(SINGAPORE) A white site behind One Shenton, launched yesterday and slated predominantly for office development, could fetch $850 to $1,000 per square foot of potential gross floor area, property consultants say.

This translates into bids of $1.22 billion to $1.43 billion. And some analysts reckon that the price could go even higher.

The tender for the 110,206 sq ft site - offered on a 99-year lease by the Urban Redevelopment Authority - closes on Sept 19.

At least 70 per cent of the maximum 1.43 million sq ft of gross floor area must be developed as offices. Assuming the successful bidder puts up an all-office development, the net lettable space could be just over one million sq ft.

The development can rise higher than 40 storeys. And if roof forms are included, the maximum height can go beyond 50 storeys.

CB Richard Ellis executive director Li Hiaw Ho says that the site could fetch around $900 to $1,000 psf per plot ratio (psf ppr), which would result in a breakeven cost of $2,300 to $2,500 psf for the completed office project.

Using a yield-based approach and assuming gross monthly average rent of $12 psf and a capitalisation rate of 4.5 per cent, the value of the completed project would be about $2,600 psf.

Mr Li also notes that $2,500-2,600 psf capital values are in line with current office transactions. BT reported last week that Hong Leong Group had received an offer of about $2,500 psf for 1 Finlayson Green and has since learnt that this offer, from a European property fund, may actually be higher.

Knight Frank managing director Tan Tiong Cheng predicts a slightly lower price of $850 to $900 psf ppr, saying that bidders may take a cue from last month's sale of nearby UIC Building for $870 psf ppr. He expects the URA site to draw at least four to five groups of bidders.

Taking a more upbeat view, Credo Real Estate managing director Karamjit Singh predicts that the top bid is 'certain to go over $1,000 psf ppr' because of interest from overseas institutional investors like funds. 'Their perspective on target returns and market outlook may be rather different from local developers,' he said.

Agreeing, a seasoned market watcher - alluding to the office glut that plagued Singapore a few years ago - pointed out: 'Local players know local history.'

Some investors may now be concerned that the government could release a slew of new office sites - on 99-year leases and short tenures for temporary structures - to alleviate the current shortage of space.

Still, CBRE's Mr Li expects URA's latest site to draw strong bidding. 'The future CBD will be in the Marina Bay area and if you want to be in the office market, you have to be there,' he said.

Knight Frank director and head of research and consultancy Nicholas Mak reckons that the authorities would only release additional office sites selectively, knowing that new developments can be completed only after the first phase of the Business and Financial Centre is ready in early 2010.

The government's proposal to offer short-tenure sites for temporary or 'transient offices' will have limited appeal, he said. 'Big international financial institutions and other users concerned about image will probably not find such premises appealing. However, perhaps some smaller local firms facing pressure from rising rents - like architectural firms and law firms - may consider them.'

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