Paya Lebar push

The area around the Paya Lebar MRT interchange station is undergoing a massive transformation. Hoardings have been put up around two plots totalling 422,275 sq ft that will be developed into Paya Lebar Central (PLC), a massive mixed-use scheme by a 70:30 joint venture (JV) between Abu Dhabi Investment Authority (ADIA) and Australian property group Lendlease.

When completed in 2018, PLC will have three Grade-A office towers totalling 874,717 sq ft, a shopping mall with close to half a million sq ft of retail space and more than 400 units in three residential towers. The project will be connected to the Paya Lebar MRT station, which is also an interchange for the East-West and Circle Lines.

The purchase price paid by the JV for the 99-year leasehold site at Paya Lebar Central was $1.67 billion, which translates to $943 psf per plot ratio (psf ppr). PLC will be the first mixed use scheme with residences that is linked directly to the Paya Lebar MRT Inter change station. That will attract both homebuyers and investors. The project will be the “first international development located in Paya Lebar Central” and it will be “ transformational”, says Richard Paine, Lendlease’s managing director for Paya Lebar Central.

‘Catalyst’
Owing to the scale and quality of the overall scheme as well as its mix of uses, “PLC is the catalyst for Paya Lebar Central”, says Chris Archibold, JLL’s international director and head of markets.

There is nothing comparable to the residential apartments at PLC in Paya Lebar Central at the moment. The nearest residential project is Katong Regency, which sits on top of One KM shopping mall and was completed earlier this year. The project is a five-minute walk to the Paya Lebar MRT station and units in the freehold development were fully sold within the first week of its launch in 2012. The average price then was $1,600 psf, although some of the one-bedroom units of 581 sq ft achieved highs of $2,009 psf.

One KM has a wide mix of retail and F&B offerings, as well as a cluster of enrichment centres. The 210,000 sq ft mall has a total of 150 shops and was considered the first full-fledged shopping mall in Paya Lebar when it opened in December 2014. The mixed-use project — One KM and Katong Regency — is a redevelopment of the former Lion City Hotel and the adjacent former Hollywood Theatre, which were purchased by UOL Group in January 2011 for $313 million.

It marked the first major redevelopment undertaken by a property group since the announcement by the URA that the area around the Paya Lebar MRT station would be designated “Paya Lebar Central”, a new commercial hub, under its 2008 Master Plan.

Paya Lebar Central and Jurong Lake District are the two new decentralised hubs that are part of the government’s plan to bring jobs closer to home and ease congestion in the CBD. To realise its vision for Paya Lebar Central, the URA had said it intends to put up for sale about 12ha (1.29 million sq ft) of land around the Paya Lebar MRT station for development. This will translate to about 5.38 million sq ft of commercial space, with the largest developments to be concentrated around the junction of Tanjong Katong Road and Sims Avenue, to anchor the area with retail, hotel and office developments, according to URA.

New offices
The first 99-year leasehold commercial site in the new Paya Lebar Central precinct to be launched for sale by URA was in January 2011; it drew 10 bids at the close of its tender in April that year. The winning bid went to a consortium comprising Low Keng Huat, Guthrie GTS and Sun Venture Group, which paid $586 million ($872 psf ppr) for the site, which has since been developed into Paya Lebar Square.

Paya Lebar Square, completed in November 2014, has a three-storey retail podium with 95,000 sq ft of retail space and is linked to the MRT station. It has a 10-storey office block with 556 strata office units that were offered for sale in 2012 at an average price of $1,750 psf. Recent strata office units have changed hands at $2,003 to $2,150 psf, according to caveats lodged for units sold from October to December. Meanwhile, the strata office units are being listed for rent with rates ranging from $2,000 a month ($3.64 psf) for a 549 sq ft unit to $8,000 a month ($5.43 psf) for a 1,475 sq ft unit.

Strata offices, especially those that have been divided into very small units, are a completely different niche from the single-owner office buildings aimed at large occupiers, says JLL’s Archibold. While occupiers with space needs of 1,000 to 5,000 sq ft will be attracted to strata-titled buildings, large occupiers looking for 20,000 to 100,000 sq ft of space will want buildings with Grade-A specifications, he adds.

The three Grade-A office towers at PLC will be the first premium office space launched at Paya Lebar Central. Archibold, therefore, expects to see a similar profile of occupiers as those at The Metropolis at one-north, which has two office towers with 1.1 million sq ft. The Metropolis is located next to the Buona Vista MRT station, also an interchange station for the East-West and Circle lines, but in the western region. The Metropolis has just 28 tenants, five of which have taken up space of more than 100,000 sq ft, says Archibold. The project was developed by Ho Bee Land and completed in 2013.

