PLANS to redevelop Market Street Car Park into an office building could be back on track, now that its owner CapitaCommercial Trust (CCT) has obtained provisional permission for the project.
The Urban Redevelopment Authority (URA) gave the tentative nod in November last year. The new office building could have a gross floor area of around 854,400 square feet. There are no details on the number of car park lots that it may have.
Market Street Car Park, at 146 Market Street, has 704 car park lots. It also has retail and food and beverage outlets on the ground floor. Its lease expires in 2073. A number of industry watchers have been expecting CCT to trigger redevelopment plans for Market Street Car Park again, as it looks for ways to deploy capital this year.
Back in January 2008, the commercial real estate investment trust (Reit) said that it had gotten outline planning permission (OPP) to redevelop Market Street Car Park into a Grade A office tower.
The authorities granted the OPP on two conditions: there would be no extension of the present lease, and CCT would have to pay a development premium equal to 100 per cent of the enhancement in land value. CCT estimated then that the total project cost would be $1 billion to $1.5 billion.
The global financial crisis foiled CCT's plans. In January 2009, it said that it would drop the project because of its significant size, the high redevelopment cost, an uncertain market outlook and tight credit conditions.
CCT later divested two office buildings and prepaid a secured term loan. With the recovery of the office market, and an investment capacity of up to $1.6 billion, it is back looking for investment opportunities this year.
Several analysts have flagged the redevelopment of Market Street Car Park as a possible venture, given the difficulties of making yield accretive acquisitions in today's market.
Lower construction costs - compared with levels before the financial crisis - could also make the project more attractive.
'We continue to expect the redevelopment of Market Street into a Grade A office building,' said Standard Chartered research analysts in a Jan 20 report. 'We calculate that the project is likely to cost $1-1.07 billion, including $500-600 million of development charges.'
CCT might have to undertake the redevelopment with a joint venture partner as development projects cannot exceed 10 per cent of a Reit's asset size, said Macquarie Equities Research analysts in a Jan 19 note.
Cushman & Wakefield Singapore vice-chairman Donald Han said that he believes that it is an opportune time to revisit the project. Office rents have been recovering, and if redevelopment takes place in the next 12 months, the new building could be ready in 2013 or 2014 when the office market would be in 'full swing', he said.
However, 'a lot of the new buildings are now being built with tighter car park ratios', he said, adding that the potential removal of car park lots would affect the parking situation in the central business district.