SINGAPORE (EDGEPROP) - Shophouse transactions in the CBD soared to an all-time high of $1.9 billion in 2021 despite Covid-19, nearly double the $1 billion achieved the year before. Transacted prices of freehold and 999-year leasehold shophouses also climbed to a new record of $4,500 to $5,500 psf, notes Clemence Lee, CBRE senior director of capital markets, Singapore.
See also: Two strata office floors at Raffles Place for sale at $30 mil
Word on the street is that a shophouse at 96 Amoy Street changed hands for $22.5 million sometime in the middle of 2021. With a built-up area of about 4,300 sq ft, this means the purchase price works out to $5,233 psf, which is a new psf price threshold for shophouses. The buyer is said to be a Chinese national who purchased the property under Xin Xin Consultancy, and the deal is believed to be brokered by PropNex. No caveat was lodged for the deal.
According to caveats that have been lodged, the highest psf prices achieved are for a pair of 999-year leasehold shophouses at 202 and 204 South Bridge Road, which fetched $35 million, or close to $5,000 psf based on built-up area, last August.
Meanwhile, a 999-year leasehold shophouse at 64 Club Street fetched $26.038 million or $4,635 psf last November in a deal brokered jointly by Yap Hui Yee, director of investment sales and capital markets, Savills Singapore; and Sammi Lim, founder and executive director of Brilliance Capital.
With most of the freehold and 999-year shophouses on the market already sold last year, there is currently a limited stock of such units available for sale, especially in the prime CBD area, such as Amoy Street, Telok Ayer Street, Boon Tat Street and Stanley Street, notes CBRE’s Lee. Consequently, Singaporean investors and foreign high-net-worth individuals are now turning to strata commercial assets, Lee adds.
Low Choon Sin, managing partner of SRI Capital Markets, concurs. “With shophouses the star performer in 2021, there has certainly been a spillover of interest to the strata commercial space as foreign investors continue seeking to establish a presence in Singapore,” he says.
On the market are two F&B units on the fourth level of Oxley Tower, a 32-storey freehold commercial tower that was completed in 2016. It was developed by Singapore-listed property group Oxley Holdings, whose headquarters is located on the penthouse floors.
The two F&B units on the fourth floor are served by dedicated lifts. The interiors of the units have high ceilings with full-height glass windows and doors leading out to a private roof terrace. The units have a total strata area of 14,650 sq ft, with a guide price of $21 million ($1,433 psf). The appointed joint marketing agencies are CBRE and SRI.
These two units were originally sold when Oxley Tower was first launched for sale in December 2012. Unit #04-01 had fetched $9.088 million ($1,251 psf based on total strata area of 7,266 sq ft) while unit #04-02 went for $12 million ($1,625 psf based on total strata area of 7,384 sq ft), according to caveats lodged then.
However, the buyer terminated the sale. The termination was upheld by the courts following a legal battle, and the units were returned to Oxley Holdings. The developer the refurbished the interiors and landscaped the roof terrace.
Such freehold strata retail units are attracting interest from investors as their prices have not increased by the same magnitude that freehold shophouses have, points out CBRE’s Lee.
Six months ago, CBRE and SRI had launched the two F&B units at Oxley Tower for sale at $26 million by expression of interest (EOI). “In the last EOI exercise, there was a good mix of owner-occupiers and investors looking for alternative investments,” notes SRI’s Low.
Low has been fielding enquiries from high-net-worth individuals and overseas family offices who are seeking commercial assets in the CBD. Their budgets are in the range of $20 million to $30 million. “That is perfect for the strata property at Oxley Tower,” he says.
With the hike in additional buyer’s stamp duty (ABSD) and property tax for high-end homes, investor interest for such commercial units has spiked. “Some property investors who had previously considered buying a second or more luxury residential property are now willing to consider strata commercial space instead,” CBRE’s Lee. (Find Singapore commercial properties with our commercial directory)
The two units at Oxley Tower have been approved for F&B use. They are served by dedicated lifts and are linked by a service corridor. There is also a carpark within the tower. “This makes [the units] ideal for an exclusive restaurant with an open kitchen and bar at one of the units and private dining spaces at the other,” reckons SRI’s Low. “A lot of F&B tenants want to have outdoor seating these days, and it’s quite rare to have a private roof terrace in the CBD. This is what gives Oxley Tower an edge.”
