Bugis revived with upcoming completion of DUO

By Michael Lim

/ The Edge Property |

November 18, 2016 11:26 AM SGT

Located on the fringe of the CBD, the Bugis neighbourhood is a well-established hub with malls, shophouses, office buildings and hotels, particularly the area bounded by Ophir Road, Beach Road, Middle Road and Queen Street.

The Bugis neighbourhood has good connectivity: The MRT interchange station for the East-West and Downtown Lines is just two stops from Raffles Place on the East-West Line and three stops from Marina Bay on the Downtown Line. “The area is ideal for companies that want to be close to, but need not be located in, the heart of the CBD,” says Alan Cheong, head of research at Savills Singapore.

View of Bugis area from Shaw Centre

Greater vibrancy from new landmark developments

The completion of South Beach and the upcoming completion of DUO— both landmark mixed-use developments — will bring greater vibrancy to the neighbourhood, particularly around Tan Quee Lan and Liang Seah Streets, says Sammi Lim, CBRE director of investment properties.

South Beach, jointly developed by City Developments Ltd and Malaysia’s IOI Properties, was completed last year. According to CDL in its 3QFY2016 results announcement on Nov 10, the 510,000 sq ft, Grade-A office space in the 34-storey South Beach Tower and the 32,000 sq ft retail space on the basement level connecting to the Esplanade and City Hall MRT stations have been fully taken up. About 70% of the retail outlets have already commenced business, with the remainder scheduled to open soon. CDL also announced that the 634-room South Beach hotel would be rebranded the JW Marriott Hotel Singapore South Beach and open for business in January 2017.

Developed by M+S, a joint-venture company set up by Singapore’s Temasek Holdings and Malaysia’s Khazanah Nasional, DUO is expected to be completed by 2017. The project contains a 49-storey residential tower, the 660-unit DUO Residences. As at end-October, the project was 95% sold.

The second tower of 39 storeys at DUO contains 20 levels of Grade-A office space with a net lettable area (NLA) of 570,000 sq ft. So far, about 40% of the office space has been taken up, at rents ranging from $7.50 to $9 psf a month, according to market sources. Meanwhile, the 340-room hotel in the second tower will be branded Andaz Singapore and managed by Hyatt Hotels.

About 40% of DUO’s office space has been leased and 95% of its 660 residential units have been sold

Properties on the market

With DUO’s greater visibility as it nears completion, some owners of neighbouring buildings are taking the opportunity to put their properties on the market. An example is trading firm Geetex Group, the owner of Bugis Point, which put up the property for sale by tender at end-September. The property’s indicative price is $59.5 million ($3,505 psf), according to CBRE’s Lim, who is marketing the property. The tender closed on Nov 9, and the owner is said to be reviewing the offers received.

Bugis Point is located at the junction of North Bridge Road and Tan Queen Lan Street. It is a six-storey building with a built-up area of 16,975 sq ft that sits on a 999-year leasehold site of 2,776 sq ft.

Bugis Point is currently leased to the Club J’wels karaoke lounge on the upper floors, with the ground floor tenanted by two F&B outlets, Ah Seng Bak Kut Teh and Blanco Court Beef Noodles.

Located across the road from Bugis Point is the Bugis Junction mall, one of the most successful shopping malls in the portfolio of CapitaLand Mall Trust. The mall is linked directly to the Bugis MRT interchange station in the basement, and via an overhead bridge to Bugis+. Together, the two malls have a combined NLA of more than 600,000 sq ft. Bugis Junction is also part of a mixed-use develop ment and is linked to InterContinental Hotel and the Bugis Junction Tower office block.

Bugis Point, located next to Wisma Alsagoff, has been put up for sale at an indicative price of $59.5 million

“The Bugis area has one of the highest footfalls outside of Orchard Road, which is why it is a magnet for investors looking for commercial properties to invest in,” says Savills’ Cheong.

However, not all buildings bene- fit from the high footfalls. Just one street away from Bugis Junction and a few doors from Bugis Point is the strata-titled commercial development Bugis Cube. Formerly known as North Bridge Commercial Complex, it was converted into a strata- titled mixed-use development with 122 units of retail and office space for sale. The six-storey building’s extensive refurbishment was completed in 2013.

However, most of the investors who bought units at Bugis Cube struggled to find tenants for the better part of the first 18 months after it was completed. This was because many of them, whose units were on the upper floors, had asking rents of more than $10 psf per month, says Jason Low, a senior division director with ERA Realty.

Bugis Cube is a 122-unit, 999-year leasehold development that Gryphon Estate Management completed in 2013

The units are now filling up because some of the owners have lowered their rents, he adds. However, their yields have been affected as a result. For example, a 334 sq ft unit on the third level was sold for $1.6 million during the launch. It is currently being rented out for $2,500 a month ($7.50 psf per month), giving the owner a yield of around 2% a year, which is not even enough to break even after deducting the mortgage payment, says ERA’s Low.

