A 60-year leasehold industrial site at Yishun Avenue 6 (Parcel 1) has received overwhelming response from property developers.
Seven parties had expressed their interest on the tender by the time it was closed yesterday. OKH Management submitted a top bid of $71 psf ppr or $27.2 million, which is 2.4 times higher than the trigger price of $30 psf ppr, or $11.5 million, that an anonymous developer had committed to shell out in February, prompting the URA to release the site for tender.
Not far below the front runner, Soilbuild Group submitted the second-highest bid of $66 psf ppr, or $25.12 million.
In fact, five of the seven parties offered a bid of more than $20 million. The other three above this level are from Ho Lee Group, KNG Land and Whye Wah Group.
According to Mr. Lim Kien Kim, head of industrial business space at Knight Frank, the bids are “unexpectedly high” and show that developers are bullish. “The economy is trending upwards, and there is demand for (industrial) space,” he said.
Based on the Purchasing Managers’ Index for the month of March, the manufacturing sector expanded for 11 straight months.
The industrial property market improved in Q1 2010, according to a report by CBRE. There is a growing demand for warehouse and factory space and rents could increase towards the end of the year, it added.
Mr. Li Hiaw Ho, research executive director of CBRE, said that the high bids for Yishun Parcel 1 could be attributed to a lack of industrial sites within the area. “No sites in Yishun were awarded under the government land sales programme in the past 10 years,” he said.
Mr. Li estimates a breakeven cost of around $250 psf to $270 psf for the development on the site.
Next to Parcel 1 is Parcel 8, for which the tender is ongoing. Mr. Lim expects that those developers who submitted a bid for Parcel 1 will also bid for Parcel 8. He said that by getting both plots, the developer could reap economies of scale.
The 152,770-sq-ft Parcel 1 is zoned for ‘Business 1′ and has a maximum gross plot ratio of 2.5.