Resurgence of Mixed-Use Developments in Singapore’s CBD

December 2014

Mixed-use developments are nothing new globally, but they have seen somewhat of a resurgence in Singapore over the last few years. The Singapore Central Business District (CBD) has been undergoing a transformation since the early 2000s with the government’s push to encourage city living and ensure that the CBD remains lively during both the evenings and the weekends. Historically, the CBD has been dominated by pure office buildings plus a number of hotels and supporting retail amenities.

A new push on city living started in the mid-2000s with residential developments such as The Sail @ Marina Bay, which is located in the heart of the CBD in Marina Bay. The CBD today is punctuated by various non-office use developments. Residential apartments have sprouted up all over the CBD, from Tanjong Pagar to Beach Road, and a number of new hotels managed by international chains have emerged in the city, either in the form of new buildings or revamped and reused existing buildings.

The transformation efforts were initiated by the Singapore authorities with the goal to turn the growing CBD into a vibrant district round the clock by encouraging a mix of uses – commercial, residential, hotel and entertainment. This vision of a more vibrant CBD was in reaction to a global trend of extending the activity in the CBD beyond the standard office hours, and to recoup the large investment in infrastructure that has gone into developing the area.

This transformation would not have been possible if not for two key enablers.

Introduction

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The key planning initiative that has driven this is the concept of “white” site zoning. The concept of “white” sites was first introduced by the Urban Redevelopment Authority (URA) in 1995 to give developers more flexibility in planning the composition of land use on certain land parcels sold by the state through the Government Land Sales (GLS) programme. Under the URA’s white site guidelines, developers can decide on the mix of uses and the respective quantum of floor space of each use as long as the total permissible gross floor area (GFA) for the whole development is not exceeded. Some sites also include a minimum fixed percentage of the development to be dedicated to a use decided by the government, which is often an office space in the CBD and the rest is up to the developer. Some recent GLS plots have also had a percentage stipulated for hotel use. The flexibility of land use given to a white site allows developers to develop schemes that respond best to changing market conditions. Developers therefore have a stronger chance of matching demand and supply. White sites can generally include commercial (office and retail), residential or hotel use, or a mix of these uses. This also means that from an investor/developer’s point of view, a mix of asset classes also serves to spread the risk and mitigate a particular usage being in a down cycle. Many developers also use the presale of any residential component to offset the upfront costs and improve the cash flow for the entire development.

Development Year Completed / Due Office Component

Hotel / Serviced Apartment Component

Retail Component

Residential Component

Convention Centre

Raffles City 1985 Yes Yes Yes

Suntec 1994 Yes Yes Yes

UE Square 1997 Yes Yes Yes Yes

MBFC 2010/12 Yes Yes Yes

Asia Square 2011/13 Yes Yes Yes

South Beach 2014 Yes Yes Yes Yes

Duo 2016 Yes Yes Yes Yes

Marina One 2016 Yes Yes Yes

Tanjong Pagar Centre 2016 Yes Yes Yes Yes

OUE Downtown 1994 (refurbishment expected to be

completed in 2016)

Yes Yes Yes

Artist impression of Guoco Tower – a mixed development by Guoco Land

Flexible Planning

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The result of this planning has been the successful emergence of mixed-use developments that bring life to the CBD beyond normal business hours. Mixed-use developments have proved to be very appealing to users across many global cities. Pacific Place in Hong Kong originally comprised three hotels (the Shangri-La, Marriott and Conrad), two office towers and a shopping centre when it was developed back in the late 1980s. The development has always enjoyed high occupancy rates as users enjoy the convenience of having multiple amenities located under one roof. From an office occupier’s viewpoint, a hotel and strong retail offering provide excellent convenience to staff and visiting clients. The hotels and retail in turn benefit from the patronage of the office occupiers. On the back of its success, this development has since been further enhanced with the addition of another hotel (The Upper House) and a third office tower.

Successful developments in Singapore include Raffles City, which was completed in the mid-1980s and comprises an office tower, two hotels (Swissôtel The Stamford and the Fairmont Singapore) and a retail mall. Despite the growing presence of newer office developments in the CBD, Raffles City Tower has consistently maintained high occupancy rates.

