The rejuvenation of Beach Road

Once just a tourist destination for the area’s history and culture, Kampong Glam has become one of Singapore’s hippest enclaves. Part of the state’s plans for the Ophir-Rochor Corridor, the potential in this often overlooked region is great.

Many Singaporeans have visited Kampong Glam several times over the course of our education as part of the National Education programme. Then, we were brought into Sultan Mosque, and learned about the history of the area.

Time has brought about changes to the area, and Kampong Glam has changed drastically. Haji Lane, where some of the earliest shophouses stand, is now home to some of the hippest cafes, bars and shops in Singapore. Many of the units carry either home-grown labels or sell pre-loved vintage apparel and accessories.

At night, a younger crowd will emerge from the nearby office buildings, such as Gateway and The Plaza to patronise the bars. The restaurants and eateries continue to do a roaring trade in soup tulang, and tagines, but have been joined by upscale gastrobars and pubs.

Gazetted as a historic conservation district by the Urban Redevelopment Authority (URA), the state has imposed strict guidelines to maintaining the character and style of the area. A trend riding on nostalgia has also served the area well. Features of these shophouses, which were once inconveniences for business owners, such as high and narrow staircases, low ceilings and uneven floors, have become sought after for their authenticity and character.

More than just gentrification, Kampong Glam is part of the rejuvenation of the entire Beach Road and Bugis area, and stands to benefit greatly as new developments rise, and businesses and residents flock to the area.

Future potential

In recent years, real estate developers have been looking at the area for its potential, with a number of collective sales already taking place.

In 2009, Hong Fok Corporation launched Concourse Skyline, a 99-year leasehold residential project that now stands at a former wing of The Concourse, a commercial building. The launch of the project coincided with a market panicked by the Global Financial Crisis, and sale volumes were not as robust as expected.

At time of writing, primary sale caveats lodged for Concourse Skyline total 227 units, under two-thirds of the units in the project. More generous unit sizing and higher stack premiums for the view however, led to quantums that many buyers seem unwilling to commit to.

Subsequently, in 2012, Fragrance Group and World Class Land threw their cap into the Beach Road area, buying over the commercial building KeyPoint for a sum of $360 million. KeyPoint’s tenants have since vacated and the building demolished. In its place, the mixed development City Gate is rising. With quantums more in line with buyer price expectations, the residential component of the project is mostly sold out, while 92 caveats for their strata-titled commercial units have been lodged, as at time of writing.

There are a few projects in the area that many industry watchers speculate are ripe for en bloc purchasing soon, such as Textile Centre and Golden Mile Complex. However, there are a number of common difficulties these projects face when it comes to going on collective sale. These include shorter remaining leases, as these are 99-year leasehold buildings, and a difficulty in getting consensus on profit sharing agreements between residential and commercial unit owners.

Of the two however, Textile Centre is more likely to be put up for collective sale, simply because of the smaller site size. Golden Mile Complex sits on a three-acre site, and the fees that a collective buyer would need to pay to extend the lease, would be tremendously high. With each passing year, the amount to top up the lease is going to increase as well. Golden Mile Complex has seen two failed attempts at collective sales, the last time in 2006.

Another building in the area, The Plaza, is also an office, retail and residential tower, and has been eyeballed for its en bloc potential by several investors. While a strata-titled development as well, developer UOL maintains control over a number of units, making the threshold for collective sales a lot easier to achieve.

Future plans

In URA’s 2008 Master Plan, the state laid out its plans for the Ophir-Rochor Corridor, envisioning it as a mixed used precinct, with developments containing offices, residential, retail and hospitality components. Kampong Glam and the Beach Road area fall into this zone, and have already begun to benefit from the state’s plans to revitalise the area.

These plans have started to bear fruit, with two massive developments – the Ole Scheeren designed DUO, and South Beach, whose hotel rooms are designed by Philippe Starck – already transforming Singapore’s skyline. Despite a lacklustre real estate market, residential units at DUO are almost completely sold, a testament to buyers’ belief in the potential of the area.

The state has also released one more site next to the current Shaw Towers next to Beach Road. As part of the conditions of sale, the URA has stated that a minimum of 61,820 sq m of office gross floor area needs to be part of the development, while the rest can be used for retail, hotel, serviced apartment or residential uses. Developers are likely waiting to see the reception of South Beach’s residential component, which has yet to be released for sale, and the two projects’ office take up rates, before bidding for that particular site.

Subsequently, in 2014, when the URA updated the Master Plan, it extended plans for the Ophir-Rochor Corridor eastwards towards the Kallang area. With the massive Sports Hub anchoring developments in the area, civic areas, parks and a network of cycling and pedestrian paths are planned to connect Kampong Bugis, Beach Road, and the upcoming Southern Waterfront.

Rochor Canal has also been rejuvenated, transforming it from the drab drain of yesteryear, to a more picturesque waterway that includes lookout decks, seating, and pedestrian pathways. The upcoming North-South Corridor will be ready in in 2026, providing greater access links to the Beach Road-Kampong Glam area.

Future transactions

While this article has largely focused on what developers can reap from plans for the Kampong Glam area, retail or individual investors can potentially benefit as well.

Figure 1 shows the overall price movement of both residential and commercial real estate in District 7. Prior to Q4 2013, the bulk of the transactions in District 7 were commercial units. However, from Q4 2013, we see a dramatic spike in residential units being sold, led by sales at DUO Residences. In fact, DUO was so popular with buyers that it accounts for more than half of all residential transactions in District 7 over the past 18 quarters.

PropertyGuru

The two massive spikes in median prices of commercial property were led by the sales of two strata-titled retail developments – Bugis Cube in Q3 2012 and City Gate in Q3 2014. Bugis Cube enjoyed brisk sales due to cooling measures in the residential market, with investors swinging their wealth and portfolios to another asset class. The project has since been completed, with bright neon signs fronting North Bridge Road to draw attention to the business within, and a number of eateries within making the rounds in the blogosphere.

For those looking to purchase in District 7, this might not be a bad time to consider striking. Median prices for both commercial and residential property are at one of their lowest points over the past 18 quarters, and volumes have been lacklustre.

However, investors with deeper pockets with an eye to long term appreciation can look at the shophouse units in the area. While they rarely come on to the market, those that do are often quickly snapped up. Most recently, 3 shophouse units at Tan Quee Lan Street sold for a whopping $23.6M, or $10,790 per sq ft in the past month.

Source: Property Guru June 2016

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The rejuvenation of Beach Road

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