The Business Times
By Kalpana Rashiwala
Downsizing aimed at residential property investors thwarted by curbs
The instant success of shoebox residential units has drawn some developers to adopt the same strategy for industrial projects – to target investors and speculators thwarted by restrictions on trading in residential properties introduced over the past year.
The trend, visible even before the authorities’ latest measures last Thursday to cool the sizzling private housing market, is now expected to gain further momentum.
While smallish industrial strata-titled units have been available in the Singapore market for some time, industry observers say at least one developer – the Oxley Holdings group, which has been active in developing shoebox apartments – is now branching into developing small-format strata industrial units for sale.
Other developers, such as Soilbuild and Chui Teng, are also expected to launch projects with such units for sale in the next few months.
Shoebox apartments have sold like hot cakes over the past 18 months because of their affordable lumpsum investment quantum, and Oxley is said to be banking on the same strategy for industrial property. It plans to offer about 750 strata factory/warehouse units with an average size of about 1,000 square feet for its project in Ubi Road 1. These units will be priced at about $500,000.
The proposed scheme is subject to approval from the Urban Redevelopment Authority (URA). BT understands that URA typically approves strata industrial projects with unit sizes of at least 100 square metres (1,076 sq ft), although sources say that in certain locations, types of development and designs, the minimum size allowed could be even lower at about 80 sq m (861 sq ft).
A URA spokeswoman said the planning authority ‘generally does not prescribe a minimum size for industrial units in order to give developers the flexibility to cater to the different needs of industrialists’.
‘However, there is a need to ensure that the layout and configuration of industrial units are capable of effectively functioning as meaningful spaces for industrial activities (for example, manufacturing and warehousing).
‘Where it is unclear how a proposed layout is going to cater to industrial activities, URA will work closely with the developer and architect to better understand their development proposal and, if necessary, refine and improve the layout of the development to facilitate the intended industrial activity. This will also help to ensure that the space is not illegally converted to other uses,’ she added.
Oxley’s proposed 10-storey project in Ubi is said to comprise four blocks and could also feature condo- type facilities such as a gym and rooftop swimming pool. It is located near Tai Seng MRT Station.
The project will come up on a 60-year leasehold plot that Oxley bought for a whopping $169 per sq ft per plot ratio (psf ppr) at a state tender which closed last August.
Market watchers estimate Oxley’s breakeven cost for the project could be about $400 psf and that it could market the units for about $500 psf on net saleable area. The 375,150 sq ft plot is zoned for ‘Business 1’ use.
The lumpsum investment of about $500,000 per unit is similar to the entry-price for shoebox apartments and could draw investors who do not wish to be constrained by the restrictions when investing in residential properties, said Ong Choon Fah, head of consulting & research, SE Asia, at DTZ.
Agreeing, Colliers International director (industrial services) Tan Boon Leong noted that, unlike those who invest in private homes, investors in strata industrial units do not have to pay a seller’s stamp duty if they flip the property within specified periods.
In addition, those dabbling in industrial property investment may borrow up to 80 per cent of their property values (as opposed to 50-60 per cent for residential investors), depending on whether they are companies, trusts or individuals.
There are also no restrictions against HDB flat owners who are barred from owning a private property during the HDB flat’s five-year minimum occupation period.
The returns are relatively attractive. ‘Yields on 60-year industrial units can be about 6-8 per cent – higher than the sub-4 per cent for residential,’ said Mr Tan.
Soilbuild is expected to launch in the first half a 60-year leasehold ramp-up factory development at Yishun Street 23 with about 500 units; some will be large (above 10,000 sq ft) but the majority about 1,500-2,000 sq ft and could be priced around the $500,000 mark on average, say sources. Chiu Teng is expected to retrofit Kallang Bahru Complex into a project with more than 150 light industrial units of around 1,000-1,500 sq ft, BT understands.
Colliers’ Mr Tan says small-format industrial units appeal not just to investors but end-users. ‘They may buy a few adjoining units and knock down the walls for a larger contiguous area.’