Category Archives: Shophouses

OCBC looks to offload over 30 shophouses and shop units

OVERSEA-Chinese Banking Corporation (OCBC) is poised to divest a portfolio of more than 30 shophouses and strata shop units across Singapore which market watchers estimate could be worth around S$150-200 million.

The shophouses are in locations such as Havelock, Geylang, Upper Thomson and Upper Serangoon roads, while the strata shop units are in places such as Jalan Besar Plaza, Hoa Nam Building along Foch Road, Balestier Point, Sixth Avenue Centre and Upper Serangoon Shopping Centre.

Also for sale are shops in HDB estates such as Ang Mo Kio and Bukit Batok as well as HDB shophouses in locations such as Bishan, Aljunied, Jurong Gateway Road and Yishun Ring Road.

OCBC is believed to have arranged the properties in several bundles to be marketed by property agencies.

Some of these properties were previously used for bank operations but the majority are investment properties held for rental income.

When contacted, the bank noted that it reviews its overall property holdings from time to time, for opportunities to unlock value.

OCBC Property Services managing director Vincent Soh said: “We recently engaged agents to help us market a portfolio of investment properties that includes shophouses and shop units located across Singapore. The majority of these were bought by OCBC Bank and its subsidiaries in the last 10-30 years.”

No mortgagee sales were involved in the portfolio, he added.

“If we receive satisfactory offers, we will consider divesting the investment properties in the portfolio.”

OCBC did not comment on the specifics of the properties.

BT understands, however, that the portfolio includes three 999-year leasehold shophouses along Havelock Road comprising a pair of adjoining properties – Nos 743 and 745 – and another a few doors away at No 735. The ground floor of the shophouses is leased to eateries.

Assuming a buyer wanted to pick up all three shophouses, the price is expected to exceed S$16 million.

Under the Urban Redevelopment Authority’s (URA) Master Plan 2014, the three-storey shophouses are on land zoned for residential use with commercial at the first storey, and have a 3.0 plot ratio (ratio of maximum gross floor area to land area) with a six-storey height limit. This suggests there is redevelopment potential to tap unutilised plot ratio.

Also in the OCBC portfolio is a conservation shophouse at 382 Geylang Road on a site with commercial zoning and 3.0 plot ratio. The land area is 2,081 square feet and the built-up area around 3,300 sq ft. The guide price is believed to be S$5.2 million.

Among the strata shop units for sale are a ground-floor unit each at Balestier Point and Sixth Avenue Centre.

The pricing expectation for the 1,540 sq ft Balestier Point unit is S$3.4 million (or around S$2,200 per square foot on strata area) while that for the 3,509 sq ft shop at Sixth Avenue Centre is S$5.8 million, reflecting S$1,653 psf. “These psf price levels are considered attractive for freehold/999-year leasehold ground-floor retail units with good frontage – compared with the S$4,000-5,000 psf at some new projects, some of which are 99-year leasehold,” said an industry observer. “Rarely do owners of prime ground-floor shop units put up their properties for sale.”

Among the HDB shophouses in OCBC’s portfolio is a nearly 2,700 sq ft unit on Jurong Gateway Road, with an expected price of S$6.9 million. The property has a balance lease term of 69 years. Buyers seeking a lower price point may prefer a shophouse on Aljunied Avenue 2 or another on Bishan Street 11 – with respective guide prices of S$2.2 million and S$2 million.

A 1,447 sq ft HDB shop unit on Ang Mo Kio Avenue 8 – with about 64 years balance lease – is expected to cost around S$5.8 million. This works out to slightly above S$4,000 psf.

Shophouses are attractive investment in Singapore: Colliers

In a recent Colliers White Paper released on 17 Mar 2015, Colliers noted that shophouses in Singapore remain a very attractive investment class of properties in land-scarce Singapore. Median rent of shophouses rose from $4psf in 2012 to $5.42 psf in end 2014. Capital values rose 37% to a high of $3772 psf in end 2014.

Mohammed Sultan Shophouse

Pagoda St Shophouses fetch top notch price

A member of the family behind Gudang Garam (Indonesian cigarette maker) bought a pair of adjoining shophouses along Pagoda Street at the busy entrance/exit of Chinatown MRT Station). The price of S$20m for the two adjoining 999-year shophouses translates to S$3,500 psf on built-up area and reflects just 1.8% gross yield based on current rental income.The land size is 2010 sqft with a 999-year leasehold tenure from 1875. The estimated build up area is 5700 sqft.

