Singapore’s urban rejuvenation schemes, spearheaded by the Central Business District Incentive (CBDI) and the Strategic Development Incentive (SDI) schemes, have reached a pivotal milestone, concluding their five-year term in late November. The Urban Redevelopment Authority (URA) launched these initiatives in 2019 with a clear goal: to transform and rejuvenate key urban areas in Singapore. As these schemes have drawn significant attention and led to substantial city renewal projects, experts now suggest that while they have achieved noteworthy success, some fine-tuning is necessary to ensure their continued effectiveness and relevance in a rapidly evolving urban landscape.
The Goals and Mechanisms of CBDI and SDI Schemes
The CBDI and SDI schemes were designed with specific objectives and mechanisms to drive urban redevelopment. The CBDI scheme, in particular, incentivizes developers to convert older, predominantly office-oriented buildings in the Central Business District (CBD) into mixed-use developments. By incorporating residential or hotel spaces alongside office environments, the initiative aims to increase the live-in population within the CBD. In exchange for changing land use, developers are offered an increase in the maximum allowable gross floor area (GFA). This strategic move is intended to breathe new life into aging commercial zones by attracting a diverse community, fostering a dynamic and vibrant urban atmosphere.
On the other hand, the SDI scheme promotes the joint redevelopment of two or more adjacent sites, although exemptions can be considered under specific circumstances. The design behind this scheme is to stimulate redevelopment in built-up areas controlled primarily by private sector developers holding land on a freehold or 99-year leasehold basis. By providing these incentives, authorities aim to guide redevelopment outcomes rather than leaving them entirely at the mercy of market forces. This structured approach allows the government to steer urban transformation in a manner that aligns with broader urban planning and development goals, ensuring balanced and sustainable growth.
Achievements and Notable Projects
The results of the CBDI and SDI schemes thus far have been promising, demonstrating both the potential and challenges of such initiatives. The URA has given in-principle approval to 13 out of 17 applications under the CBDI scheme, with three projects currently in active development. Similarly, for the SDI scheme, seven out of nine applications have received in-principle approval, with two projects in development stages. These figures indicate a solid foundation of participation and commitment from developers, which is crucial for the ongoing success of urban renewal efforts.
Among the notable projects that have emerged under the CBDI scheme are The Skywaters on the former AXA Tower site in Shenton Way and Newport Plaza on the former Fuji Xerox Towers site in Anson Road. These projects exemplify the transformative potential of the incentive, converting stagnant office spaces into mixed-use developments that can better cater to contemporary urban needs. In the case of the SDI scheme, significant developments include a hotel on the old Faber House site in Orchard Road and Union Square at the Central Mall and Central Square sites. These projects highlight the collaborative potential of joint redevelopments, which can lead to more cohesive and expansive urban renewal endeavors.
Challenges and Evolving Market Conditions
The urban redevelopment landscape in Singapore has been undeniably influenced by evolving market conditions and the impact of the COVID-19 pandemic. Experts agree that the review of the CBDI and SDI schemes is timely, given the significant shifts in office space demand driven by the rise of hybrid work models. The pandemic prompted a widespread transition to remote working from 2020 to 2022, which in turn reduced the demand for traditional office spaces. Coupled with surges in construction costs and fluctuating interest rates, these factors have heightened development risks and complicated the execution of urban renewal projects.
Consequently, the initial incentivizing potential of increased GFA has proven insufficient to spur non-office uses within the CBD. Developers are grappling with escalating construction costs and extended project timelines, which dampen the appeal of undertaking large-scale urban transformations under the current incentive structures. This evolving scenario underscores the need for a nuanced approach to revitalizing urban areas, one that takes into account the substantial financial and logistical challenges faced by developers in a post-pandemic world.
Proposed Enhancements and Incentives
To address these challenges and bolster participation in urban rejuvenation schemes, industry analysts and developers suggest implementing additional incentives alongside the existing GFA increases. One of the proposed enhancements involves providing concessions on the land betterment charge (LBC). The LBC is a fee levied by the state on increased land value when sites are used more intensively or redeveloped for higher-value purposes, accounting for 70% of the land value increase. This fee, paid upfront, constitutes an extra cost that impacts developers’ investment returns, often acting as a deterrent to project initiation.
