More building owners are likely to seek lease top-ups from authorities as the stock of buildings developed on 99-year leasehold sites sold by the Singaporean government since the late 1960s gets older.
Since 2007, the Singapore Land Authority (SLA) has processed 56 applications for lease extensions, but only 60 percent were approved and the rest were rejected.
According to a spokeswoman for SLA, leases in land-scarce Singapore are mostly allowed to expire with no extension. This policy allows the government to recover lands upon lease expiry and reallocate them to meet rapidly changing socio-economic needs.
“Nevertheless, lease extensions can be considered on a case-by-case basis,” she said.
In evaluating applications for lease extensions, the government considers many factors such as the long-term planning intention for the site and if the proposed use would optimise land.
SLA said lease extensions awarded since three years ago involved several uses like residential, commercial, conservation and industrial properties. The lease top-up’s period depended on certain circumstances, but any top-ups along with the unexpired term of current leases will not go beyond 99 years.
“This is in line with our current policy that all new state leases (for sites which are capable of independent development) should not exceed 99 years,” said SLA.
Tan Tiong Cheng, chairman of Knight Frank, sees soundness in the approach of the government. “To extend or not to extend? The answer lies in whether it fits into the long-term planning for the area. The government does not have to reveal its plans, so it has adopted a case by case approach,” he said.
He cited the government selling land for recreational purposes in Marina South on 20-year short term leases as an example. “The government did not extend the leases when they expired and took the sites back because it had bigger plans for the area,” said Mr. Tan.
“It’s a similar situation with the government’s plan for a new Central Business District on reclaimed land in the Marina area which can accommodate modern, big floor-plate office developments. What happens to ageing, pencil buildings on small plots in the old CBD? Should the government agree to reset their leases so that they can be redeveloped into new tiny office blocks for which there may not be much demand? The State may prefer to take back the sites when their leases expire and amalgamate them for a bigger development,” he continued.
Meanwhile, leaving these buildings as they are may lead to urban blight. However, if building owners offer to redevelop the buildings into apartments, they may be granted lease extensions, as this will broaden the government’s plan to boost inner-city housing. This case was seen in Natwest Centre, which is being developed into The Clift.
Building owners who seek lease top-ups usually have redevelopment proposals or intend to sell the property on the assumption of redevelopment assumption, said market watchers.
Ong Choon Fah, executive director (consulting) of DTZ, said several leasehold buildings are getting physically obsolete, and some are attracting undesirable occupier profiles. “If government is willing to top up leases, that will give these property owners an incentive to redevelop,” she said.
Among the properties which have received lease top-ups since 2007 include the former Overseas Union House site, which is being redeveloped into an 18-storey office project – 50 Collyer Quay – and the former Ong Building site, which is making way for the 76 Shenton project with 202 apartments.