In 1944, when Harold Samuel founded Land Securities, one of the United Kingdom’s largest property companies, he coined the phrase “location, location, location” as the three things that matter in determining property value.
As simple and cliché as the phrase may sound, examining a property’s location entails in-depth consideration of numerous interplaying elements that have direct relations to its value – and thus “location, location, location” has long been the mantra of many property investors.
One important consideration used when assessing the location of a property has always been to determine its proximity to amenities in the locality.
As our work and commitments demand most of us to lead lives at a pace quicker than before, quality of time spent becomes ever more important and having amenities nearer to cater to our daily needs is now essential.
Every hundred-meter distance saved by having a supermarket, eatery or MRT station nearer to our home equates to time being shaved off commuting and added on to the precious time we can spend on ourselves or our families.
Convenience has become an indispensable element for the lifestyle of modern families, and property developers in Singapore are aware that their products need to evolve in order to meet our needs.
Instead of finding a plot of land with a good supply of amenities around to build on, why not just build amenities on the same plot of land together with our homes?
What is Mixed Use Development?
Mixed-use developments include a combination of commercial use and residential units where typically the residential tower(s) sits atop the commercial element of the building.
According to URA guidelines, the mixed developments may be developed on land zoned as either Commercial & Residential or Commercial, which determines the ratio of Gross Floor Area (GFA) to be allocated to residential and commercial use.
This is therefore a broad category comprising developments from the likes of Sim Urban Oasis with 1024 residential units and 6 strata-titled shops, Alexis with 293 residential units and 21 strata-titled shops, to Lucky Plaza apartments and Shopping Mall with 88 residential units and a 7 storey retail podium.
What is Integrated Development?
It seems quite common nowadays for the terms “integrated development” and “mixed-use development” to be used interchangeably, albeit incorrectly.
An integrated development can be defined as a mixed-use development with a residential and large commercial element, that is additionally connected seamlessly to a transport node and public spaces.
In simpler terms, an integrated development is an improved version of the mixed-use development, with direct access to MRT stations or bus interchanges and mall podiums with usually more than 100,000 sqft net lettable area.
There are currently only 14 completed integrated developments at the time of writing:
1. Convenience and Quality of Life
As mentioned, integrated developments provide unparalleled convenience to the residents, usually offering amenities that cater to basic daily living needs (food, transportation, healthcare) right at their doorsteps.
The close proximity to transportation especially make them stand head and shoulders above other Singapore condominiums. Residents can save on the costs of buying and owning a car and still enjoy hassle-free commute to their destinations.
There may also be more than basic amenities available with a good tenant mix that comes with a larger and well-managed commercial podium.
A childcare centre, music school, multiple dining options and a supermarket with an organic section are some examples that can provide improvement to the quality of living for the residents.
2. Limited supply = Value
All the completed integrated projects yield about 7,500 units in the Singapore property market today, which makes up less than 3% of the total non-landed stock of about 300,000 condominiums and apartments units as of 1Q2021 according to URA data.
Although there may be an increase in the number of future integrated projects, the supply is still relatively low which, from an economic point of view, will help value and prices of existing projects stay resilient.
The convenience will also logically attract more rental demand and in turn drive up the overall demand for units in these projects.
Again this will help prices stay resilient, or even encourage appreciation in some situations, making such projects attractive for investment. (Do note that there are no integrated development of freehold tenure currently and entry may well depends on a development’s age and remaining lease. Feel free to speak to us if you need more in-depth analysis on a project)
Issues relating to congestion can arise due to high footfall if the commercial mall in the integrated development turns out to be popular.
Many developers do mitigate this in their planning by having segregated ingress/egress access for residents and patrons, but this may not be able to prevent traffic congestion on adjacent public roads leading up to the development especially during peak hours.
The good thing being a resident with direct access to transportation however means that you may not need to drive and be stuck like the others.
Being close to transport nodes and having high footfall in the vicinity may also result in higher noise and air pollution, primarily for residents staying on lower levels.