Homegrown boutique property outfit TG development is selling the properties.


Sultan Gate Shophouse sold at $20.8M

A FREEHOLD standalone shophouse block along Sultan Gate in Kampong Glam has been sold at S$20.8M recently. Located at 32, 34 and 34A Sultan Gate, the property sits on a single land lot of 7401 sqft zoned commercial. The total floor area is 7944 sqft. The price reflects S$2618 psf based on total floor area. The Seller is believed to be Olympia Development, a unit of Chee Tat Holdings, controlled by the Ng family that developed Textile Centre and Serene Centre. The new owner is believed to be a F&B operator.


Colliers auctioning a row of 5 adjoining shophouses as single bloc

International property consultant, Colliers International is putting up – for sale by auction – five adjoining two-storey refurbished shophouses located at 9, 11, 13, 15 and 17 Teck Chye Terrace. To be sold as an entirety, the shophouses have a freehold tenure and sit on a land area of approximately 7,861 sq ft.  The total floor area is approximately 12,163 sq ft.  Each shophouse has a side staircase for access to the upper storey.

Under the 2014 Master Plan, the subject property is zoned for “Residential” use with a plot ratio of 3.  The first storey of all five units have obtained permanent approval for “Shop” use.

Ms Grace Ng, Deputy Managing Director of Colliers International, says, “It is not often that a row of adjoining shophouse units is made available for sale as an entirety.  We are optimistic that the subject property will greatly appeal to investors, as the indicative price is relatively reasonable at S$13 million, which works out to be some S$1,069 per sq ft.  Typically, the average price of a similar suburban freehold shophouse ranges from S$1,300 per sq ft to S$1,500 per sq ft.”

Ms Ng continues, “Additionally, such freehold shophouse units – particularly those with prominent road frontages and have car park facilities located right in front of the premises – are easily rentable and typically enjoy long-term capital appreciation, adding to the list of pull factors for serious investors.

Recent comparable transactions included a shophouse located at Serangoon Garden Way that was sold at S$2,478 per sq ft in March 2014 and another at Serangoon Road that was sold for S$1,556 per sq ft in February 2014.

According to data captured by URA Realis, the median price for freehold sub-urban shophouse units has appreciated by approximately 65 per cent since 2012.  It is also likely that there will be no freehold shophouse unit expected to be built in the market in the near future.”

The shophouse units are all currently tenanted at a total rent of approximately S$36,850 per month, with most of the tenancies expiring in 2016.

Ms Ng adds, “Subject to the relevant authorities’ approval, the successful buyer can consider A&A/refurbishment works to increase the floor area or re-configure the floor layout for maximised use, potentially increasing the yields.”

Located at the junction of Upper Serangoon Road and Boundary Road, the subject property is located along a street comprising a row of 15 shophouses, collectively known as the “Teck Chye food street”.

The immediate locality comprises a mixture of landed properties, condominiums, commercial developments and HDB estates.  Access to other parts of the island is via Central Expressway and the nearby Serangoon MRT station.  Prominent developments in the vicinity include Nex Shopping Mall, Upper Serangoon Shopping Centre, Space @ Kovan, Paya Lebar Methodist Church and Serangoon Stadium, among others.

The auction will be held at Amara Hotel on 22 January 2015, at 2.30 pm.

Shophouse deals remain resilient despite volume drop

THE number and value of shophouse transactions so far this year is roughly half that of last year, as demand has been hit by tightened availability of loans, a compression of shophouse yields and investor interest being diverted to overseas properties.

Prices in choice locations in the Central Business District, however, are still holding given the limited supply and the profile of owners, mostly deep-pocketed investors that are happy to continue renting out their premises if they cannot reap significant capital appreciation.

CBRE’s analysis of URA Realis data shows that 101 caveats have been lodged for shophouse transactions so far this year totalling S$548 million, down from 206 caveats adding up to S$1.27 billion in 2013.

In the first half of last year, S$922 million worth of shophouses changed hands; however the onset of the total debt servicing ratio (TDSR) framework in late-June 2013 has caused some buyers to hold back their purchase plans.

