Developers welcome incentive scheme to revamp CBD

AXA Tower, a landmark cylindrical-shaped building in Shenton Way, may well usher in a wave of redevelopment in the Central Business District (CBD) under an incentive scheme announced at Wednesday's launch of the Draft Master Plan.

The 50-storey AXA Tower is currently an office development with some retail space but is primed for a $3 billion makeover to feature residential and hotel spaces as well. The site will receive a plot ratio increase of 25 % under the CBD Incentive Scheme, which aims to rejuvenate the area. It is one of two schemes meant to incentivize developers to convert aging developments for other purposes, such as hotels and residential use.

Most developers and building owners, such as CapitaLand, Hong Leong Holdings and City Developments Limited, welcome the move to encourage more mixed-use projects. But there remain deterrents to redevelopment, such as cost. Also, strata-titled projects have to be sold en bloc before they are repurposed, which complicates the redevelopment process.

Mr.Pua Seck Guan, chief executive of Perennial Real Estate Holdings (PREH), which owns AXA Tower, said that under the new Draft Master Plan and with the new incentive, the site will have a total increase in gross floor area of 46.5 %, from the existing 1.05 million sqft to 1.55 million sqft.

The CBD Incentive Scheme applies to the Anson Road, Cecil Street, Shenton Way, Robinson Road and Tanjong Pagar areas, and is for predominantly office buildings that have been built or have had their last major refurbishment at least 20 years ago.

AXA Tower was built in the 1980s. The sites stand to get a plot ratio increase of between 25 % and 30 %, depending on location and land use, which may range from a hotel to a condominium with shops on the ground floor.

Mr.Pua said the scheme, which will kick in when the master plan is gazetted later this year, is a timely one as PREH had been exploring redevelopment options for AXA Tower. As recently as 2017, the company was considering a collective sale of the development for at least $1.65 billion. "Of course there is the cost of redevelopment and we have to make sure the value outweighs the cost," said Mr. Pua, pointing to hotel development charge (DC) rates, which experienced the highest pace of increase on record in the latest rate review, at 45.6 % on average. Developers pay DCs for the right to enhance the use of some sites or to build bigger projects on them.

Ms Tricia Song, head of research for Singapore at Colliers International, said the rates could potentially discourage owners from converting their office developments, but added: "Owners have to do the maths and look at the particular plot's DC rates. They may still have something to gain from the increased plot ratios under the incentive scheme, despite the higher hotel DC rates."

The rates are revised on March 1 and Sept 1 each year. Another potential challenge to CBD rejuvenation is strata-titled developments, which have to be sold en bloc first before they can be redeveloped. One example is the International Plaza, which was completed in 1976. It was touted by its collective sales committee last November as a future landmark integrated development in Tanjong Pagar with a hotel, office and apartment block.

Adapted From The Straits Times, March 29 2019