is being explored in the city centre as well as in job nodes closer to homes.
The Urban Redevelopment Authority (URA) is making this move, as part of its latest long-term plan, to allow Singapore to refresh its land uses in shorter cycles and to support businesses in adapting their operations to changing economic trends.
Even as flexible work arrangements become more prevalent, their full impact on the demand and design of office space remains uncertain, the URA noted.
Mr Wong Xian Yang, head of research at Cushman & Wakefield, said short tenure commercial sites could be released in the Central Business District, and in major decentralised office markets such as Jurong, and Alexandra or Harbourfront.
“Within the CBD, we anticipate shorter-tenure sites could be released in the Marina Bay area where there is available land for development, compared with Raffles Place, which is already very built-up,” he added.
“Over the longer term, such short tenure sites could also be released at the Greater Southern Waterfront.”
Commercial land generally comes with 99-year tenures, except for a few parcels that have leases of 15 to 60 years.
In 2007, URA began selling sites on shorter leases for transitional office use to address a short-term shortage in office supply.
To meet immediate demand while retaining flexibility for longer-term plans, these sites came with a lease of 15 years. They were in areas including Mohammed Sultan Road, Scotts Road, Mountbatten Road and Aljunied Road/Geylang East Avenue 1.
Mr Wong noted that commercial sites with at least a 30-year-lease may be attractive to developers, as they have the flexibility to divest the property with more than 20 years of lease remaining.
“The depreciation on land values accelerates as the lease runs down. Given their shorter tenure, land pricing would be lower and yields would be higher. This could appeal to yield-hungry investors,” Mr Wong said.
Sites with less than 30 years of lease may also be attractive to anchor tenants that may want to lease the whole space, he added, noting that such firms may have limited options in the market given rising Grade A office rents and tight vacancy rate in the CBD.
“Building a built-to-suit development on a short lease commercial site could be a cheaper option over time,” he said.
But he does not expect these sites to have an immediate impact on office rents in the near term.
“Factoring in the sale process and construction period, future developments may only be completed after 2026,” he said.
Moreover, the number of sites released in the CBD will likely be limited as the Government is moving towards decentralising commercial activities away from the city centre, and providing workspaces closer to homes, he noted.
“New sites would also be released gradually to avoid a future supply glut. As such, the overall impact on CBD Grade A rents may be limited,” he said.
More attractive and flexible workspaces to support innovation and the needs of businesses and workers are also being planned in the city centre and regional centres.
To save on land, the URA said it is exploring in industrial estates a "vertical zoning" concept that integrates different but complementary uses within a single development. For instance, clean industrial activities can occupy the lower floors, while co-working spaces take up the mid-floors, which then creates a buffer for residences on the upper floors.
Some industrial spaces may house a greater proportion of non-industrial uses, such as co-working, retail and food and beverage spaces, said URA. These spaces may be located in areas near transport nodes and distributed across estates islandwide, while hotel and residential uses could also be considered.
To support more vibrant industrial developments, the URA is looking at potential sites for business-white zones - such as the Kolam Ayer and Yishun industrial estates - to accommodate non-industrial uses.
Other potential business-white zones include one-north, the Pasir Panjang Power Station, Tai Seng, Jurong Lake District and Changi Business Park, “where industries, such as biomedical, tech, electronics, are concentrated,” Mr Wong noted.
Business-white sites are industrial sites that allow a greater flexibility of use. This means that they can potentially include more office or retail units, compared with existing B1 sites, which are for light clean industries only; and B2 sites, which allow only light, clean and general industries.
Apart from rejuvenating the city centre by injecting mixed-used developments and more recreation options, the URA also plans to do the same for regional centres as the nature of work changes.
While some companies may want to locate their headquarters in the city centre, they could increasingly be supported by workspaces in the regional centres, where workers work closer to their homes, it said.
For example, Jurong Lake District is envisioned to be the largest business district outside the city centre, and its proximity to Tues Port as well as manufacturing and research nodes in the west region allows offices to be conveniently located closer to other operations.
The URA is also studying ways to use technology to improve industrial processes and better manage disamenities.
If industries such as cloud kitchens or logistics distribution centres can become cleaner and be located closer to homes, this will in turn reduce commuting time and improve residents' access to services, it said.