The highest rent achieved at Bugis Cube was for a 1,356 sq ft unit on the ground floor, which has been leased to an F&B outlet for $24,000 a month ($17.70 psf a month). The owner paid $9.35 million ($6,899 psf) for the unit when it was launched in 2012. The latest transaction at Bugis Cube was for a 301 sq ft unit on the second level that changed hands for $1.03 million ($3,417 psf) in August 2015.

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Units for lease

The Prospex is another building that had undergone extensive refurbishment works, which were completed in 2015. The nine-storey commercial building is located at the corner of Victoria Street and Middle Road, and adjacent to Bugis+. The owner of The Prospex — Hong Kong- and Singapore-focused real-estate private- equity firm Pamfleet Group — had originally offered office units for sale on a strata basis. It subsequently offered the entire building for en bloc purchase with a price tag of $80 million last year.

The commercial units in The Prospex are now available for lease, though. Asking rents for the office units range from $8 psf per month for a 581 sq ft unit to $7.20 psf per month for a 3,800 sq ft unit, according to listings by agents. More than 80% of the building has been leased so far. The retail space was put up for lease earlier this year, with asking rents of $17.50 psf per month.

The Prospex is no longer for sale, but it is available for lease; 80% of its space has already been taken up

Coveted shophouses on Tan Quee Lan, Liang Seah Streets

There is keen interest from investors eyeing the wide array of assets at Bugis, says CBRE’s Lim. “Some of these assets, including the limited stock of conservation shophouses, are highly prized.”

The most coveted conservation shophouses are those on Tan Quee Lan and Liang Seah Streets. However, very few of these are available for sale as they are held by family trusts. These shophouse owners are also hoping that with the completion of DUO, the whole Bugis area will be rejuvenated, says ERA’s Low.

Most of the shophouses on Tan Quee Lan and Liang Seah Streets are zoned for commercial use. However, some of the owners have converted the upper floors from office space into apartments for lease.

Liang Seah Street has a wide array of eateries such as Beavers Pub & Grill, Arirang Korean Restaurant, Thai Mookata and Chinese hotpot

At Liang Seah Place, for instance, the upper floors of shophouses, which were originally offices, have been converted into one- and two-bedroom apartments of 800 to 1,400 sq ft. They are offered for lease at $3,300 to $4,350 a month.

Meanwhile, at Liang Seah Court, a row of four adjoining conservation shophouses of 999-year lease, the upper floors have been converted into 10 strata-titled apartments. The last transaction of an apartment at Liang Seah Court was for a 1,206 sq ft, two-bedder on the third floor that fetched $1.7 million ($1,425 psf) in August 2012, according to a caveat lodged with URA Realis. Prior to that, the unit had changed hands for $1.2 million ($995 psf) in August 2007.

A 1,206 sq ft, two-bedroom unit on the third floor of the 999-year leasehold Liang Seah Court was sold in August 2012 for $1.7 million ($1,425 psf)

Heritage Place is made up of a row of 11 adjoining conservation shophouses whose upper floors have been converted into 21 strata-titled apartments. The last time a unit changed hands there was also in August 2012, when a 1,851 sq ft, three-bedroom unit on the fifth level was sold for $2.4 million ($1,286 psf). The unit was previously sold in February 2006 for $1.1 million ($589 psf). On the market is a 980 sq ft, two-bedder with a price tag of $1.7 million ($1,735 psf).

Tan Quee Lan Suites is also a row of 999-year leasehold conservation shophouses converted into 30 apartments for lease a decade ago. According to recent listings, 820 sq ft, two-bedders are available for lease at $3,720 a month, while 1,216 sq ft two-bedders are available at $5,472 a month.

The last time a unit at the 999-year leasehold Heritage Place changed hands was in August 2012

Impact on rents, yields

Although South Beach and DUO are likely to inject new life into Bugis and attract new businesses to the area, Edmund Tie & Co’s head of research for South-east Asia, Lee Nai Jia, says the global downturn is having a negative impact on rents and therefore on the yields of some of these properties, particularly the shophouses on Liang Seah and Tan Queen Lan Streets.

Rents for office space and apartments on the upper floors of these shophouses range from $4.20 to $4.70 psf per month. Meanwhile, commercial units leased out to F&B outlets on the ground floor command rents of $19 psf per month. Therefore, Lee estimates rental yields for conservation shophouses at 2% to 3%.

Despite the relatively low yields, investor interest in such assets remains strong, notes CBRE’s Lim. “Property funds, family offices and high-net-worth individuals are on the lookout for the opportunity to acquire these income-producing assets, priced at a palatable quantum, in the hope of future capital appreciation,” she says.

This article appeared in The Edge Property Pullout, Issue 755 (Nov 21, 2016) of The Edge Singapore.

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