Hongkong Street shophouse with hotel and restaurant tenants on the market for $35 mil

/ EdgeProp Singapore |

September 19, 2023 11:57 AM SGT

The exterior of the refurbished intermediate four-storey shophouse at 41 Hongkong Street with a six-storey rear extension (Photo: Samuel Isaac Chua/EdgeProp Singapore)

The Singapore Grand Prix 2023 benefitted not just the upscale hotels but the budget hotels, too. Along Hongkong Street, many boutique hotels also enjoyed high occupancies, with some running full, such as Fragrance Hotel Riverside at 20 Hongkong Street, Bluewaters Pods Hotel at 38 Hongkong Street, Hotel Nuve Elements at 41 Hongkong Street and Hotel Bencoolen at 47 Hongkong Street.

Bars and restaurants on Hongkong Street include a cocktail bar at 28 Hongkong Street (voted one of Asia's 50 best bars in 2023), Greek restaurant Vios by Blu Kouzina at 31 Hongkong Street, Italian restaurant Amo at 33 Hongkong Street, Korean bistro bar Soollounge2 at 38 Hongkong Street and Japanese restaurant Mizume at 41 Hongkong Street.

Recent transactions at Hongkong Street: EdgeProp Research

Located off New Bridge Road, Hongkong Street is three minutes from Clarke Quay MRT station and Clarke Quay Central Mall. From there, it's just a short walk to the cluster of restaurants, bars and clubs at Clarke Quay, Robertson Quay and Boat Quay along the Singapore River. The Core CBD, Chinatown and Marina Bay are also nearby.

Read also: Properties for sale for May 27-29

Hongkong Street off New Bridge Road is within walking distance of Clarke Quay (pictured), Robertson Quay and Boat Quay (Photo: Samuel Isaac Chua/EdgeProp Singapore)

“Hotels on Hongkong Street are extremely popular with American and European independent travellers who want the experience of living in a heritage area in the heart of Clarke Quay,” says Sammi Lim, founder and director of Brilliance Capital.

From January to July, the average room rate is up 25.2% y-o-y to $275.21, with an average occupancy rate hovering at 80.09%, up 10.7% y-o-y, according to Singapore Tourism Board statistics. Room rates across all hotel categories have risen in the post-Covid recovery.

Since then, there’s been a lot of investor interest in the hospitality sector, says Brilliance Capital's Lim. The shophouse owners at 41 Hongkong Street are hoping to capture some of that investor interest and have put up the property on the market. The sale is by expression of interest (EOI), with Brilliance Capital as the exclusive marketing agent. The EOI will close on Nov 9.

Upper Circular Secondary Settlement

Hongkong Street, off New Bridge Road, sits within the Upper Circular Conservation Area. It is considered a Secondary Settlement — similar to Balestier, Beach Road, Joo Chiat and Geylang — developed between the 1900s and 1960s as the city centre expanded outwards.

Unlike the shophouses within the Historic Districts, which have strict conservation guidelines, the shophouses within Secondary Settlements have greater redevelopment flexibility, such as adding a six-storey rear extension, as long as the front façade is retained.

The six-storey rear extension of 41 Hongkong Street built and completed in October 2019 (Photo: Brilliance Capital)

When the owners of 41 Hongkong Street purchased the property a decade ago, the ground floor was occupied by a dried goods store and the upper floors of the four-storey shophouse were leased to a backpackers' hostel operator.

However, in 2016, the owners decided to undertake a $5 million retrofit that spanned three years. It included adding a new six-storey rear extension and installing a lift to every floor. The property is zoned for commercial use with a plot ratio of 4.2 under the Master Plan 2019. Hence, its built-up area is 8,872 sq ft.

The lift lobby of the Hotel Nuve Elements (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Approval for hotel, F&B operations

Three years ago, approval was obtained for hotel use on the upper floors and F&B use on the ground floor. "Hotel licences are very limited, and various restrictions are imposed on these sites," says Lim. "Hence, properties with a hotel licence are very precious."

