Time for Singapore to step up decentralisation efforts

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Singaporeans spend too long getting to work. Could decentralised mixed-use developments ease the congestion in major commercial areas? 

By John Pennington

London’s commuter belt is more than ten times as big as Singapore’s total area. On average, both Londoners and Singaporeans take 84 minutes to get to work. Singaporeans spend more time getting to work than those in Hong Kong (73 minutes), Melbourne (80), and Sydney (82).

Singapore will always face logistical challenges due to its limited space and high population density. As the population increases, and more people work and live in the most popular commercial areas, the more bottlenecks will appear. Must the state decentralise more to alleviate the stress on its infrastructure?

Decentralisation plans did not achieve the expected results

The Urban Redevelopment Authority (URA) launched plans for Singapore’s decentralisation in 1991. The URA planned to ease congestion, relieve pressure on infrastructure and bring work closer to home. How? By spreading commercial activities around the country and investing in developing those areas into decentralised multi-use centres. To connect these hubs would require a doubling of the number of rail lines in Singapore.

However, it did not progress as well as expected. One key reason is due to insufficient availability of Grade A office stock. The shortage of stock is partly due to limited land supply released by Government Land Sales (GLS).

Furthermore, companies do not feel motivated enough to move because rents for office blocks in decentralised areas remain too high. Due to the lack of supply – just 1.6% of decentralised units lie vacant – the gap between Central Business District (CBD) area rents and decentralised area rents has narrowed.

Source: JLL Research

However, to date, decentralisation progress has been slow and at times stagnant. For example, the construction of mixed-use developments only really took off in 2015 with the building of The Metropolis, Westgate Tower and the JEM Office Tower.

Source: JLL Research

Singapore could learn from London

In London, demand for office space continues to rise. There, the authorities have mandated the creation of mixed-use space as part of any new development in critical areas.

According to a GVA report, “In some core areas, Mayfair & St James’s being obvious examples, available space is very low with no significant development pipeline.” Based on current growth projections, London needs 64,000 new homes per year and 20 million square feet of office space. To meet that demand and also maintain London’s economic growth required action.

Therefore, solutions were needed to enable workers to either work further from the centre of the city or live closer to their offices. As commuting prices rise, more people are heading back to the city to live and work. Hence the move towards mixed-use spaces serves their needs and prevents overcrowding.

Singaporeans’ daily battles to get to work highlight the problem, but mixed-use developments can ease the burden.

There are frequent public transport delays. Roads are clogged. During Singapore’s early years, there was a clear demarcation between residential and commercial areas of the city. That model is no longer efficient. The volume of people heading to and from those business centres on a daily basis causes enormous problems. SMRT Corporation is tapping into big data in a bid to ease difficulties on the Mass Rapid Transport (MRT).

It was not until very recently that constructing mixed-use developments took off. Initially, many corporates jumped at the chance to move out of the congested central area. On the other hand, the low availability of Grade A office stock and high rental prices – in the region of S$5.8 (US$4.3) per square metre per month – put others off. There needed to be a more significant gap between rents to entice more people to decentralise. It was a missed opportunity.

The good news is that decentralisation remains a critical long-term strategy of the government. The rental gap between decentralised office stock and CBD office stock is set to grow, making decentralisation a more attractive and financially feasible option for businesses. Increasing the supply of offices in decentralised areas is essential. The government must also restrict new CBD area developments. Alternatively, it could adopt London’s idea of mandating mixed-use spaces.

In theory, London’s commuter belt can stretch as far south as the coast and as far north as Birmingham and beyond. Singapore, where space is at a premium, cannot expand similarly. In that respect, mixed-use developments make more sense as part of a decentralisation strategy in Singapore than in other cities.

It is time for Singapore to capitalise on mixed-use developments

There is a definite pathway for boosting decentralisation. Two significant barriers must be broken down. First, the URA must make more Grade A decentralised office stock available. Then they must widen the rental gap between central and decentralised areas.

With such limited expansion opportunities, mixed-use developments are crucial to ensuring Singapore keeps pace with its growing population and commercial activities. Hong Kong and Tokyo have shown it can work in Asia. Even those already established in Singapore are showing good returns.

There will always be challenges. Developers have to predict what people will want many years from now. However, Singapore must move forward because the current commuting situation is unacceptable. Unlike London, she can do so without Brexit uncertainty clouding her future.

It is, therefore, time for the government to press forward with mixed-use developments to resuscitate Singapore’s decentralisation, ease pressure on its infrastructure and boost the economy.