Commentary on GLS tender awards for Zion Road Parcel A and Upper Thomson Road Parcel B

By Tricia Song (宋明蔚), Head of Research, Southeast Asia, CBRE

The URA awarded the tenders for the site at Zion Road (Parcel A) and Upper Thomson Road (Parcel B) which closed on 4 Apr 2024, today (16 Apr 2024).  
 
Zion Road Parcel A
As the pilot Long Stay Serviced Apartment (SA2) site launched for tender, the residential with commercial at 1st storey site at Zion Road Parcel A received 1 bid of $1.107 bn ($1,202 psf ppr) when its tender closed on 4 Apr, and was awarded to CDL-MFA Vega Property Pte. Ltd. and CDL-MFA Altair Property Pte. Ltd, a CDL and Mitsui Fudosan joint venture today. The plot is the pilot SA2 site, a hybrid developmental site comprising of 735 conventional housing units and 435 – 500 long-stay serviced apartments – which require a minimum stay of three months, up from the minimum stay of seven days for existing serviced apartments.
 
At a unit price of $1,202 psf ppr, the top bid was below market expectations and a significant 30% lower than the comparable land parcel across the road, which now houses the 455-unit Riviere along Jiak Kim Street. In Dec 2017, the site which drew 10 bids was awarded to Frasers Property for $955.4 million or $1,733 psf ppr. Riviere, which is now fully sold, saw 47 transactions in 2023 at a median price of $3,083psf.
 
The acceptance of the lower-than-expected bid price despite its being the sole bid, is a recognition that market conditions have changed over the past 5-6 years since the neighboring site was awarded, given factors such as increased ABSD, higher construction costs, financing costs, as well as risk premium for the SA2 component which is a new asset class. This is a positive signal to developers to challenge new frontiers amid headwinds. In the medium to longer term, consumers would also benefit from more prime residential choices and hence stable prices.
 
Upper Thomson Road Parcel B
The plot at Upper Thomson Road Parcel B drew just 1 bid at the lower end of our expectations at its tender closing on 4 Apr 2024 with a bid price of $780 mil or $905 psf ppr and was awarded to its sole bidder, a JV between GuocoLand and Hong Leong Holdings today. 
 
While the unit pricing was slightly below expectations, it is reflective of the plot’s large size and the current competitive landscape. Hence, it is unsurprising that the site was awarded. 
 
Summary
Overall, CBRE Research expects pricing of end-product will be pegged to market pricing at the time of launch, and not deliberately lowered because of lower land costs. Conversely, the developers have more margin headroom to create a quality differentiated product to attract demand at affordable price points, and to clear inventory within the ABSD timeline.