Decentralisation, rejuvenation
What makes Paya Lebar Central stand out as a commercial hub? “Office occupiers are very location- sensitive as they are very conscious of the needs of their staff,” says Archibold. Paya Lebar Central is just a 10-minute MRT ride to the Raffles Place MRT interchange station, as well as a 10-minute drive to the CBD. It is, therefore, much closer to the CBD, compared with other decentralised office precincts such as Jurong Gateway in the west, Tampines Regional Centre and Changi Business Park in the east and the future Woodlands Innovation Corridor in the north.

Take-up rate in the office market has slowed in 2015 and is expected to continue in 2016, according to JLL. Global economic headwinds have made companies more cost-sensitive and cautious in their approach to expansion and capital expenditure, adds Archibold. However, Lendlease and ADIA’s PLC is slated for completion in 2018, and it will be the only such decentralised office development in the pipeline. “PLC will therefore be well-positioned to take advantage of demand from occupiers looking for more cost-effective non-CBD space,” says Archibold.

The transformation at Paya Lebar Central has put the heat on Singapore Post Centre to reinvent itself, especially with the changing retail dynamics and the need to cater to more discerning consumers. At end-October, SingPost announced that it was spending $150 million to add a 269,100 sq ft shopping mall, with four levels and a basement. It will be the first shopping mall in Singapore to house both bricksand- mortar shops and e-commerce retailers.

Perhaps this could spark a rejuvenation of other old shopping malls in the area as well, the two oldest being City Plaza and Tanjong Katong Complex. The freehold City Plaza was the first residential-cum-retail development by City Developments. Completed in 1981, it has an 18-storey apartment block with 66 units and a four-storey shopping complex with 376 shops. Some of the strata shops are as small as 183 sq ft. The most recent transaction of a strata shop at City Plaza was for a 248 sq ft unit on the second floor that changed hands for $820,000 ($3,312 psf). In 2012, a 226 sq ft unit on the third floor was sold for $1.5 million, or an all-time-high of $6,636 psf. The mall has turned into a wholesale fashion centre for ladies’ clothes, shoes and handbags, as well as houses an assortment of Muslim fashion boutiques, electronics stores and nail and beauty salons.

Tanjong Katong Complex, completed in 1983, has a retro-looking façade, and three storeys of mainly Muslim fashion boutiques and renovation contractors. Hoe Kee Hardware, a specialist in kitchen and bathroom fittings, is an anchor tenant along with Giant supermarket.

Further down from Tanjong Katong Complex is Geylang Serai, which is also part of the Paya Lebar Central enclave. A new Wisma Geylang Serai will be built on the site of the former Malay Village next to the existing Geylang Serai Market. Wisma Geylang Serai will house a Malay heri tage gallery, a community club as well as other arts and community activities. The new civic centre is scheduled for completion in 2018.

“Part of the attraction of Paya Lebar is the eclectic mix of old and new and the different types of occupiers,” says Archibold. “This mix gives the area character and ensures that it is vibrant. The addition of Paya Lebar Square, the new One KM and the rejuvenation of Singapore Post Centre are just what is needed for a comprehensive transformation of the Paya Lebar commercial hub.”

Spillover
Once PLC is completed in 2018, it will form the cornerstone of the commercial hub. Further sites are likely to be made available for sale — either greenfield land adjacent to Paya Lebar Central or brownfield sites next to Singapore Post Centre — for instance, the car workshops which could be redeveloped, says Archibold. “These will form a very significant quantum of development and redevelopment land for the future and will ensure its success as a hub,” he adds.

The remaking of Paya Lebar has also sparked a rejuvenation of the neighbouring Aljunied and Geylang Road. Located at the corner of Sims Drive and Aljunied Road is GuocoLand’s Sims Urban Oasis, a 1,024-unit project launched in March this year. It has seen a strong pickup in sales over the past two months: 46 units and 39 units were sold in October and November, respectively, at median prices of $1,285 and $1,338 psf, according to URA data.

This could be a result of the launch of three other city-fringe projects in October and November, namely Principal Garden at Prince Charles Crescent, where the average price was $1,600 psf; Thomson Impressions at Lorong Puntong off Sin Ming Avenue, at an average price of $1,400 psf; and the latest, Poiz Residences, which is adjacent to the Potong Pasir MRT station, where prices averaged $1,380 psf. The transformation of Paya Lebar Central, which is now visible, could have prompted homebuyers to take a second look at the project after seeing the buzz created at the other decentralised hub in Jurong and the other projects in the city fringe, say property agents. The neighbourhood could also benefit from URA’s proposed rezoning of the area bounded by Geylang Road, Lorong 22 Geylang, Guillemard Road and Lorong 4 Geylang for commercial and institutional use from the current residential and institution zoning.

JLL’s Archibold reckons the government’s push for a new decentralised hub in Paya Lebar will be a success. Being only a 10- minute MRT ride from the CBD, and accessible via three highway connections — the Pan Island Expressway, East Coast Parkway and Nicoll Highway — it also has the critical mass needed to make the hub work, he adds.

Source: The Edge Property 27th January 2016

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