Temporary Occupation Permit was achieved in October 2019. The owners had also topped the lease to a fresh 99 years from December 2018. The upper floors were then leased to the 30-room Hotel Nuve Elements, while Japanese restaurant Mizume took up the ground floor unit.

Source: EdgeProp Inspector

The fifth floor houses the hotel reception, with an open terrace turned into a nursery selling plants. A rooftop terrace above the sixth floor has been turned into a spa with a jacuzzi for hotel guests to enjoy the city views.

41 Hongkong Street is on the market for $35 million, which translates to $3,945 psf based on the built-up area.

After deducting the price of the F&B space of 1,051 sq ft (excluding the common areas) on the ground floor, which is estimated at $5,800 psf or a total of $6.1 million, Brilliance Capital's Lim reckons the price of the hotel component at 41 Hongkong Street to be about $963,000 per key.

The space occupied by Mizume Japanese restaurant on the ground floor of 41 Hongkong Street is estimated to have a value of $6.1 million (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Rejuvenation on Hongkong Street

The rejuvenation of Hongkong Street began a decade ago when at least 13 shophouses changed hands in 2010 and 2011, notes Lim. Another wave took place five years ago in 2018 when at least four shophouses were sold: 43 Hongkong Street for $7 million in March 2018, followed by 6 Hongkong Street for $13.75 million (May 2018), 9 Hongkong Street for $18.8 million (June 2018) and 28 Hongkong Street for $9 million (October 2018).

This past year, more shophouses on Hongkong Street have been put on the market. In April, the shophouse at 18 Hongkong Street was sold for $9.6 million. The property sits on a 1,884 sq ft site with a 99-year lease from January 1, 1951. Hence, the property has 27 years left on its lease. The existing four-storey walk-up property has a gross floor area of 5,074 sq ft, which brings the transacted price to $1,892 psf.

At 18 Hongkong Street, City Backpackers @ Clarke Quay leased the shophouse for seven years, with planning permission for the hostel operation due to expire in 2024. The property could be redeveloped into a new building with a six-storey rear extension, says Krystal Khor, director of Mondania, who brokered the sale.

The property at 17 Hongkong Street is on the market for $47.5 million, which translates to a price of $5,975 psf based on floor area (Photo: CBRE)

Price gap between leasehold and freehold

The freehold 17 Hongkong Street was put up for sale on Sept 6 by CBRE. The shophouse sits on a land area of 1,793 sq ft, with a total built-up area of 7,950 sq ft. Under the URA Master Plan 2019, the property is zoned for commercial use with a plot ratio of 4.2.

The ground floor of the five-storey building at 17 Hongkong Street has been leased to Japanese omakase restaurant Kappo Shunsui, while the upper floors have been leased as offices to businesses of different trades. The property at 17 Hongkong Street is on the market for $47.5 million, which translates to a price of $5,975 psf based on floor area.

Given the premium for freehold property, "a price below $4,000 psf for an almost new 99-year leasehold property in the CBD area is considered attractive", says Brilliance Capital's Lim.

Lim: Genuine buyers are returning to the market, and with sellers becoming more realistic in their asking prices, we believe the price gap will be bridged (Photo: Brilliance Capital)

The shophouse at 41 Hongkong Street is likely to attract shophouse and hotel investors. Lim sees the possibility of family offices swooping in, too. They could consider holding it as a long-term investment, possibly converting it into a single office building for their use in the future.

Lim also sees the return of some investors who had withdrawn from the Singapore property market over the past three years. "They felt that prices were driven up to unreasonable levels for some shophouses, and now we know why," she says. Lim is alluding to the money laundering scandal last month, which saw 10 suspects originally from Fujian, China, arrested in Singapore, and $1.8 billion worth of assets, including high-priced real estate seized.

"These genuine buyers are returning to the market, and with sellers becoming more realistic in their asking prices, we believe the price gap will be bridged," Lim adds.

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