Monday, February 7, 2011

Home office units gaining in popularity

THE growing trend of working from home is prompting developers to roll out more so-called Soho - small office, home offices - projects.

The popularity of the concept is also showing up in the leasing market, where properties termed as Soho units can fetch higher rental than similar-sized units simply labelled as flats.

Urban Redevelopment Authority (URA) figures show how the notion of working from home has really taken hold.

It has authorised about 3,700 private residential owners since its Home Office Scheme was launched in 2003. The licence lets owners run small-scale businesses from their homes. About 600 applications and licence renewals were approved last year, up by 11 per cent on 2009 and double the number in 2008.

Developers have cottoned on. Mr Chia Boon Kuah, executive director and chief operating officer of property sales at Far East Organization, said he sees a trend of more people looking for flexible spaces that allow them to live, work and relax under the same roof.

Far East's recent project The Tennery, a 338-unit Soho-style project in Bukit Panjang, was partly inspired by the success of its other Soho projects, The Greenwich and Soho@Central.

More than 90 per cent of The Tennery has been sold, with prices averaging $1,200 per sq ft (psf). Its one-bedroom flats range from 619 sq ft to 640 sq ft, while its two-bedroom flats range from 860 sq ft to 950 sq ft.

Mr Bong Flores, who bought a one-bedroom unit at The Tennery, said the project's investment potential was a big draw: 'We were tracking units at Soho@Central and the response from the market has been very good. The units there have also seen capital appreciation. As an investor, it gave me motivation to buy into another Soho project.'

Okio Residences in Balestier has sold almost 40 per cent of its Soho-concept units since its launch late last month. The freehold project, built by SDB Asia, a subsidiary of Malaysian-listed Selangor Dredging Berhad, has 104 units, with prices for its 420 sq ft flats starting from $600,000.

Soho Life, a freehold mixed-use development in Joo Chiat Road, has fewer than five units left. The 70-unit project by World Class Land, launched last October, has a combination of office and residential units. The smallest 344 sq ft flats sold at prices from $1,200 psf to $1,300 psf.

One reason Soho units are popular is because they can attract good rentals, some consultants say.

Savills Singapore director of corporate residential leasing Patrick Lai said rents of centrally located Soho units averaged from $4.50 psf to $5.50 psf in 2009.

Last year, these rents rose to as much as $6.50 psf, with Mr Lai predicting they could hit $7 psf later this year.

He said rental demand for Soho units will stay strong, especially among entrepreneurs and small businesses, as they can be used for both residential and business purposes.

Mr Colin Tan, head of research and consultancy at Chesterton Suntec International, added: 'There are a lot of apartments but very few Soho units. So developers can claim these units are in limited supply and therefore have higher capital appreciation potential.'

But analysts caution that people must be aware of what they are buying into.

The URA said the term Soho is a marketing term used by developers and their property agents and does not refer to a specific development type that it grants approval for.

Small units branded as Soho units by developers are less than 500 sq ft in size, and are often labelled as 'Mickey Mouse flats' or 'shoebox apartments'.

Their size means that the total price tag still remains relatively affordable, even though the psf value is higher than that for bigger-sized apartments.

Mr Herman Chang, managing director of the Macly Group, said he plans to roll out about 350 small apartments this year.

He said:'Sometimes when we hand over the projects to the marketing agents, they try to sell small apartments as Soho units. They'll try to persuade buyers, especially for properties with a frontage facing the main road, that the units can be rented out as offices when the office sector is good, or as residential units when that sector is doing better.'

Labelling small units as Sohos could help differentiate the project from others, said Chesterton's Mr Tan, therefore justifying a higher price tag.

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