Raising land supply may aggravate housing issues
The Business Times, 3 Jun 2021, Thu
By Fiona Lam
ADJUSTING the additional buyer's stamp duty (ABSD) remission deadline on government land sales (GLS) sites and allowing a change of use for hospitality properties may help reduce pressure on housing developers in the short run, amid the construction industry's labour shortage.
Those were the suggestions by Lee Nai Jia, deputy director of the Institute of Real Estate and Urban Studies (IREUS) at the National University of Singapore, as the foreign workforce in the construction industry continues to shrink while the number of private homes and executive condominiums under construction remains little changed.
Noting a supply-side "dilemma" in the residential market, Dr Lee said that while more GLS sites may need to be released to prevent land prices from soaring, that will also likely further heat up competition for labour and construction materials.
Developers' land bids remain high, demand for housing has been robust, and prospective homebuyers are facing fewer options due to the dwindling supply of unsold, uncompleted private homes, he noted. If GLS plots are in short supply, real estate developers with depleting landbanks may turn to smaller collective-sale sites, Dr Lee said.
However, releasing more GLS sites will drive up construction activity and thus the costs of raw materials and manpower, adding upward pressure to prices of private homes and HDB resale flats, he said.
This comes as the construction sector is already facing an increasingly acute labour shortage.
The number of private residential and executive condominium (EC) units under construction as at the end of 2020 and 2016 were similar, at 46,452 and 44,149 respectively, but there were fewer workers last year. At end-2020, the construction, marine and process sectors had 311,000 Work Permit (WP) holders, down 24 per cent from 2016, the Ministry of Manpower's annual figures showed.
Last month, Minister for National Development Desmond Lee said the number of construction WP holders had dropped about 15 per cent from pre-Covid levels, and is expected to fall further in the months ahead due to the ongoing Covid-19 situation. Worsening the labour shortage are the recent border restrictions on India and Bangladesh, the home countries of the bulk of foreign workers in Singapore's construction sector.
Meanwhile, private residential and EC units under construction as at end-March 2021 kept largely steady at 45,324, ticking down by 2.4 per cent from end-December 2020, according to quarterly data from the Urban Redevelopment Authority.
Median wages of construction WP holders climbed 15-30 per cent in March this year compared to pre-Covid times, due to competition for the limited supply of workers, affecting both new and ongoing projects, Mr Lee said.
IREUS' Dr Lee expects the shrinking workforce to make it harder for developments to meet deadlines.
Dr Lee suggested that in the immediate term, the supply of GLS residential sites may be increased to satiate the strong demand for housing, but this could ideally be accompanied by an extension of the typical five-year ABSD remission deadline for developers. "It may be worthwhile to review the deadlines for GLS sites, especially the larger plots, to give developers and contractors more room to manoeuvre. That'll help ease pressure on resources and manpower."
ABSD is a form of tax, levied at 30 per cent on the land price. Developers can get an ABSD remission of 25 per cent of the land price if the project sitting on the land is finished and fully sold within five years.
Given delays due to Covid-19, developers have been granted relief from the government via a 12-month extension of both the project completion period and ABSD remission timeline for completion.
Another option Dr Lee proposed is to allow some existing properties such as hotels and serviced apartments to be converted into condominiums.
Depending on the condition of the existing property, changing its approved use to residential use may require less manpower and resources than building on new sites, Dr Lee noted. That being said, there could be ramifications if these conversions are allowed, such as a possible shortage of non-residential properties after the Covid-19 pandemic, he added.
The Singapore government has rolled out several measures to support the built environment sector during this period, including temporary flexibility for construction firms to recruit workers from China. While Dr Lee finds these measures helpful, he said they may not resolve the manpower crunch in the immediate term.
For one thing, China's construction workers now have "more options", given the country's surge in infrastructure spending, so they may not come to Singapore to work unless they are paid "much higher wages", Dr Lee noted. It will also take some time for them to be trained and adapt to the work in Singapore, he added.
Likewise, the Construction Industry Joint Committee earlier said that workers from China tend to be specialised in certain trades and command higher salaries, thus it will not be feasible for companies to hire them to carry out general works.
Strong leasing interest for part of StanChart space in MBFC
The Business Times, 3 Jun 2021, Thu
By Kalpana Rashiwala
THE asset manager of the Marina Bay Financial Centre (MBFC) has received strong interest from potential tenants for about 200,000 sq ft office space that it has been actively marketing in the development's Tower 1. This is part of the roughly 400,000 sq ft currently leased to Standard Chartered (StanChart) in the tower.
