Nearly a year ago, when news broke that OCBC : O39 +0.89% was exploring the redevelopment of its Chulia Street property, there was much buzz in property circles as to how this would rejuvenate the locale, which is in Singapore’s central business district, near the banks of the Singapore River.

However, at the bank’s fourth-quarter results briefing last month (February 2025), group chief executive officer Helen Wong revealed that the bank would defer plans for the redevelopment of the OCBC Centre cluster of three buildings.

What brought about the change?

For one, redevelopment would involve a huge capital outlay at a time when Singapore banks are under pressure from the market to return excess capital following changes to global bank capital requirements.

OCBC or its consultants would have held discussions with the Urban Redevelopment Authority (URA) to explore plans for the trio of buildings. The landmark OCBC Centre, comprising a 50-storey tower and a carpark block (with six storeys and two basement levels), was completed in 1976. Two extensions were built later: OCBC Centre South, a seven-storey building with a basement, and the 15-storey OCBC Centre East.

Chulia Street is home to the bank’s head office and various departments. At the same time, URA has been seeking to inject a bigger live-in population in the CBD to make it more vibrant 24/7.

One could make an educated guess that OCBC is likely to have looked at a redevelopment scheme that would allow it to retain the existing commercial zoning provided it sets aside 40 per cent of the total gross floor area (GFA) for non-commercial uses (such as hotels, serviced apartments or residences for sale).

In April last year, OCBC stated that any redevelopment plans being explored for its Chulia Street asset would include preserving the rich heritage of the iconic OCBC Centre, designed by the late renowned architect IM Pei. When completed 49 years ago, OCBC Centre, at 198 metres, was the tallest building in South-east Asia. The tower, flanked by two rounded concrete cores, was designed in the Brutalist architectural style, favouring minimalist construction.

As an incentive for conserving OCBC Centre, URA would have offered the bank a substantial increase in the GFA for the overall project – from the existing figure of about 1.2 million square feet across the three buildings. However, the additional GFA will come at a price.

S$2 billion redevelopment cost?

OCBC would have to pay a land betterment charge (LBC) to the state. This is a tax creaming off 70 per cent of the appreciation in land value when some sites are put to higher use or built on more intensively. Besides LBC, another big chunk of the redevelopment cost would be construction costs, which have risen substantially post-Covid.

Back-of-the-envelope calculations suggest the total cost of redevelopment including conserving OCBC Centre could be in the ballpark of S$2 billion for a high-end product.

One would think Singapore’s second-largest bank has the wherewithal to undertake the redevelopment. It posted S$7.6 billion in net profit last year, a record for the group and an 8 per cent increase from the previous year.

However, OCBC’s decision to put its plans for redeveloping its Chulia Street property on the back burner is a reflection of its priorities.

Danger of derailing capital-return plans

Like its two fellow Singapore banks, OCBC has announced plans to return capital to shareholders. The group intends to do this to the tune of S$2.5 billion over two years through special dividends and share buybacks. This will provide a nearly one-percentage-point boost to the bank’s return on equity.

OCBC’s priority is optimising capital to raise shareholder returns. Embarking on a high-outlay project like the redevelopment of the Chulia Street property in the near future would derail the plan to return capital to shareholders.

The bank knows its shareholders well. They are more interested in how much special and ordinary dividends they will be receiving, and in share buybacks.

Less exciting to them is a rejuvenation of the Chulia Street property.

Growing Singapore office footprint

Slightly more than half of OCBC Centre, at 65 Chulia Street, is occupied by the bank and various departments. Behind it, OCBC Centre South, which has an 18 Church Street address, is home to OCBC Securities and other bank departments.

OCBC Centre East, at 63 Chulia Street, houses some bank departments in addition to tenants such as flexible-space operator JustCo, Starbucks and Japanese restaurant Cho Omakase.

Even without redevelopment of the Chulia Street asset, there is upcoming space. The bank’s second-largest office premises in Singapore will be in the Punggol Digital District, where it has bought 430,000 sq ft across eight levels of a 12-storey mixed-use tower under development. When operational in 2027, OCBC Punggol will house up to 4,000 employees, mostly from the bank’s technology workforce.

The bank also owns two office buildings in Tampines which house its operation and tech staff, in addition to 260 Tanjong Pagar Road, which is home to OCBC Campus and some human resources staff.

The group also owns 63 Market Street, where its private banking subsidiary Bank of Singapore is headquartered.

OCBC will have no dearth of space options, with or without the redevelopment of the Chulia Street asset.