Thus, it is important for prospective buyers of such units to confirm the quality of the windows and balcony doors installed.
When considering an integrated development, homeowners or investors have to weigh the pros and cons in tandem with their objectives. But what will interest homeowners and investors alike are some observations on price and rental data since the launch of the 1st integrated development 20 years ago:
1. Historical Price Trend
When we compared the average per square foot (psf) price today against the average psf price during launch, 13 out of 14 completed integrated projects showed a positive price trend.
The only negative price movement belongs to 172 -unit The Orchard Residences at ION Orchard which launched at $4,000 psf on average in 2007; and the biggest appreciation of almost 128% comes from 610-unit The Centris at Jurong Point which launched at $497 on average in 2006.
In general, we observed that the projects in Outside Central Region (OCR) and Rest of Central Region (RCR) had better appreciation than those in Core Central Region (CCR). Projects that launched during 2007 and 2013, years when the market peaked, also had more unfavourable price movement.
On a side note, it is also evident that along with the rest of Singapore's residential property market, prices of integrated projects are increasing over the years due to contributing reasons like land scarcity and rising land costs (except for luxury projects in CCR like The Orchard Residences).
2. Rental Comparison
We wanted to ascertain our view that, together with the convenience they bring, integrated developments can command better rental demand and rates.
In order to do that, we did a comparison of the average rent per square foot per month landlords have collected between some of the integrated developments and their non-integrated counterparts with similar age in the 3 different regions in Singapore.
OCR (Outside Central Region)
RCR (Rest of Region)
CCR (Core Central Region)
The numbers observed has so far shown that integrated developments do command a better rental rate in general and there may be a strong association to the fact of their close proximity to MRT stations and major commercial platforms.
3. Market Perceived Premium
Having hypothesized via logical reasoning that convenience will help make integrated developments attractive to the Singapore property market consumers, we wanted to know through statistical evidence if the market agrees with us on this notion. and how much a premium they are willing to pay for such convenience in today’s context.
In order to do so, we compared the average resale psf price in 2Q 2021 for some of the recently completed integrated projects against all non-integrated counterparts with similar age in the same district.
This will give us an initial idea, ceteris paribus, the difference in amount consumers are willing to fork out for an integrated project.
Through observation of such comparisons, the general trend seems to suggest that integrated developments may command a 15-25% premium in general.
Apart from the 14 completed integrated developments we have spoken so much about, the following are those still under construction and with new units still available for purchase direct from developers:
There will also be 2 upcoming new launches this second half of 2021.
Pasir Ris 8 sold more than 85% of its 487 units on its first weekend launch in July. Despite the fact that the development had only 487 units, the developers collected more than 1,500 cheques as expressions of interest in the lead-up to the launch. This is possibly the best performing condominium launch in 2021.
Although we have used mostly historical data to make certain inferences and support certain hypothesis regarding the value of integrated developments, it is our duty as real estate consultants to highlight this adage familiar to savvy investors that “past performance is no guarantee of future results”.
These observations do however allow us to have a surface overview of the market trend regarding the subject matter to help us decide if we would like to drill more in-depth.
As always, there are many other factors to consider in a property purchase/investment in order to fulfil specific objectives and you should always reach out for a more comprehensive discussion.
As a general conclusion, we think that integrated developments are products that result from an evolution over time to cater to the needs of the modern lifestyle (think Nokia 3310 > Blackberry > Digital Smartphones).
These products are becoming more appealing to a generation who are becoming more money-rich, time-poor.
We will definitely be seeing more of such developments but at the moment the limited supply in the market may well lend some strength to the investability of integrated projects with a correct entry price.
If you are thinking of buying a private property in Singapore, is integrated development in your wishlist?
Disclaimer: the numbers provided are based off available data at the time of publication, and may be subject to further revision. All information published in this article is for general education only, and should not be substituted for independent research or verification. It should also not be regarded as substitute for legal advice.