New medical hubs are quickly taking shape away from traditional central areas thanks to the increasing numbers of suites being built in the suburbs for doctors.
In the past, private health-care groups that own hospitals sold or leased these medical suites to only doctors or dentists. But in recent years, mainstream developers have started building mixed developments with units in this niche field and selling them to lay investors as well, but tenants must still be medical practitioners.
Buying interest has been healthy, but some experts caution that rental demand in this segment of the property market remains to be tested.
In the Jurong Gateway area, for instance, developer Sim Lian Group launched its 740-unit mixed development Vision Exchange in March with 53 units earmarked for medical suites.
The firm said 87 per cent of these units that were released in the first phase of the launch have been sold, but declined to comment on how many were made available. They were sold for $4,498 per sq ft on average.
"It was a strategic decision we made to offer the first and only supply of medical suites in the West, and we continue to receive strong response from buyers attracted to the project's location as well as its proximity to upcoming medical facilities and research institutions," said Sim Lian Group executive director Kuik Sing Beng. The medical suites will cater to the growing number of businesses locating to the area, as well as residents, he added.
Developer RB Capital Group is preparing to launch Farrer Square's medical suites, which opened for buyers to register their interest this week. The entire Farrer Park project comprises 42 strata-titled medical suites, a 300-room hotel and retail offerings. The 99-year leasehold medical units range from 500 sq ft to 1,000 sq ft and have an indicative price of $3,700 psf to $4,500 psf.
RB Capital chief executive Kishin R.K. said the firm is confident of developing medical suites, given Farrer Square's proximity to the KK Women's and Children's Hospital and privately owned Farrer Park Hospital, which is housed within another mixed-use project, Connexion.
Other upcoming developments that also house medical suites include Far East Organisation's SBF Center in Tanjong Pagar and Hoi Hup Realty and Sunway Developments' Royal Square in Novena.
Figures from property consultancy Jones Lang LaSalle show that $93.4 million was invested in medical suites for the three months to March 31, up from an estimated $66.8 million in the same period a year ago. About $491.1 million was also invested in these properties last year.
Property consultancy Knight Frank estimates that about 170 units were sold last year, up from about 40 units in 2012.
Investors are confident in this sub-segment of commercial property because doctors are generally perceived as credit-worthy tenants, said Jones Lang LaSalle regional director Karamjit Singh.
Ms Mary Sai, executive director of Knight Frank, said rental yields are about 3 per cent to 3.5 per cent, which are comparable to strata-titled offices and shops.
Though medical suites have limited uses, they remain attractive as investors feel the supply is still far behind that of office space.
There are fewer than 2,000 medical suites for sale and lease while a further 300 are still being built, said Mr Singh. He noted that there are more than 8,000 registered doctors and about 3,600 specialists here now, adding: "It does point to an under-supply situation."
Ms Sai estimated that 2,000 more units could come onstream in the next two years.
However, Century 21 chief executive Ku Swee Yong noted that no more than 300 new medical specialists join the industry every year. "Specialists can also choose to practise in retail shops and office spaces. Investors should also consider the number of doctors who graduate every year, and how many go on to specialise or run their own clinics," Mr Ku said.
Savills Singapore research head Alan Cheong added that privately owned medical suites can complement private hospitals more than public ones. "It's not that it may not work, but we do not know the likely outcome because of the lack of historical evidence associating the success of such suites with public hospitals."
This article was published on May 3 in The Straits Times.Get a copy of The Straits Times or go to straitstimes.com for more stories.