About one million sq ft of office space located in the Central Business District (CBD) is set to be converted into at least 1,000 private homes within the next three years.
According to property analysts, developers are now considering to renovate older office buildings in the current CBD in anticipation of business activity moving to the Marina Bay financial district, which is taking shape.
These redevelopment plans were also driven by soaring prices of luxury homes, which contrasts sharply with declining office rents.
City Developments said that it was looking at possibilities to convert any of the ‘old’ CBD’s office buildings into residential units.
“It is a question of demand,” said Kwek Leng Beng, chairman of CityDev.
Hong Leong Holdings, the parent company of CityDev, is already redeveloping 76 Shenton Way, which has a net lettable area of about 92,700 sq ft of office space.
The planned 202-unit residential project on the site is likely to be launched over the next few weeks.
Other similar conversions in the pipeline include Starhub Centre on Cuppage Road and UIC Building in Shenton Way.
“With the theme of working, living and playing in 21st century Singapore fast becoming a lifestyle reality, we see great potential in quality residential developments in the core central region,” said a spokesperson from Hong Leong.
In late 2008, the ban to convert offices in the central area was lifted, as fears of an office space oversupply emerged.
Tan Tiong Cheng, chairman of Knight Frank, said that developers are now taking another look at their buildings situated in the current CBD, with the entire Marina Bay area taking shape and the Marina Bay Sands integrated resort (IR) now set to open.
“It is the government’s intention to have a new CBD in Marina South. So there is concern that some of the older office buildings may not be relevant to future needs,” said Mr. Tan. “Office rents have also dipped, so it is a good time to look at redeveloping some of these buildings now that the ban has been lifted.”
Other office properties that could be fully or partly converted into private homes include KOP Capital’s The Spazio on Cecil Street, three buildings owned by Yi Kai Group and Fission Group – Aviva Building and Cecil House on Cecil Street, and VTB Building on Robinson Road.
Overall, about one million sq ft of office space could be transformed into upmarket homes and be removed from the market.
Analysts said that this conversion of some office space into residential units will provide support to rents.
UBS Investment Research said that instead of the 550,000 sq ft it expected earlier, it now expects more than one million sq ft of office space to be removed in 2010 and 2011.
“As a result, we upgrade our prime office rents in 2010-2013 by 5 per cent,” said Regina Lim, an analyst from UBS. “We now expect prime office rents of $8.70 psf per month by end-2010 and $9.70 psf per month by end-2011.”