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While Sentosa Island saw over five million visitors for the whole of last year, Mapletree Investments’ Vivocity at HarbourFront across the waterway has already seen more than nine million throng the mall since its soft opening on Oct 7.
"We are very pleased with the footfalls attained since our soft opening," says Chong Kim Fung, vice-president of asset management at Mapletree, "These have far surpassed our projections. At this rate we are confident that Vivocity's visitorship will exceed 30 million a year."
The Sentosa integrated resort, which was awarded to Malaysia's Genting International and Star Cruises on Dec 8, is expected to have a positive spillover effect on property prices and rentals beyond the Sentosa-HarbourFront and Keppel Bay precinct. It is also expected to spark a rejuvenation of the sleepy, relatively old and undeveloped part of Telok Banglah Road and the Mount Faber neighbourhood which is just across the street from Vivocity/HarbourFront and the Keppel Bay area.
"There will be a ripple effect," says Chua Yang Liang, head of research at Jones Lang LaSalle. "In time to come, there will be interest in these areas."
Indeed, it has already started. Two weeks ago, a 21,000 sq ft site just directly across Telok Banglah Road from Vivocity was put up for collective sale with a price tag of $52 million. This existing development called Citiport Centre is an old, mixed-use commercial and residential development with 28 commercial units and 15 apartments with a total gross floor area of around 44,823 sq ft. Dickson Property Consultants, which is the marketing agent for the project, announced that it had received an 81.5% consent rate after having worked on the sale since last year. The property agent thinks it's an ideal site for a boutique hotel.
Meanwhile, property consultant Cushman & Wakefield will be putting up another collective sale site, called Pender Court, for tender next month. The existing low-rise apartments block is on Wishart Road at the foot of Mount Faber's Jewel Box, and just off Telok Banglah Road and across the street from Vivocity. The indicative price for the 65,000 sq ft, freehold site is upward of $60 million.
"This is probably the only piece of freehold site there - the others are mainly 99-year leasehold," says Christina Sim, director of capital markets at Cushman & Wakefield.
If you're driving along Telok Banglah Road, on the left side are the new developments at HarbourFront with Vivocity being the latest, and further up is The Caribbean - and that's where all the action is. But on the right hand side, that's an eyesore with old, mixed-use developments." He expects the redevelopment potential on this side of Telok Banglah and Mount Faber to provide a window of opportunity for developers who had missed out on Sentosa and HarbourFront.
"It would interest the big developers who want a piece of the action in and around this area," she says. "It's an exciting location to watch, what with the changing landscape."
Ong Choon Fah, executive director of DTZ Debenham Tie Leung, agrees. "With the IR, the whole area will be rejuvenated," she says. "We are already seeing it happening, look at Citiport." As for property prices on this side of Telok Banglah and Mount Faber, Ong believes that they will catch up.
"But in terms of environment, it's different from what you see in the CBD," she adds. "This is a different lifestyle, it's more leisurely. Marina Bay is more business-focused."
Cushman & Wakefield is betting that the upcoming 2008 master plan will have a comprehensive proposal for rejuvenating the Telok Banglah and Mount Faber area in keeping with the new developments at the HarbourFront-Sentosa precinct across the road. "The government has the next two years to come up with a new vision for the Telok Banglah/Mount Faber areas, and I'm sure [the masterplan] will be tweaked now that the Sentosa IR site has been awarded," says Donald Han, managing director of Cushman & Wakefield.
He reckons that the entire place leading to HarbourFront and Sentosa needs to be spruced up. "The main thing is the existing port activities next to HarbourFront. It's an eyesore right now because as you enter Sentosa and the IR, there are all these huge container trucks using the same road and causing traffic congestion."
HarbourFront - Sentosa's $15 billion investments.
Including Genting's investment in the IR, Sentosa Island has seen a total of $12 billion worth of investments in the last three years. Meanwhile, Mapletree has ploughed $3 billion into HarbourFront to turn it into a "work, live, play" destination with the recent opening of Vivocity and St James Power Station, and entertainment and F&B hub with nine restaurants and clubs. This is on top of the existing office park with HarbourFront Towers One and Two, and Keppel Bay Tower office buildings. The HarbourFront office towers saw rentals ranging from $5 to $6.30 psf in October. Mapletree expects office rents in the area to increase by another 20% to 30% next year.
The latest office development at HarbourFront is the Mapletree Lighthouse, a six-storey building that will be entirely occupied by Merrill Lynch.
"The combined attractions at HarbourFront as well as the luxurious waterfront homes in Sentosa [Cove] will liven up the entire location, making it one of the most vibrant destinations in Singapore for locals and tourists alike," says Chong of Mapletree.
The infrastructure and connectivity being put in place - with a direct rail link between
Sentosa and Vivocity, MRT access via the North-East Line and upcoming Circle Line, as well as cruise ships and ferries at the Cruise Terminal - will also increase its accessibility and attractiveness as a destination.
"The property values in this locality have benefited from the rejuvenation of HarbourFront as a destination for 'work, live, play’," observes Chong. "In fact, we think that the whole precinct can be further enhanced from more developments but unfortunately, until the government releases more development land, there is limited supply."
