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Robust bidding for Tuas industrial plots

Offers within expectations, reflect interest from users and developers.

Posted on 04-Jan-2013
By: Ong Chor Hao

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Robust bidding for Tuas industrial plots

DEMAND for industrial property remains robust, going by the bidding activity for three plots of land in the Tuas area that closed on Wednesday, even though the offers were largely within market expectations.

JTC Corporation launched a plot of land at Buroh Street and two others at Tuas South Street 6 under the Industrial Government Land Sales programme in November last year.

Said Ong Kah Seng, director at R'ST Research: "The responses for each site are generally very positive, reflecting keen interest from both developers and end-users."

The 2.74-hectare Buroh Street site (the equivalent of about four to five football fields) has a 30-year tenure and drew a total of seven bids, JTC data showed.

The top bid of $82.1 million, or about $111.35 per square foot per plot ratio (psf ppr), came from Capital Development and ZACD Investments.

This narrowly pipped the $81.9 million or $111.05 psf ppr offer from Soon Hock Investment Group.

The award of tenders does not have to go to the highest bidder, and will be announced at a later date by JTC.

Analysts BT spoke to when the tender was launched had expected around five to nine bids of between $40 to $105 psf ppr.

Tan Boon Leong, executive director of industrial services at Colliers International, said that while demand came mainly from developers, he expected them to cater to end-users' needs.

"Developers are coming in and I'm sure that they will do their due diligence and know that the 30-year lease with a short tenure and with a (Business 2 zoning), is more for the end-users rather than investors."

With land zoned as Business 2 meant for heavier industrial use, and with the lease shorter than before, industrialists will be very particular that their premises meet their work requirements, he noted. End-users are further aided by technical conditions introduced by the government last year to ensure that their needs are met.

The two plots at Tuas South Street 6, known as plot 30 and plot 32, drew 14 and 18 bids, respectively. Both are 0.86-ha sites with a lease of 22.5 years. Earlier predictions had ranged from five to 13 bids for the two sites.

The highest bid for plot 30 came from Koh Brothers Building & Civil Engineering Contractor, at $6.6 million or $70.99 psf ppr.

This was slightly above the second-highest bid from Yee Lee Development of $70.97 psf ppr.

For plot 32, the top bid came from contractor SH Design & Build at $6.7 million, or $70.75 psf ppr.

Again, bidding was competitive, with the second-highest bid of $70.63 psf ppr coming from Tiong Seng Contractors.

Colliers' Mr Tan said this reflected "pent-up demand" from end-users and urged the JTC to introduce more of these smaller plots of land for end-users.

"Developers have been on the bay for Tuas plots ... due to the short 20-odd years tenure which make the site hard to be resold as likely its value will depreciate with diminishing tenure," said R'ST's Mr Ong.

But he urged caution in case prices rise to such an extent that end-users are priced out of a purchase.

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