Integrating LBC concessions with GFA incentives could offer a balanced compensation package for developers willing to undertake significant development risks. This combined approach has shown promise in past projects, such as the successful redevelopment of Golden Mile Complex. Purchased by Perennial Holdings, Far East Organization, and Sino Land for $700 million in 2022, the complex benefited from URA’s package of incentives, which included a lease renewal to a fresh 99-year term, bonus GFA increasing the site’s development intensity by one-third, and a partial development charge waiver on the additional floor area. Such incentives demonstrate the tangible benefits of a holistic approach to facilitating urban renewal.
Case Studies and Successful Implementations
The Golden Mile Complex serves as a prime example of how comprehensive incentive packages can drive successful urban redevelopment. The collaboration between Perennial Holdings, Far East Organization, and Sino Land highlights the potential for joint ventures to tackle large-scale projects effectively. URA’s support package for the complex included several critical components: a lease renewal to extend the site’s development horizon, a substantial GFA bonus to enhance the development’s scale and scope, and a partial development charge waiver to mitigate upfront costs. This multifaceted approach enabled the developers to navigate the complexities of redeveloping an iconic but dated structure, ultimately revitalizing it for modern use.
Such case studies underscore the importance of tailoring incentives to address specific challenges faced by developers. By providing tangible benefits that directly impact project viability, authorities can significantly enhance participation in urban rejuvenation schemes. The success of the Golden Mile Complex redevelopment also illustrates how strategic incentives can align developer interests with broader urban planning goals, fostering a collaborative environment for sustainable growth.
Future Prospects and Policy Adjustments
Looking ahead, experts advocate for extending the CBDI and SDI schemes for at least another five years to allow market conditions to stabilize and further enhancements to be implemented. Such extensions would provide a buffer against the economic uncertainties that have characterized recent years, offering developers the confidence to invest in long-term projects. In tandem with scheme extensions, there is a need for relaxation or adjustments to stringent requirements that currently impede participation.
For instance, one notable obstacle is the 2023 doubling of the additional buyer’s stamp duty (ABSD) to 60% for foreign buyers. This significant increase has dampened private residential sales in and near prime areas like the city center, posing challenges for long-term residential redevelopment in the CBD. Considering the high ABSD rates, it becomes crucial to find ways to incentivize foreign investment while balancing the need for regulatory oversight. Aligning policy adjustments with market realities will be essential for ensuring the continued success of urban rejuvenation initiatives.
Addressing Strata-Title Complexities
The SDI scheme, while successful in promoting major urban transformation projects, encounters significant challenges with strata-titled retail and office developments. These complexities stem from fragmented ownership structures, which make it difficult to achieve consensus among all owners on redevelopment plans. Examples of older buildings requiring rejuvenation with strata titles include Orchard Towers, Orchard Plaza, and Cuppage Plaza. Addressing these issues will require strategic policy development and targeted incentives to facilitate smooth transitions from individual ownership to cohesive redevelopment efforts.
Developers and experts believe that resolving strata-title complexities is crucial for unlocking the full potential of urban renewal schemes. By simplifying the process of obtaining consensus among multiple owners and offering incentives for collective redevelopment, authorities can mitigate one of the biggest barriers to large-scale urban transformation. Streamlined approval processes and flexible policy frameworks can further support these efforts, enabling more efficient and effective redevelopment of aging urban structures.
Streamlining Processes and Enhancing Flexibility
Singapore’s urban rejuvenation schemes, led by the Central Business District Incentive (CBDI) and the Strategic Development Incentive (SDI) schemes, have hit a major milestone. These initiatives concluded their planned five-year term in late November. The Urban Redevelopment Authority (URA) unveiled these programs in 2019 with a specific aim—to revitalize and transform key urban sectors in Singapore. Their introduction has spurred significant city renewal projects and garnered considerable attention. Experts now believe that while these initiatives have accomplished noteworthy success, they require fine-tuning to stay effective and relevant amid Singapore’s rapidly changing urban landscape. These programs have helped modernize parts of the city, but adjustments will ensure they continue to meet the needs of a growing and evolving metropolis. As the city evolves, these schemes must adapt to address new urban challenges and opportunities, maintaining Singapore’s position as a leading global city.