More recently, Asia Square (2 million sq ft of office space, The Westin Singapore hotel and more than 60,000 sq ft of retail space) has become the first Grade A office development in the CBD to encompass a 5-star hotel within the building. There are a number of notable new schemes in the pipeline, including South Beach (500,000 sq ft of office space, a hotel, luxury residences and retail space) and the Tanjong Pagar Centre, which includes a 900,000 sq ft office tower (Guoco Tower), a hotel, luxury residences and retail space.

Artist impression of South Beach – a mixed development by CDL

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Scale Economies and Accessibility

Another key factor to the success of these mixed-use developments is scale economies and transportation links (subway access). Besides a more productive use of space, mixed-use developments also bring about land use synergies. Combining multiple uses within a single development allows developers to share common resources within the overall development, lowering development costs and maximising the use of the land. A steady flow of foot traffic, drawn from residential occupants, hotel guests and office tenants, also serves to create buzz within the development throughout the day and night. The cross selling of services and amenities to stakeholders within the same development also builds up a small community, acting as a win-win and further encouraging a timeefficient productive community. While retailers benefit from a stable catchment of shoppers, the occupiers likewise gain from the convenience of having retail right on the doorstep.

For office tenants, the diverse mix of offerings within mixed-use developments undoubtedly raises the appeal of office space to their staff. Besides the doorstep convenience offered by the retail component, the presence of hotels and residential units within the same development provides an added benefit for office workers and visiting guests and reduces overall travelling time.

The efficient connectivity of the development to other parts of the city through integration with the public transit system offering the occupier alternatives other than relying on private automobiles makes such a project highly efficient and functional. The transport connectivity improves not only the accessibility for the occupiers, but also enlarges the market catchment for the entire project, especially retail.

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The Future is MixedOn the back of ever-growing concerns over environmental sustainability and labour productivity, we envisage more mixed-use development. While there is still very much value in single use schemes, given the popularity of mixed-use developments with occupiers and therefore investors, we will see further developments of

this kind in the future, which will continue to add to the vibrancy of the CBD. Certain areas such as Marina Bay, given its greenfield nature, need to be carefully orchestrated to ensure that supporting amenities are sufficient, and mixeduse schemes prove very effective in this regard.

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About JLLJLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual fee revenue of $4.0 billion and gross revenue of $4.5 billion, JLL has more than 200 corporate offices, operates in 75 countries and has a global workforce of approximately 53,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.0 billion square feet, or 280.0 million square meters, and completed $99.0 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has $53.0 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.

JLL has over 50 years of experience in Asia Pacific, with over 27,500 employees operating in 80 offices in 15 countries across the region. The firm was named ‘Best Property Consultancy’ in seven Asia Pacific countries at the International Property Awards Asia Pacific 2014, and won nine Asia Pacific awards in the Euromoney Real Estate Awards 2013. www.ap.jll.com

Chris Archibold International Director at JLL and is Head of Markets in Singapore. He is responsible for the delivery of transactional and advisory services to our clients in Singapore. Chris is also a member of the Asia Pacific Markets Executive Committee. Chris is a Fellow of the Royal Institution of Chartered Surveyors (FRICS) with over 20 years’ experience of advising both occupier clients and developer/ investor clients principally in Asia Pacific and in EMEA (Europe Middle East & Africa).

Dr Chua Yang Liang, Head of Research, JLL, South-East Asia leads the JLL research teams in the South-East Asia region, encompassing Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. Trained as an urban planner, Dr Chua brings to the Firm a different perspective to the fundamental research on the property market. He publishes original research on regular property market updates, rental and price indices, topical property market matters, as well as consultancy assignments.

About the authors

Chris Archibold Head of Markets, JLL chris.archibold@ap.jll.com +65 6494 3750

Dr Chua Yang Liang Head of Research, South-East Asia yangliang.chua@ap.jll.com +65 6494 3721

www.jll.com.sg

Jones Lang LaSalle© 2014 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

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