Bugis shophouse investors bank on area’s potential
Less than five months after it was put on the market, a three-storey shophouse at 534 North Bridge Road was sold to an overseas property investor for $10 million ($3,333 psf on built-up area). The shophouse, with a total floor area of about 3,000 sq ft, sits at the junction of North Bridge Road and Tan Quee Lan Street, right next to upcoming residential project Midtown Modern by GuocoLand.
“We received multiple offers. Considering the sale was launched during the circuit breaker period, the transaction was relatively swift and smooth,” says Loyalle Chin, associate director at PropNex Realty, who concluded the deal.
The buyer was particularly drawn to the shophouse’s “rentability”. It is currently being leased to a Korean dessert chain Nunsongyee, and the lease is due to be renewed in 3Q2021. Even so, Chin says that the property has received five different leasing enquiries — from restaurants, non F&B tenants, and convenience stores — since Phase Two started.
All three levels in the shophouse can be used for F&B. It is within one minute by foot to Bugis Junction shopping mall and Bugis MRT interchange station, and has a double frontage along North Bridge Road and Tan Quee Lan Street. A 999-year leasehold property within such a short walking distance to the MRT station is rare as well, Chin adds.
More importantly, this particular shophouse will benefit from additional footfall when the entire Guoco Midtown precinct is completed just across Tan Quee Lan Street from Midtown Modern.
Expected to achieve TOP in 2024, the 500-unit Midtown Modern is built on a Government Land Sale site bought by GuocoLand for $800.19 million in October 2019. It is an extension of the Guoco Midtown plan, which consists of a 30-storey office building with 770,000 sq ft of premium Grade-A office space; Midtown Hub, comprising private office suites, meeting rooms and collaborative work spaces; retail shops and F&B outlets; and Midtown Bay, a 33-storey residential development at Beach Road with 219 units.
When fully completed, the various components in Guoco Midtown are expected to bring an additional 10,000 residents, workers and visitors into the Bugis district daily.
Chin says that shophouses in close proximity to the future Guoco Midtown at Tan Quee Lan Street, Liang Seah Street and North Bridge Road are rarely on the market. The previous transaction before 543 North Bridge Road was made two years ago for 32 Liang Seah Street. The three-storey shophouse, which was also brokered by Chin, changed hands for $12.2 million ($3,142 psf on built-up area) in April 2018. With a floor area of around 3,882 sq ft and land area of 1,176 sq ft, it is currently tenanted to Kuan Kuan Spicy Hotpot on the first two floors.
Now, Chin is also marketing another 999-year three-storey shophouse, at 5 Tan Quee Lan Street, for $15 million. The property sits on a 1,102 sq ft land area and is located within a few minutes’ walk of Bugis MRT Station. The shophouse has a gross plot ratio of 4.2, with the potential of increasing the floor area further up to around 4,629 sq ft. All three levels are approved by URA for change of use to “restaurant”. It will be sold with its existing tenant Joo Bar, which is a makgeolli bar and restaurant.
Poised for growth
The Ophir-Rochor corridor rejuvenation plan is well underway. Aside from Guoco Midtown, there is integrated development Duo, which comprises Duo Galleria, Duo Tower, Andaz Hotel and Duo Residences — a 660-unit condominium characterised by its sleek concave shapes. Bordered by Ophir Road, North Bridge Road and Beach Road, Duo was developed by M+S, a company jointly owned by Khazanah Nasional and Singapore’s Temasek and completed in December 2017.
Allianz Real Estate and Gaw Capital acquired Duo Tower and Duo Galleria in July last year for $1.6 billion. Andaz Hotel, the luxury hotel component of Duo, was sold to Hoi Hup Realty for $475 million in October last year.
Another completed project in the area is South Beach integrated development by CDL, which comprises 190 residential units in South Beach Residences, JW Marriott Hotel and 500,000 sq ft of Grade-A office spaces in South Beach Tower.
More developments are to come. The M, a 522-unit condominium by Wing Tai Asia, was launched in February this year and has since been 76% sold, according to caveats lodged. Located along Middle Road, it is slated for completion in 1Q2024.
Next to Guoco Midtown, Shaw Tower is being demolished and will be redeveloped into a 35-storey building with Grade-A offices and retail space by 2023. When completed, the new Grade-A office tower will be linked to Guoco Midtown as well as to South Beach via overhead bridges on the second level.
