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Given the perceived shortage in hotel room supply and the hike in hotel land values, more developers are jumping on the hotel-conversion bandwagon, reported The Business Times.
The rise in hotel land values and shortage in hotel room supply came after the Urban Redevelopment Authority disallowed – from July 2014 – development application for new hotels as well as change-of-use proposals on sites not zoned for hotel use. The restrictions were only relaxed in August 2018.
“Hotel land values, based on recent transactions, have exceeded those of commercial and even residential in some instances. Therefore, building owners are exploring conversion to extract the highest and best value,” said Savills Singapore deputy managing director of investment sales and capital markets Galven Tan.
Among the developers riding on the trend are Fragrance Group and Lian Beng.
In August, Fragrance obtained provisional permission to redevelop Fragrance Empire Building (formerly NOL Building) in Alexandra Road into a 1,000-room hotel with 289,441 sq ft gross floor area (GFA) and 13,132 sq ft retail space.
The group also received written permission in November to redevelop Tower 15 in Hoe Chiang Road into an 807-room hotel. It also plans to build a hotel on the combined sites of Min Yuan Apartments and Waterloo Apartments, which the group acquired via en bloc sales this year and last year, respectively.
Meanwhile, Lian Beng Group and Apricot Capital, which purchased Wilkie Edge in 2017, obtained provisional permission from URA in July for additions and alterations on the building to create a 540-room hotel as well as 28,200 sq ft of retail space.
Other projects slated for conversion to hotels include Chinatown Plaza in Craig Road and Golden Wall Centre in Short Street, both of which were sold en bloc in 2018.
One of the factors fuelling the change-of-use applications to hotels is the expected shortage in new hotel rooms.
JLL’s Hotels & Hospitality Group data showed that the total upcoming known supply of hotel for this year to 2023 and beyond is around 8,300 rooms, which is far below the net increase in supply of around 17,000 rooms between 2013 and 2018.
Tan, on the other hand, pointed to the government’s development charge (DC) rates as a clear evidence of the hike in hotel land values outstripping residential and commercial land values.
“DC rates for hotel use for most of the city area, including Orchard Road and the financial district, are the highest among all use groups, surpassing those for commercial and residential uses,” he said.
Developers pay DC, which is the Chief Valuer’s assessment of the site’s value, for the right to enhance the site’s use or to build bigger project.
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Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email victorkang@propertyguru.com.sg
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