Public Sector Construction Demand Set To Rise

The public sector construction demand is expected to increase in 2017. This trend is reflected in the total cost estimates of some projects that are available in the BCI Asia research database:

Commercial redevelopment project: Golden Shoe Carpark at Market Street (S$150 million)

Golden Shoe Carpark at Market Street
Located in the heart of the financial district at Raffles Place, along Market Street, Golden Shoe Car Park is a 10-storey building with 47,000 square feet of net lettable area, comprising retail and office spaces as well as a multistorey car park with 1,053 car park lots. This excludes space on the second and third storeys of the building, which have been granted to the Singapore Ministry of the Environment and Water Resources, free of rent, for use as a food centre.

Plans for redevelopment are expected to transform the property into a higher-value commercial development that will include an office tower up to 280 metres high. Current tenants are expected to vacate the property by 31 July 2017.

Owner CapitaLand Commercial Trust has already seen success following the redevelopment of the former Market Street Carpark. Net property income rose 8.3 per cent to S$57 million in the third quarter of 2016, while gross revenue increased 8.9 per cent to S$74.4 million.

Sources:
CapitaLand Commercial Trust Management Limited (http://capitaland.listedcompany.com/newsroom/20161019_075652_C31_XWLCNFNN9LVJZ69U.1.pdf);
The Straits Times (http://www.straitstimes.com/business/golden-shoe-carpark-building-to-be-redevelopedas-office-tower)

Industrial projects: HDB’s Defu Industrial City (S$445.33 million) and JTC’s Logistics Hub @ Gul (S$35.31 million)

HDB’s Defu Industrial City
The new 13-hectare Defu Industrial City is developed as an eight-storey stack-up industrial complex to relocate existing occupants. It will feature 115 units of purpose-built dormitories and a three-storey commercial centre. The site covers an area of 131,665 square metres, with a gross floor area of 329,163 square metres.

Source: Kyoob Architects (http://kyoob.sg/kyoobarchitects/2015/07/29/defu-industrial-city)

Healthcare facilities: National Cancer Centre at Outram (S$85 million) and Integrated Intermediate Care Hub at Jalan Tan Tock Seng (S$1 billion)

Mega public sector infrastructure projects: second phase of the Deep Tunnel Sewerage System (S$6.94 billion), North-South Corridor (S$7 to 8 billion) and Circle Line 6 (S$3.7 billion)

Total construction demand projected to reach up to S$35 billion
In a media release dated 6 January 2017, the Building and Construction Authority (BCA) projects the total construction demand or the value of construction contracts to be awarded this year to reach between S$28.0 billion and S$35.0 billion, higher than the preliminary estimate of S$26.1 billion for last year.

Public sector to contribute 70 per cent of total construction demand
BCA stated that the projected stronger construction demand is due to an anticipated increase in public sector construction demand from about S$15.8 billion last year to between S$20.0 billion and S$24.0 billion this year. The public sector is expected to contribute about 70 per cent of the total construction demand, boosted by an increase in demand for most building types and civil engineering works.

In contrast, private sector construction demand is likely to remain subdued and is projected to stay between S$8.0 billion and S$11.0 billion this year as a result of the current slowdown in the property market and continued economic uncertainties.

Key projects in 2017
Residential projects: a steady pipeline of new public housing construction, upgrading works for HDB flats, and a number of upcoming sizeable condominium projects earmarked for developments on various Government Land Sales sites at Siglap Road, Martin Place and Anchorvale Lane.

Commercial projects: redevelopment projects such as Funan DigitaLife Mall at North Bridge Road (S$560 million) and CPF Building at Robinson Road (S$1 billion)

Funan DigitaLife Mall at North Bridge Road
This upcoming integrated development will have a total gross floor area (GFA) of 887,000 square feet and will include a six-storey retail mall, two six-storey office towers and one nine-storey tower of co-living apartment units.

Crockery-return robots at Kopitiam; a drive-through shopping service and an indoor cycling lane that cuts through the mall are just some of the features that the new Funan live-work-play mall will offer when it reopens in the fourth quarter of 2019. Three tenants have already signed on—cinema operator Golden Village, local food court operator Kopitiam and indoor climbing gym operator Climb Central. The mall is owned by CapitaLand Mall Trust.

