CBD Incentive Scheme to breathe life into old buildings

By Amy Tan / EdgeProp Singapore | March 28, 2019 8:14 AM SGT
A CBD Incentive Scheme has been announced on March 27 to encourage building owners to convert existing office buildings in the CBD to mixed-use developments as part of URA’s plans to rejuvenate the city centre.
The scheme is applicable to the areas around Anson Road, Cecil Street, Shenton Way, Robinson Road and Tanjong Pagar. It will offer an increase in gross plot ratio (GPR) so that developers can build more units.
According to Tricia Song, head of research at Colliers International, some sites such as AXA Tower and International Plaza, which have already received a 25% increase in base plot ratio, could receive another 25% increase in GPR.
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AXA Tower (left) and International Plaza (right) Credit: Samuel Issac Chua/EdgeProp Singapore
This is subject to the buildings meeting the scheme’s requirements of being more than 20 years old, having a site area of more than 21,528 sq ft, and having plans for redevelopment into residential with commercial at first storey, commercial and residential, or hotel, she says.
While some commercial or predominantly commercial mixed sites along Anson Road and Cecil Street will not receive any uplift in base GPR, they may qualify for a 25-30% increase in GPR if they are also redeveloped to the above uses, she adds.
Christine Li, senior director and head of research at Cushman & Wakefield, says the scheme could be beneficial for many office developments that face challenges when it comes to land use zoning.
“As residential and hotel uses typically have a lower capital value, it does not make sense for landowners to downgrade to those development options without the increase in the plot ratio. With the new CBD Incentive Scheme in place, it will make commercial sense to look at various development options,” she says.
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Likewise, Nicholas Mak, ZACD Group’s head of research and consultancy, believes this scheme is attractive for owners of eligible office developments. On the other hand, he highlights that the take-up rate for the scheme could be curtailed due to costs. He elaborates: “Owners have to factor in the costs of redevelopment work, development charge or differential premium payable, as well as the loss of income during the construction period.”
Overall, Desmond Sim, CBRE's head of research, Southeast Asia, sees this as an opportunity for landlords and developers to revive their older and underperforming assets. “The net effect will be a private-sector-led urban regeneration of the CBD. This also widens options for investors and funds as the gross floor area incentives will effectively enhance their returns,” he says.
Buildings that are not within the designated areas can still propose amalgamations and seek approval for increase in plot ratios and building height through the Strategic Development Incentive (SDI) Scheme.
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However, URA has not clearly defined what it deems to be strategic areas under this scheme apart from Orchard Road, CBD and Marina Centre.
Mak points out that there are a handful of ageing commercial buildings outside these areas. In particular, he observes that owners of ageing retail malls face threats of dwindling foot traffic amid the rise of e-commerce. “These owners are likely to welcome incentives which encourage redevelopment and possible conversion of uses to inject more life and vibrancy into the area,” he says.