Shophouse sales slipped to S$347 milion in the second half of 2013 before easing further to S$277 million in H1 this year and S$271 million so far this half. However, these figures do not include deals involving sales of shares in special purpose vehicle companies that own shophouse assets, since caveats are typically not lodged for such deals. An example would be a S$50 million sale of a row of five shophouses in the CBD this year.

A shophouse in Boat Quay is understood to have been sold recently for S$9.5 million – which has not been caveated.

Owners who want to sell shophouses may have had to clip their pricing expectations, say property agents, but actual transacted prices have been resilient in districts 1 and 2, where the choicest conservation shophouse stock is located, such as Telok Ayer Street, Club Street, Amoy Street, Chinatown, Duxton Hill and Tanjong Pagar.

Sammi Lim, CBRE associate director, investment properties, said: “Despite the decrease in the number of transactions compared with pre-TDSR, shophouse prices have remained resilient and in fact we are still observing an overall increase in capital values in choice locations. Current transacted prices in districts 1 and 2 in the CBD are in the range of S$2,200 psf to S$2,500 psf of gross floor area (GFA) on average – depending on land tenure – compared with S$1,800-2,200 psf around May or June last year before TDSR.”

Knight Frank executive director, investment, Mary Sai also said that transacted prices in Telok Ayer and Chinatown locations are around S$2,500 psf of GFA – surpassing the S$2,000-2,100 psf in Q1 last year. “Prices of conservation shophouses in the Central Area and Little India have held firm – defying our expectations of a price softening in the aftermath of TDSR and the Little India riot last December.

“However, shophouse prices outside the Central Area in places such as Geylang, East Coast and Upper Serangoon have softened about 5-10 per cent (post-TDSR).”

Simon Monteiro, director at Historical Land, a boutique property agency specialising in shophouses, observed that “those who are selling shophouses currently are the ones looking to divest a few small shophouses in various locations and replacing them with a bigger investment, for example, a row of shophouses; or some investors who just want to cash out now for retirement reasons”.

Even after the TDSR rollout, a few investors have managed to realise attractive gains from shophouses. For example, a property in Peck Seah Street was acquired in March last year for S$12.2 million and resold four months later (before the completion of the sale) for S$16.8 million before being flipped again in October the same year for S$20.5 million.

Such cases are rare though. Most of those making sizeable gains have longer holding periods. For instance, a property on Tras Street that was sold two months ago for S$11.15 million had previously changed hands for S$7.1 million in May 2012 and prior to that for S$5 million in July 2010, according to caveats data.

Mr Monteiro notes that most shophouses are held by ultra high net worth (UHNW) owners with very good holding power. “For them to sell, the values must double or more.”

Agreeing, Knight Frank executive director (investment) Mary Sai, said: “There are owners telling us: ‘If I don’t get my price, I’ll just rent it out.”

Yields on shophouses have declined as rental increases have not kept pace with the jumps in capital values.

“Net yields today are around 2-2.5 per cent on average on commercial shophouses in Districts 1 and 2,” said Ms Sai. “In Q1 2013, they used to be 3-3.5 per cent.”

Mr Monteiro said that current sub-3 per cent yields are “rather unattractive to investors”. “If you are a serious seller, you may have to lower your price expectations to allow the yield to the buyer to be 3-3.5 per cent. Only then will you see interest.”

Industry players note that buyers are also factoring in expected increases in borrowing costs.

Ms Sai said that a common strategy by landlords is to lease out the ground floor to a food and beverage (F&B) outlet or as a showroom, and find office tenants for the uppper floors.

The increase in Grade A office rents has helped to prop up office rents in shophouses.

“Landlords try to maximise their rental returns by having one tenant per floor to avoid having to give a bulk discount to a single tenant occupying the whole building,” Ms Sai added.

Investors that acquired shophouses more than five years ago would be able to comfortably service their mortgage from rental collection as their purchase price would be much lower than current values, she said. “But those who bought 1-2 years ago, I think, to their horror, some of them find they cannot push up the rental much if the rent at the point when they bought their property was already quite peakish. If they trigger any further increases, their tenants may not find it sustainable to continue business at the location.”

On the other hand, Zain Fancy, founder and director of Clifton Real Estate, which owns more than a dozen shophouses in Singapore, pointed out that it is still possible to spot good investment opportunities. “A lot of shophouses are under-rented; their owners have not spruced up the properties in years. So there is a value proposition here.

