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The area's regional centre, now called Jurong Gateway, is seeing a flurry of construction activity as new mixed-use developments with premium office and retail space, private condos and hotels come onstream. Will the regeneration in the west fuel another boom?
The area in the vicinity of the Jurong East MRT Interchange station had always seemed underdeveloped relative to most parts of Singapore. For the past decade, the 32-storey JTC Summit, where government statutory board JTC Corp is headquartered, had stood out as a lone high-rise structure surrounded by an expanse of empty land the size of 70 football fields.
Over the last two years, however, the area has started to resemble other property hot spots in Singapore. Hoardings have sprung up around some of the previously empty plots. Cranes have moved in, and the area is now a massive construction site.
What brought about such a transformation? Look no further than the URA 2008 Master Plan, which unveiled an ambitious billion-dollar scheme to turn that part of Jurong East into a commercial hub called Jurong Gateway. It will feature premium office towers, shopping malls and hotels. Meanwhile, the neighbouring and largely residential Lakeside precinct will be injected with leisure and entertainment facilities, capitalising on the waterfront living around Jurong Lake.
Both the Jurong Gateway and Lakeside precincts will constitute the new Jurong Lake District, according to the URA Master Plan. Occupying a total area of 360ha, it rivals Marina Bay in size, and is poised to be the largest commercial hub outside the downtown area.
That has set the stage for enthusiastic bids by developers in some of the government land tenders, and fuelled a mini construction boom in the western region of Singapore.
When the first white site at Jurong Gateway was launched two years ago, it received six bids. Australian listed property group Lend Lease and its Asian Retail Investment Fund paid $748.9 million or $650 psf per plot ratio (ppr) for the 205,856 sq ft site.
Construction of the $1.6 billion mixed-use development called JEM is at an advanced stage. The project will house an 818,000 sq ft shopping mall and a 13-storey office block. The six-level mall will be completed late next year. Meanwhile, the office tower was fully leased three years ahead of completion when the Ministry of National Development announced last year that it will take up the entire 315,385 sq ft space for 30 years with effect from 2015.
The second white site located next to JEM was put up for sale last year and drew five bids, with CapitaLand submitting the highest bid of $969 million or $1,012 psf ppr. That price was considered the most expensive for a commercial site outside the CBD last year. CapitaLand and its listed retail development arm, CapitaMalls Asia, are jointly developing the project, called Westgate, a $1.5 billion mixed-use project with a 20-storey office tower (320,000 sq ft) and a 416,000 sq ft shopping mall. From end-2014, CapitaLand will relocate its headquarters to Jurong, and will occupy half the office tower. The rest of the space, which features 17,000 sq ft floor plates, will be leased to other tenants.
When completed, Westgate will be linked to the Jurong East MRT station, the bus interchange, as well as neighbouring buildings such as JEM and Ng Teng Fong General Hospital. The 700-bed hospital is part of a $1 billion integrated medical facility incorporating the 400-bed Jurong Community Hospital. The entire development is slated for completion from 2014.
CapitaLand also controls two other retail schemes in Jurong Gateway. On one side of Westgate is JCube, a $200 million redevelopment of the former Jurong Entertainment Centre. The niche mall soft opened in April this year, and boasts of an Olympic-sized ice rink. On the other side of Westgate is IMM Building, which is undergoing a $30 million repositioning into Singapore's largest outlet mall. IMM Building and JCube are owned by CaptitaLand's shopping mall REIT, CapitaMall Trust (CMT). Together with the upcoming Westgate Mall, CapitaLand will have more than one million sq ft of retail space in the Jurong Gateway precinct, making it one of the largest commercial stakeholders in the area.
'Out-of-town office hub'
There is currently very little privately owned pure Grade A office space in Jurong, says Chris Archibold, head of markets at Jones Lang LaSalle (JLL). "Given both the public- and private-sector development plans for the area, we are certain that Jurong Gateway will reinvent itself into a strong out-of- town office hub," he adds.
The latest commercial site was launched for sale on Dec 19, and it is located along Venture Avenue, near JTC Summit. The site can be developed into a 25-storey commercial scheme with gross floor area (GFA) of around 695,000 sq ft. One of the conditions is that at least 90% of the space has to be designated for office use. Ong Teck Hui, JLL's national director of research & consultancy, expects bids to be in the $700 to $800 psf ppr. "The price also reflects a generally slower office market and demand characteristics in the west," he says.
The $700 to $800 psf ppr bid price estimate is in line with what has been achieved at other office sites sold in government land tenders recently. Examples are Paya Lebar Square, which fetched $872 psf ppr in April 2011, and the parcel along Robinson Road (SBF Centre) that was sold for $882 psf ppr in September last year. JLL's Ong points out that the commercial site in Venture Avenue can't be compared with CapitaLand's winning bid of $1,012 psf ppr for Westgate, as the latter was a white site, where only 40% of GFA needs to be allocated for office use. The developer has designated more than half the space in Westgate for retail, which generally fetches higher rents and capital values, therefore commanding a higher land price, he explains.
The Venture Avenue commercial site is also next door to International Business Park, where multinational companies such as Johnson & Johnson, Sony, Acer, Dell, and M&W Zander are already present. The transformation of Jurong Gateway into a commercial hub will also have a positive impact on International Business Park, according to Archibold.
Residential, hotel components add to appeal
Any project launch or record bid price for a land parcel by a developer tends to attract interest to an area. This was the case when the first hotel site in Jurong Gateway was launched for sale in September. At the close of the tender last month, the site received 11 bids. Genting Singapore won the site with a bid of $238.2 million or what was considered a record $1,167 psf ppr. The company announced it will build a 500-room mass-market hotel on the site.
The upcoming launch of the first residential project in Jurong Gateway by MCL Land is also likely to generate a buzz. MCL Land beat 11 others to win the hotly contested site with a bid of $369.4 million or $705 psf ppr in May this year. The developer is building a 600-unit private condominium on the site, and property agents reckon there will be strong buying interest as it will be the first private condo launch in Jurong Gateway. Other factors working in the condo's favour are its location next door to Westgate, which has a shopping mall linked to both a MRT station and bus interchange. The project is expected to be launched in 1H2013.
With all the new developments taking place, even the fate of the Big Box warehouse retail scheme now looks more certain. Listed TT International purchased the Big Box site from JTC for $40 million in 2007, and pumped another $95 million into the project before the company ran out of funds in 2008. Since a proposed investment by private equity real estate firm, Lucrum Capital, failed to take off earlier this year, TT International has been on the lookout for other investment partners.
On Dec 14, TT International announced that it had entered into an investment agreement with Prima BB Ltd (part of Prima Group) and Ultraco Investment, which are jointly committing $92 million to fund the initial development of Big Box. The company has also secured project financing of up to $125 million to fund the construction of the eight-storey warehouse complex. When completed, the development will have a total GFA of 1.3 million sq ft, making it the largest of the warehouse retail projects in Singapore.
The makeover of Jurong East is timely as more companies and individuals are looking "for more cost effective real estate" beyond the Central area, observes JLL's Archibold. The Jurong East neighbourhood is well provided for in terms of transport and amenities such as shopping, hotel and hospital, hence his confidence in its outlook. "As the transformation progresses, people will start to look at Jurong in a very different light," he adds.
This story first appeared in The Edge Singapore weekly edition of Dec 31, 2012-Jan 4, 2013.