The space being marketed occupies nine-and-a-half floors. "We have received very strong interest from occupiers in a range of industries, given the prominent location and views over Marina Bay," said Rob Garman, executive director of Hongkong Land, which owns a one-third stake in the commercial space at MBFC. He is also a director at Raffles Quay Asset Management (RQAM), the asset manager for the commercial space at MBFC and the nearby One Raffles Quay.
The profiles of occupiers that have shown the strongest interest are tech firms from the United States, China and Singapore, as well as companies in media and financial services, said Mr Garman in response to questions from The Business Times. "We expect to achieve rents of between S$11 and S$12 psf a month. Tower 1 MBFC is a premium-quality asset, in the best location in the CBD, with uninterrupted views of the Bay."
While the final amount of space that StanChart will give up remains uncertain, RQAM continues to market the 200,000 sq ft. Mr Garman told BT that the matter is still under discussion with StanChart.
In all, the London-headquartered bank currently leases 18.5 levels in the 33-storey Tower 1, which has office floor plates ranging from 18,000 sq ft to 22,000 sq ft. BT understands that the bank's lease expires in late-October 2022, with an option for renewal.
StanChart also has its own premises in Changi Business Park.
When contacted, the bank said that since April 1, it began piloting a programme where up to 80 per cent of its employees in Singapore will have more flexible work arrangements, including working from home. It also has a global partnership with International Workplace Group (IWG), which provides near-home workspaces across 3,500 locations. "Our employees in Singapore can choose to utilise this service occasionally, should their current home environment be unconducive for work and if their job role allows them to."
The 400,000 sq ft offices on 18.5 levels that StanChart currently leases at MBFC Tower 1 is part of the roughly 513,000 sq ft it initially leased in the tower.
Talk in the market is that StanChart exercised its rights under the lease contract to release four-and-a-half floors around 2014/2015. A couple of years ago, it negotiated to release another floor.
At the neighbouring MBFC Tower 2, the bank had previously leased for around four years Levels 9 and 10 totalling nearly 50,000 sq ft under a sublease agreement.
That lease expired in April this year; about 38,000 sq ft of this space - on the whole of Level 9 and part of Level 10 - has been leased to CGS-CIMB.
The MBFC project was developed in two phases. Office towers 1 and 2 were part of the first phase, which received Temporary Occupation Permit (TOP) in 2010. Tower 3, in the second phase, received TOP in 2012.
In all, the MBFC development has nearly three million sq ft of office space and about 180,000 sq ft of retail space.
It was developed by a tripartite consortium comprising Hongkong Land, Keppel Land and Cheung Kong Holdings. The same consortium had earlier developed One Raffles Quay (ORQ), with two office towers and a small amount of retail space. ORQ received TOP in 2006.
At ORQ's North Tower, about 95 per cent of the 200,000-plus sq ft on the top 12 floors of the 50-storey tower vacated by UBS has been committed. The UBS lease expired at the end of last year.
Tenants signed up include L'Oreal, which is taking 67,000 sq ft; The Executive Centre (for the top two floors) and Canadian pension fund OMERS, which has leased about 19,300 sq ft.
Capital International has also leased 58,000 sq ft of the ex-UBS space; it will be vacating two floors totalling nearly 36,500 sq ft in the tower's lower-zone.
Market watchers note that banks and other financial institutions had already started rationalising their office footprints here after the Global Financial Crisis (GFC); the pandemic and work-from-home practice have speeded up this process.
Andrew Tangye, executive director and head of office leasing advisory at real estate consultancy JLL, said: "Banking and finance used to dominate demand for offices in the CBD but post-GFC many of the banks, particularly the foreign ones, have had to restructure their business models to comply with the requirements of the financial regulators, deal with digital disruption to meet consumer needs and other forms of competition. This process was occurring before Covid-19 and the pandemic has accelerated further change in the composition of their space needs in Singapore for some banks."
Ashley Swan, Savills Singapore executive director of commercial, said: "What is crucial is whether occupiers in other sectors can make up for the reduction in office demand from financial institutions. Besides tech companies, there are also expansion pockets in a range of sectors, from fast moving consumer goods (FMCG) to wealth management. Singapore remains a port of call for a lot of corporations and will continue to do so.
"Another mitigating factor for the office leasing market is a delay in completion of new office supply."