“By renovating properties, rents go up and hence prices increase. From the tenants’ perspective, renting space in a shophouse can be attractive. For instance, we’re leasing ground floor retail space at Pagoda Street, a location with very high foot traffic, at S$17-18 psf a month – a discount to the S$35-40 psf for ground floor space in an Orchard Road mall.

“We have leased an upper-level office floor (of about 1,200 sq ft) in one of our CBD shophouses at S$8 psf, so that’s about S$10,000 monthly rent – and they get their own toilet and pantry. The occupier is new to Singapore and was previously operating out of a serviced office, paying about S$5,000 a month for a space of about 100 sq ft.”

Ms Sai too noted that the average shophouse office rent in the CBD of about S$6-6.50 psf a month is lower than the double-digit rents in Grade A office buildings.

Street-level F&B space has been the key driver for growth of shophouse rents, noted Mr Monteiro. “There has been an influx of cafes and restaurants in conservation shophouses in the CBD for example in the Duxton, Keong Saik and Gemmill Lane locales, for instance, in the past four or five years.”

Currently, approval from the Urban Redevelopment Authority (URA) for “eating houses”, the planning term for F&B use, is granted on Temporary Permission of one to three years.

However, Mr Monteiro cautions that “that there may come a time when, to maintain a mix of trades in the conservation districts, URA may limit approvals for F&B use in shophouses even in the CBD”. This could potentially cause a reversal of interest in commmercial shophouses, he added.

Another reason for thinning of shophouse transactions is that some property investors have been moving away from the Singapore scene in search of higher yields, say agents.

Still, Singapore shophouses have their attractions. “Funds and UHNW investors, mainly foreigners, are among the buyers,” said Mr Monteiro. Investors switching from the residential segment, which has been hit by cooling measures, also find commercial shophouses an attractive alternative. There are no restrictions on foreign ownership of shophouses on sites fully zoned commercial.

Ms Sai points out that despite the already sharp price appreciation, a shophouse investor paying, say, S$2,500 to S$2,800 psf on GFA in the CBD will feel comforted knowing that it is still cheaper than the S$3,000-4,000 psf on average for new strata retail units in city-fringe locations and at least S$3,000 psf for new strata offices in the financial district.

Agents say that prices of shophouses in districts 1 and 2 will continue to be supported by the fact that they are mostly well located – in the business district and near an MRT station.

There is also an increase in demand from end-users looking to buy and occupy a shophouse for their own business instead of leasing it out, said CBRE’s Ms Lim. “These properties are a limited-edition asset class as they are designed with a distinctive facade, possess a unique charm and are steeped in history. Shophouses will continue to be highly sought after. Transaction values and volumes are projected to increase about 10 per cent in 2015.”

Ms Sai too expects the pricing outlook for districts 1 and 2 shophouses to remain resilient next year. “But other areas including Little India (District 8) and non-central locations may succumb to the impact of TDSR and the economic situation.”

Shophouses to be auctioned in estate sale

Two freehold properties will be up for auction as a result of an estate sale, said property firm and consultancy Colliers International yesterday.

The properties up for sale, resulting from the owner’s death, are a two-storey conservation shophouse in Beach Road and a terraced house in Devonshire Road.

This comes amid a rebound in the number of mortgagees who have put properties up for auction, as more borrowers default on loans. The home owners find it harder to sell their properties on their own.

But, as a whole, the auction market has not fared as well, thanks to government measures such as the additional buyer’s stamp duty.

So far, $57.6 million worth of properties has gone under the hammer in the first three quarters, well down from the $87.7 million that changed hands over the same period last year, according to earlier reports.

The shophouse, which has tenants, has an indicative price of $5.1 million and a land area of 1,381 sq ft.

Values of shophouses in the area have registered healthy growth, according to data from the Urban Redevelopment Authority. The average transacted price of shophouses in the Kampong Glam district was $4,700 per sq ft (psf) this year, up 20 per cent from a year ago.

The two-storey terraced house to be auctioned also has tenants, and has an indicative price of $4.4 million.

The property’s land area is 1,405 sq ft, with a plot ratio of 2.8, said Colliers.

“The property has a unique facade, which will appeal to a niche group of buyers who appreciate properties that are architecturally distinct,” said Ms Grace Ng, deputy managing director of Colliers.

Both properties will be auctioned on Oct 29, at Amara Hotel.

– See more at: