SINGAPORE - Earlier this week, a nondescript Hougang coffee shop was sold for the eye-popping sum of $23.8 million.
"Why so much?" went the headline in a tabloid paper. But, some experts here are not surprised at the not-quite-kopi-money price.
English-language newspapers reported last Monday on the record-breaking sale of Coffee Express 2000 in Hougang Avenue 4, with 4,025 sq ft and 17 stalls, for that hefty sum. The buyer, Broadway F&B Management, runs 15 eating houses, food courts and a restaurant here.
When contacted, Broadway declined to comment. The coffee shop is not in a prime area, near an MRT station or shopping mall which generates human traffic. But experts interviewed say the sale should be seen as more than a real-estate transaction.
Associate Professor Sing Tien Foo of the National University of Singapore's department of real estate says that transactions involving coffee shops should not be seen purely as real-estate deals.
Says Prof Sing, 46: "You are looking at a business. There are other factors involved, such as economies of scale for big food chains and the smaller operation risks for those with expertise in running coffee shops."
Property analysts who spoke to Sunday-Life! say that paying a high price for commercial property is not as counter-intuitive as it sounds.
International Property Advisor chief executive Ku Swee Yong says that a $23.8-million price tag for the Hougang coffee shop is "reasonable" if it can yield a 4 per cent annual return which he adds, is a reasonable expectation of retails shops in general.