Source: TODAYonline (http://www.todayonline.com/singapore/revamped-funan-mall-have-urban-farmswimming-pool-high-tech-food-court)

CPF Building at Robinson Road
Urban solutions provider Ascendas-Singbridge Group and a consortium formed by Japanese firms Mitsui and Tokyo Tatemono (Mitsui–Tatemono JV) will hold 65 per cent and 35 per cent stakes respectively in joint venture company Southernwood Property Pte Ltd to redevelop the former CPF Building at 79 Robinson Road. The 4,371-square-metre (47,050-squarefeet) site has a potential gross floor area of approximately 57,400 square metres (617,850 square feet). The new development will feature over 500,000 square feet of Grade-A office space with retail amenities and panoramic views of the city and the southern bay.

Under the partnership, Ascendas-Singbridge and Mitsui–Tatemono JV will own, develop and manage the project. Ascendas-Singbridge had won the tender on the sale of 79 Robinson Road by the Central Provident Fund Board (CPF Board) in November 2015 with a bid price of SGD550 million.

The new development will have direct connectivity to Tanjong Pagar train station and will enjoy dual frontage access along Robinson Road and Maxwell Road. It is expected to accommodate the evolving workspace needs of local and international businesses, as well as that of a growing millennial workforce. The development will aim for BCA’s Green Mark Platinum certification, in line with the Group’s commitment to environmental responsibility. The existing building will be decommissioned and development works will commence in the second quarter of 2017. Construction is expected to complete by 2020.

Sources:
Ascendas-Singbridge (http://www.ascendas-singbridge.com/~/media/asb-new/press%20releases/2016/20161004-newsrelease-asb-partners-mitsui-and-tokyo-tatemono-to-redevelop-formercpf-building.ashx)
TODAYonline (http://www.todayonline.com/business/ascendas-singbridge-venture-redevelop-former-cpfbuilding-s1b)

Institutional and other building projects: more healthcare facilities and various educational facilities. A significant amount of private sector investments in tourist attractions and recreational facilities at Mandai Lake is expected to go ahead this year.

Last year, the total construction demand was slightly lower than forecasted mainly due to the rescheduling of a few major public sector projects to this year, as longer preparation times are needed to implement these large-scale projects. Despite the slight shortfall from the forecast, total public sector construction demand last year was higher than the S$13.3 billion in 2015, supported by the strong demand for civil engineering projects.

Total construction output or progress payments made for work done has continued to remain high at S$35.1 billion last year, a slight moderation from S$36.4 billion in 2015. BCA expects the total construction output to moderate further to between S$30.0 billion and S$32.0 billion in 2017.

Forecast for 2018 to 2021
Average construction demand is projected to be between S$26.0 billion and S$35.0 billion per annum in 2018 and 2019, and between S$26.0 billion and S$37.0 billion per annum in 2020 and 2021.

Public sector construction demand is estimated to be between S$18.0 billion to S$23.0 billion per annum from 2018 to 2021, with demands of similar proportions coming from building projects and civil engineering works. Besides public housing developments and more healthcare and educational facilities, public sector demand over the medium term will be supported by various upcoming mega infrastructure projects such as the Jurong Regional Line, Cross Island Line and various infrastructure developments for Changi Airport Terminal 5.

Stay relevant by embracing change, innovation and transformation
According to the CEO of BCA Dr John Keung, although year-to-year fluctuations in the total value of annual construction demand are influenced by the ‘lumpy nature’ of major infrastructure projects, overall on-site construction activities or construction output is expected to stay at a relatively high level. Overall construction demand prospects over the medium term as well as the long term are expected to continue to be bolstered by a strong pipeline of public sector construction projects.

Despite the challenging economic situation, companies that are more likely to sustain their growth and competitiveness will be those that are “prepared to change, innovate and transform to stay at the forefront of technological innovation, process re-engineering and productivity improvement,” said Dr Keung.

Source: Building and Construction Authority (https://www.bca.gov.sg/newsroom/others/PR_Prospects2017.pdf)