Some breathing room for small offices, shops

Business Times: Fri, Apr 20

[SINGAPORE] While condos and strata industrial units must meet certain size requirements, strata office and shop units can still stay tiny - at least for now. Several projects with strata office and shop units have been launched in recent months, including Oxley Tower at Robinson Road, EON Shenton, Paya Lebar Square, and Promenade@Pelikat in Hougang. From a developer's perspective, small commercial units keep lumpsum prices affordable while achieving high per-square-foot prices of about $3,000 psf or more. This appeals to investors seeking to diversify from the residential sector. Some industry players, however, have wondered if the Urban Redevelopment Authority (URA) could soon come up with guidelines on minimum strata sizes for them. However, a URA spokesman said there are no such plans for now. "Businesses have very diverse needs and budgets. A small accounting or law firm could have a few employees, and a retail start-up could occupy a small shopfront. Some of these small office and retail units already exist in the market today and do cater to genuine business needs. "As such, the government does not intend at this stage to over-regulate the size of office or retail units. Developers are given the flexibility to build units of various sizes in order to add to the diversity of options available and cater for different segments of the market." However, when evaluating commercial development proposals, URA said it takes into consideration the planning intention for the area and the potential impact on the surrounding environment. It also adopts a consultative approach. At Paya Lebar Square, close to 57 per cent of the 556 strata office units are under 550 sq ft. Oxley Tower at Robinson Road has some offices of about 947 sq ft but the majority are over 1,000 sq ft. At EON Shenton, 14 office units measure 506 sq ft each but the 84 other strata offices are 1,033-1,765 sq ft. Shop units start from 118 sq ft at Oxley Tower and 129 sq ft at EON Shenton. Small strata offices and shops are not new to Singapore. International Plaza for instance last year saw transactions of office units of 161 sq ft, 463 sq ft and 474 sq ft, although there were also much larger units (like 2,357 sq ft) changing hands. Knight Frank chairman Tan Tiong Cheng reckons that eventually URA will come up with clearer guidelines on strata sub-division of office and shop space, especially for private land, so that developers know, for example, whether they are catering to SMEs or MNCs. "As for state land, government should cater for both, that is allow strata subdivision into small office units for some land parcels while earmarking other plots for large-space users." He added: "An MNC would find it unwieldy to negotiate with numerous landlords to get the space on one floor." Mr Tan suggests that for locations like Raffles Place and Marina Bay, URA may not want to allow strata subdivision for office and shop space. "In the prestigious financial district, would you want to walk into a building with occupiers in a variety of trades bearing no relationship to one another? It could end up being a dingy place with foot massage outlets, eateries, laundromats, 4D booths and money lenders lining small corridors, and offices all in the same building." Jones Lang LaSalle's head of SE Asia research Chua Yang Liang, too, voiced his concerns if there is a proliferation of strata shop units in the financial district. "This could attract a mismatch of occupiers resulting in a lack of a strong theme or direction for the overall retail positioning of the retail mall or podium. We can already see this in some of the older strata retail developments in the Orchard Road area," he said. A developer told BT: "My sense is that URA is inclined towards 100 sq metres as either a minimum or average office unit size. So although they could allow a developer to carve out some smaller units due to layout constraints, they would like to see some larger units as well." This approach would be similar to that in URA's circular last November which provides a guideline on the maximum number of units for non-landed residential projects on sites with 1.4 plot ratios, based on an average unit size of 70 sq metres gross floor area. One reason some industry players think the government could be gravitating towards 100 sq metres as a possible minimum strata office size is that this was the "encouraged" minimum guide size indicated in URA's tender conditions for the second Paya Lebar site launched in July last year. That site failed to be sold after the price offered by the sole bidder was too low for the state. Some analysts wonder if URA's move to encourage the minimum strata office unit size of about 100 sq m could be in response to more than half of Paya Lebar Square's office units being under 550 sq ft. The is being developed on a nearby plot sold in April last year. So perhaps even at precinct level, the authorities may want to see a good mix of office products to cater to diverse business needs. Source: Business Times