There are only two more development plots left within the HarbourFront precinct, one of which is for the redevelopment of the SPI Building next to HarbourFront Centre into an office building. The other, for residential development, is jointly owned by Mapletree and Keppel Group.
In nearby Tanjong Pagar, Mapletree's 124-unit, 99-year leasehold apartment project called The Beacon at 130 Cantonment Road was sold out within four weeks of its private previews in June even without a public launch. The project should be completed by 2010.
Keppel Bay's proposition
Keppel Group is the other large stakeholder at the HarbourFront precinct. It owns the 30ha Keppel Bay area right next door, which is the site of its former shipyard.
"Our immediate focus is to develop Keppel Bay into a world-class waterfront living destination," says Tan Tai Chiew, general manager of Keppel Bay Pte Ltd. "Nevertheless, we are open to exploring good opportunities as they arise."
Keppel Bay is a wholly owned subsidiary of Keppel Group, which is in turn a joint venture between Keppel Corp (70%) and Keppel Land (30%). Keppel Land, as the property arm of Keppel Group, is also the appointed project manager and marketing manager.
The first phase, the 969-unit Caribbean@Keppel Bay, was completed in 2004. So far, all except for a handful of units have been sold. In a recent resale transaction, the price of $1,032 psf was achieved for a 153sq m unit in Block 6(#04-04), which was sold for $1.7 million at end-October. The owner had bought it in October 2000 for $1.37 million, or $829 psf. This is an uplift of 24.5% in price appreciation.
Next quarter, it plans to launch the second phase of 1,200-unit waterfront condominiums designed by world-renowned US architect Daniel Libeskind, the masterplan architect of the Ground Zero-WTC redevelopment in New York.
"Libeskind-designed residences have the reputation of 'selling out' within a short period of their launch," says Tan of Keppel Bay. "We are confident that the design and premium location of Keppel Bay Phase 2 will attract many keen buyers and investors, and command a strong price."
Across the sea, Ho Bee's 249-unit The Coast waterfront luxury condo saw prices increase from $1,500 psf to above $1,800 psf. Since its launch in early October, over 90% of the units have been sold. At the end of last month, the developer with the largest landbank on Sentosa Cove won The Waterfront Collection condo site in the south cove with a bid of $181.2 million, or $919 psf for a 119,508.4 sq ft site.
"My chairman's forecast of prices hitting $2,000 psf seems conservative now given the prices we have achieved at The Coast," says Ong Chong Hua, executive director of Ho Bee. "We are now almost certain that prices will breach the $2,000 mark sooner, given the IR and the scarcity premium for projects at the Cove."
Sentosa Cove is a gated community within a resort, and it offers true waterfront living on Sentosa Island itself. " It is also the only place where you can get true waterfront housing," says Ong of DTZ. "At the Cove, you will have only 2,500 housing units when everything is developed. And they command a premium because of the proximity to the water's edge"
As for Caribbean Phase 2, she continues, "it has a beautiful view, and in time to come when Keppel Island and the marina are ready, it's going to be very nice". Keppel Island will have a $30 million marina, and under construction right now is a bridge linking Keppel Bay to the Island. This is expected to be completed next year. There are plans to develop luxury villas on the island as well.
Just an Olympic Effect?
The multi-billion-dollar question facing investors and developers is that down the road, will the IR effect on the neighbourhood be sustainable or will it be short-lived?
"Of course, it will be sustainable," contends Ong of Ho Bee. "This can be likened to the Olympic syndrome, when property prices will rise in the city hosting the Games in the run-up to the event. This difference is that in this case, when the IR is completed. [three to four years later], more spin-offs are expected, which should provide sustainable real estate prices."
Chris Fossick, managing director of Jones Lang LaSalle in Singapore and Southeast Asia, puts it this way. "I don't think the IR effect is similar to that of the Olympics," he says. "The Olympic effect is because it all happens and ends in two weeks. After the Olympics, they close everything down, the athletes go home and that's it.
"The IR, on the other hand, will still be there," he continues. "And I don't think it will be the same as the Olympic Effect. What it will do is attract even more people to Singapore - more tourists, more people coming for conferences and exhibitions - it's like what's happening in Las Vegas. So, you will see a surge in the number of tourists and businesses as well. I don't think for a minute its like the Olympic Effect."
With the HarbourFront business park becoming an increasingly popular location with MNCs beyond just the shipping companies, quality of life plays an important role in attracting talented staff, says Ong of DTZ. "And now [HarbourFront] is very convenient because all the amenities like MRT, shopping and F&B are well provided in this area."
For now, only the newer developments at HarbourFront and Keppel Bay overlooking Sentosa are likely to see a revaluation in property prices and rental. The knock-on effect on property values resulting from the Sentosa IR on the old stretch of Telok Banglah and the foothills of Mount Faber "is likely to happen when they are redeveloped and the area is rejuvenated", says Han of Cushman & Wakefield.
The old part of Mount Faber and Telok Blangah is expected to see a rejuvenation resulting from the buzz at HarbourFront and Keppel Bay and the upcoming $5.2 billion Sentosa IR across the harbour
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