Although rental rates of retail and F&B spaces in the CBD dipped slightly in 2020 and 2021, CBRE’s Lee expects them to bottom out in 2Q2022 as the economy stabilises and Singapore enters the endemic phase of Covid-19.
The guide rent for the whole space is $60,000 a month. Based on the purchase price of $21 million, that translates to a gross yield of 3.4%, which is attractive compared to the general market where cap rates have been compressed, notes Low.
Besides F&B operators, other users who may want high ceilings and units with an outdoor area include childcare operators, gyms or fitness centres and banks’ private client centres, says Low. Hence, there is potential for change of use.
Rejuvenation has been taking place in the CBD, with several office buildings changing hands over the past year. In 2019, the government introduced the CBD Incentive Scheme to encourage the conversion of older office buildings into mixed-use developments to rejuvenate the area.
Last May, the entire Level 9 at Samsung Hub was purchased by a Singaporean family office for nearly $53 million, or a record $4,050 psf on strata area. In September, Indonesian tycoon Tahir reportedly paid close to $260 million ($3,650 psf) for Crown Robinson, which is next door to Oxley Tower. In December, Munich-based family office AM alpha purchased 112 Robinson for $269.7 million ($2,925 psf).
One street away at 140 Cecil Street, PIL Building was purchased by TE Capital Partners and LaSalle Investment Management for $323.8 million, according to a caveat lodged in January 2022. The purchase price translates to $1,900 to $2,000 psf per plot ratio (ppr), including maximising gross floor area and topping up of the lease for two strips of land from a 99-year lease to freehold tenure.
In February, Kajima Overseas Asia is said to have acquired the 16-storey office block, 55 Market Street, from global fund manager AEW for $286.9 million ($3,450 psf). The three deals for 112 Robinson Road, PIL Building and 55 Market Street were brokered by Cushman & Wakefield.
The recent commercial property deals have brought a note of optimism to the market, SRI’s Low observes. “There’s been an increase in enquiries for commercial assets since the cooling measures in December,” he says. “These investors are seeking properties anywhere from $5 million to $30 million, and they are open to strata commercial units too.”
Meanwhile, CBRE has launched two 999-year leasehold, strata office floors at TPI Building for sale by EOI, which will close on March 24. TPI Building is a six-storey office block along Cecil Street, and the two strata floors that are currently on the market are the top two floors (Levels 5 and 6). Each floor has a floor plate of 3,929 sq ft, bringing the combined strata area to 7,858 sq ft. These units represent 31% of the entire strata area of the building.
The two strata office floors at TPI Building have an indicative price of $30 million or $3,818 psf on total strata area. “It is becoming rarer to find two contiguous floors in the CBD available for sale and we expect strong interest for these two floors,” says CBRE’s Lee.
Under URA’s Master Plan 2019, TPI Building has a maximum plot ratio of 12.6. The existing plot ratio is 6.8, hence it is under-utilised, Lee points out. There are only three other owners within the building, so there is an opportunity for the owners to band together to either jointly redevelop the property, refurbish it or embark on a collective sale, says Lee.
“More residential developers are looking for commercial sites which they can redevelop into a new mixed-use project with a substantial residential component,” notes Shaun Poh, executive director of capital markets at Cushman & Wakefield. “This way, they are not required to pay ABSD, nor do they need to sell all the residential units within five years of acquiring a site.”
With more older office buildings being redeveloped into mixed-use developments with hotel, residences and serviced apartments components, the live-in population in the CBD is expected to increase, reckons CBRE’s Lee. “This will increase foot traffic in the CBD, hence benefiting F&B and retail outlets in the area,” he adds.
It is likely to benefit the F&B units at Oxley Tower too, which will be launched for sale by EOI on March 8, with the closing date on April 19.
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