Developers need to take the initiative to keep pace with change

Property
Published April 18, 2006

Taking charge of the future
Developers need to take the initiative to keep pace with change


By CHUA YANG LIANG


SINGAPORE'S property market will have to continually revitalise itself to keep pace with changing lifestyles and new business opportunities emerging from the regional economies.


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Untapped demand: The warm response to the launch of the Sail indicates the latent demand for downtown living


Traditionally, the industry has taken its cue from urban planning directives which dictate the supply and use of land through government land sales. While these planning directives were laggard, they have successfully supported Singapore's economic initiatives.

For example, the ring of satellite towns in the 1971 Concept Plan provided for the growing population that served the labour-intensive manufacturing industries without choking the city centre. The property market then was marked by a flurry of activity in public housing and industrial estates, and saw the arrival of shopping centres and high-rise offices in the city.

The 1991 Concept Plan proposed the regional office and retail centres (eg. Tampines, Bishan and Novena) to house secondary commercial activities, leaving the city centre free for the growth of the financial services sector.

In the most recent Concept Plan review in 2001, new zoning systems for businesses were introduced to provide more flexibility to respond to the changing economic environment.

With the broadening of definition of white sites and new business zoning systems, the planning authority has indicated that it is transiting from a top-down approach to a flexible and market-driven one.

The challenge then is for the property market to wean itself from the planning overseer. The industry can capitalise on this new planning flexibility and push the envelope by introducing innovative real estate products. The Sail is just one example where the market has responded well to the flexibility offered by a white site. City centre living is just one sub-market that has yet to be fully tapped in Singapore. Developers don't have to wait for signals from the authorities to try out new concepts such as turning obsolete factories into loft apartments.


Of homes and offices

The warm response to the launch of the Sail indicates the latent demand for downtown living. Following this, there were a series of conversions of older office stock to residential use. Last year saw five office buildings along Shenton Way being approved or seeking to apply for change of use.

While such conversions may seem to defy economic logic, especially in the current context where they will only exacerbate the shortage of office stock in the central business district, these future residential units can easily be adapted to home offices. Their location in Shenton Way allows them to capitalise on both the residential and office sub-markets.

One challenge in the residential market is the need to provide innovative housing for the increasing numbers of both foreigners and local residents. While the current demand for city centre addresses comes mostly from foreigners, the concept is likely to catch on with local yuppies.

There is already a growing trend among the creative class to move into neighbourhoods that are architecturally rich and socially colourful. A walk around the former Singapore Improvement Trust (SIT) housing estate in Tiong Bahru will provide a sense of this trend.

The challenge to owners of Shenton Way buildings is to find ways to differentiate themselves when faced with redevelopment. While many of the buildings have some social and cultural history, it remains to be seen how well the owners will capitalise on these features. For instance, would the owner of Asia Insurance consider converting the building to residential use and conserving its facade to capture the colourful local history?

Over 40 per cent of retail stock islandwide is found in the suburbs. While these malls are more resilient to external shocks than those in the main shopping belt, they suffer from a lack of imagination; you've seen one, you've seen them all. Enterprising landlords who can break away from cookie cutter formulas stand to gain since innovative retail concepts will be a major driver of leasing demand.

We are already witnessing the entry of specialised malls like Velocity@Novena. In future, boutiques and specialty retailers rather than chain stores will be the norm.

Another challenge to the retail developer is to identify and capitalise on emerging trends before his competitors. The trick is to find a balance between the stability of longer term tenants with the flexibility offered by shorter leases.


Innovative uses

Singapore's push into the knowledge sector can benefit property players in several ways. The first, of course, is in providing the physical infrastructure. Industrial developers particularly will benefit. JTC Corp's divestment of industrial properties also offers opportunities to private developers.

With the new business zoning system, there is the flexibility for research-based industries to change their use fairly easily. The challenge to developers is to provide industrial stock that can be easily adapted to different uses.

Another challenge is the export of building technology. Singapore has done a great job in reducing the level of urban heat with generous tree plantings along the roads. What we have not seen enough of is the integration of modern building technology with traditional tropical architecture to boost energy efficiency in buildings.

While many Australian and European cities have a history of environmental and sustainability movements, these two buzzwords are only slowly making their way from academia to the marketplace here. This is one key area that can be tapped. Developers can collaborate with research institutions to adopt new building designs and green technology suited to the tropics.

For a start, the One North research hub offers the best opportunities. Developments here will be a platform for testing new building codes, green technology, experimental concepts, new housing forms and other sustainable concepts in Singapore.

Property trends here so far have been driven by economic and planning directives. How the cityscape will be transformed going forward depends largely on how players respond to the market and the planning direction. Developers will have to differentiate themselves and explore new opportunities without waiting for the planners to initiate new measures.

The writer is associate director, head of research, Jones Lang LaSalle