SINGAPORE (Nikkei Markets) -- Singapore will allow owners of older commercial property in the central business district to develop larger ones in their place, boosting both valuations and redevelopment projects and refreshing the area.
Unlike newer office precincts such as Marina Bay, which is home to one of Singapore's two casino-resorts and the 100-hectare Gardens by the Bay, the older parts of the city-state's CBD contain mostly offices and are deserted at night and on weekends.
One goal of the Urban Redevelopment Authority's draft land use master plan released earlier this week is to make these areas more vibrant by encouraging larger mixed-use projects with more sizable retail and residential components.
For landlords willing to convert their offices into hotels or residences, URA will permit an even larger increase in the gross plot ratio, which measures the area of the building relative to its land.
"In land-scarce Singapore, we cannot afford to have entire precincts dedicated to a single usage defined by official working hours," said Moray Armstrong, managing director of CBRE in Singapore, adding that specific initiatives were needed to revive the area.
"The CBD incentive program could unlock much value by enabling developers to reposition and repurpose obsolete office stock," Armstrong said.
URA, the government agency in charge of land planning in Singapore, reviews and revises its master plan every five years, outlining how the city-state intends to make use of its land resources over the next 10 to 15 years.
Other initiatives in the latest master plan include the sale of land parcels with shorter leases for those testing new lifestyle concepts and providing more public space in downtown areas.
Although property stocks were unmoved by the plan, analysts said the proposals were positive for developers and real-estate investment trusts since more office space can be built on the same plot of land.
The incentives offered by URA to convert offices into hotels and residences could also reduce the supply of office space in the medium term, pushing up rents in an already rising market.
Christine Li, head of research at Cushman & Wakefield in Singapore, described the draft master plan as "fantastic news for private owners who have been sitting on historical land sites but have held back redevelopment plans due to the lack of incentives."
"Landlords who were on the fence as to whether to divest their older assets for redevelopment are now more likely to do so," she said.
Lock Mun Yee, an analyst at CGS CIMB, said developers that would benefit the most from the redevelopment of older properties in the CBD include CapitaLand, City Developments and UOL Group, which own assets in the area.
As for REITs, DBS Group Research named office landlords such as CapitaLand Commercial Trust, Keppel REIT, which is managed by Keppel Corp, Suntec REIT, and OUE Commercial Trust, whose major shareholder is Indonesia's Lippo Group.
DBS said retail rents in the CBD would also rise over time as a larger live-in population coupled with more amenities would "bring more vibrancy and allow retail to trade well across the week rather than only on weekdays currently."
Besides remaking older parts of the CBD, URA said it would increase plot ratios for selected sites in the Orchard Road shopping belt, particularly those near the Orchard MRT train station, which is the busiest in Singapore.
URA also fleshed out plans to turn the area west of the CBD into a waterfront development with residential and leisure facilities, as Singapore's port is close to completing its relocation to the western edge of the island.