2 Telok Ayer shophouses fetch $18.2m

A PAIR of adjoining shophouses less than 20 metres from Telok Ayer MRT Station have changed hands for S$18.2 million. Both shophouses are three storeys high and with an attic. One is on a site with 199-year leasehold tenure (starting June 2003) and the other is on a 999-year leasehold site.

The price paid translates to around S$2,600 per square foot on the built-up area of nearly 7,000 square feet - which is believed to be one of the highest on Telok Ayer Street.

PropNex brokered the transaction.

The two shophouses are understood to have been sold by the owners of a corporate service and consultancy group to Spanish tycoon Ricardo Portabella Peralta, who last year picked up two adjoining condo units at Seven Palms Sentosa Cove for S$28.55 million.

One of the shophouses is leased to a Japanese restaurant on the ground level with a shipping company on the upper levels. The other shophouse used to be occupied by the seller but is now vacant.

Other shophouse deals done in the past few months include Madras Hotel along Madras Street in Little India which sold for nearly S$12.5 million; the property is on a site that has a balance lease term of about 78 years. Also transacted were a freehold property along Pagoda Street that fetched S$9.5 million and another shophouse, also freehold, in Stanley Street that commanded S$8.8 million.

In the secondary settlement conservation area of Joo Chiat, six strata units on the ground and upper levels in the front portion of three adjoining shophouses changed hands at S$7.9 million or S$832 per square foot of strata area. The buyer is Silk Road Property Partners. Knight Frank brokered the deal.

CBRE's analysis of shophouse transactions showed that 11 caveats were registered in October for properties totalling S$54.85 million. In the third quarter of this year, there were 24 caveats amounting to S$157.12 million.

Since the introduction of the total debt servicing ratio (TDSR) in late-June 2013, the level of shophouse transactions in most quarters has hovered at around 20-plus transactions totalling below S$200 million.

Sammi Lim, CBRE associate director, investment properties, said: "Shophouse prices continue to hold steady, on the back of limited stock as well as very strong demand from investors and end-users with a mid to long-term horizon."

Market watchers note that although the volume of shophouse transactions has eased following the introduction of TDSR, prices are generally holding firm for conservation shophouses in prime CBD areas. The key factor is to have a good location with high footfall as that will be able to attract high-paying ground-floor tenants in the F&B business.

Moreover, said Historical Land director Simon Monteiro, shophouses on pure commercial zoned sites are something foreigners are allowed to buy - which adds to their draw.

"A lot of UHNW (ultra high net worth) buyers including foreigners are looking into this heritage property class in Singapore - with an eye on capital appreciation, because of the scarcity of shophouses."

Gross yields come to sub-3 per cent, he added.

CBRE's Ms Lim noted that while shophouses in the CBD have traditionally been the focus for investors, properties in the CBD fringe and in the East are moving into the spotlight. "There appears to be a major shift in tenant profiles in these shophouses; with strong demand from established F&B tenants, and tenants who are keen to explore non-traditional spaces, in non-conventional office layouts. Adjoining shophouses, in particular, are very much sought after because they enjoy economies of scale and flexibility of usage."

Ms Lim predicts a "moderate 5-10 per cent appreciation" in prices of shophouses over the next six months. "Speculators are virtually absent. The lower number of transactions reflects owners holding on to their assets as they anticipate more upside in time to come."

This article was first published on November 3, 2015.
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