Several old commercial buildings were put up for collective sales earlier this year, for instance, 101 Beach Road and 141 Middle Road. They have potential to be redeveloped into mixed-use projects for residential and commercial use.
“Bugis is becoming a hip, culturally-rich and vibrant commercial district, increasingly attractive to multinational companies seeking Grade-A office space in Duo Tower, Bugis Junction Towers and the future Guoco Midtown and Shaw Tower,” says Chin.
Meanwhile, CapitaLand has won the tender to operate Bugis Village and Bugis Street, which has a total retail net lettable area of about 195,000 sq ft. The largest mall developer in Singapore will revamp the area to include a day-to-night market, retail incubator, as well as co-living and co-working areas. The operating lease commenced on April 1 this year and may be renewed for two tenancy terms of three years each, with the final term not extending beyond March 30, 2030. The existing tenants can continue operating at the prevailing rent until March 2021.
Chin says: “Some of the F&B and retail tenants in Bugis Village and Bugis Street may need to look for new premises by March next year, therefore shophouses in the vicinity can benefit from this tenant pool.”
Spillover effect
Peter Chiu, associate marketing director of Huttons Asia, says that there will be a spillover effect from the new and upcoming developments in Bugis to the shophouses nearby, such as those in Kampong Glam. “The whole area will be bustling as there will be residential developments and Grade-A offices, alongside exciting retail and F&B options,” he adds.
Chiu brokered the sale of two shophouses in the vibrant enclave of Kampong Glam in July. The area is known for its art galleries, watering holes, cafes, bars and colourful graffiti art.
One of them, 13 Bussorah Street, is a two-storey shophouse with a land area of 1,559 sq ft and a built-up area of 2,744 sq ft. It was sold vacant at $5 million ($1,822 psf on built-up area).
The previous office tenant terminated the lease as the company moved to a predominantly work-from-home arrangement. The new owner is a local investor who is considering using the two-storey shophouse himself. The shophouse is on a 99-year lease from 2003.
The other shophouse was a two-storey shophouse at 11 Haji Lane, which changed hands for $3.47 million ($3,366 psf on built-up area), says Chiu. With a land area of approximately 525 sq ft and a built-up area of approximately 1,030 sq ft, the two-storey shophouse was previously tenanted to Selfie Coffee, which pre-terminated the lease due to a drop in business. It has a 999-year lease and is approved for light F&B usage.
The buyers of shophouses are local property investors in their 30s, who are acquiring a conservation shophouse for the first ttime, says Chiu. “They feel that the prices of conservation shophouses at Kampong Glam are more affordable than those in the CBD, and they see potential for capital appreciation in the next few years,” he adds.
Chiu says that shophouses in Kampong Glam are suited for smaller institutional and individual investors. “If you want to buy a shophouse in the CBD, you need at least $10 million. In the Kampong Glam area which has smaller shophouses, you could get a shophouse unit for $5 million or below,” he adds.
On Bali Lane, just off Ophir Road, a pair of two-storey shophouses (13 and 14 Bali Lane) are now on the market for an indicative price of $9.8 million ($3,746 psf on built-up area). Exclusively marketed by PropNex’s Chin, the shophouses sit on a freehold land area measuring 1,470 sq ft with a built-up area of 2,616 sq ft. They are partially tenanted to a celebrity hair salon ERI SU on the ground floor.
These two shophouses are next to the popular Blu Jaz Cafe at 11 Bali Lane, which was bought by a Korean investor at $18.8 11 Haji Lane changed hands for $3.47 million, or $3,366 psf on built-up area million ($4,100 psf on built-up area) last year. “Blu Jaz has a live entertainment licence, so the area is bustling in the evenings, which will benefit 13 and 14 Bali Lane as well,” says Chin. Due to current Covid-19 restrictions, live events are suspended, but the cafe is still serving food and alcoholic beverages.
There are more shophouses being put up for sale as rental income has been affected by Covid-19, and some owners are seeking to divest. “The reality is that rents have dipped particularly for retail spaces,” says Chin.
Huttons’ Chiu concurs: “New rental agreements in the Kampong Glam area are around 20% cheaper than pre-Covid-19, but softer rents also attract confident tenants to take up space.”
For deal hunters who are hoping to capitalise on the current low interest rate environment and softer purchase prices to enter the commercial shophouse space, there is perhaps no better time, says Chin. 13 Bussorah Street, a two-storey shophouse with a built-up area of around 2,744 sq ft, was sold vacant at $5 million in July