CONTINUES ON PAGE EP6

Click and mortarThe future of retail space PG2

Feng shuiLocation versus direction PG6

Deal watchPasir Ris condo selling at below $800 psf PG7

Industrial vacancy rates spook sellers

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M A K E B E T T E R D E C I S I O N SMCI (P) 046/03/2015 PPS 1519/09/2012 (022805)

THE WEEK OF MARCH 21, 2016 720

Waning confidence| BY FEILY SOFIAN & ESTHER HOON |

Faced with manufacturing gloom and rising vacancy rates, industrial proper-ty owners have been eager to offload their units. Amid waning confidence, more sellers are opting to let go of their

industrial properties even if they have to in-cur seller’s stamp duty.

Sellers must pay 15%, 10% and 5% SSD if they sell their properties within one, two and three years, respectively, of purchase. The rule applies to industrial properties bought on or after Jan 12, 2013.

By matching the sales caveats of indus-

trial units with the caveats of their previous transactions, we found that 11 transactions in 4Q2015 were levied with SSD. In comparison, there were only three to four such transactions each quarter in the first three quarters of 2015. The numbers could be understated, as many industrial transactions were not captured in the caveat record.

For the 11 transactions, the highest SSD paid amounted to $290,000. It accrued to a ground-floor unit at The Splendour, a 60-year leasehold factory on Bukit Batok Crescent. Based on caveats published by URA and the Singapore Institute of Surveyors and Valuers, the seller purchased the unit in April 2014 at

$2.69 million and sold it in December 2015 for $2.90 million ($335 psf).

The transaction, which resulted in a loss of $78,000 for the seller, would have been profit-able if not for the 10% SSD payable. The prof-it-and-loss computation did not take into ac-count other costs that the seller might have incurred such as the regular stamp duty and service charge. A land register search indicates that the unit is currently owner-occupied by an Indian grocery store. The seller was stated as HB Glass & Aluminium Pte Ltd.

In the first two months of 2016, there were already three transactions saddled with SSD. This was based on caveats downloaded on

March 8; there could be more caveats for Feb-ruary that will stream in over the next cou-ple of weeks.

The highest SSD this year, amounting to $73,200, accrued to a fourth-floor unit at 15 Woodlands Loop — a 30-year leasehold food factory. The transaction resulted in a $65,200 loss for the seller, who purchased the unit at $480,000 last April and resold it at $488,000 ($157 psf) in January this year. The unit is cur-rently vacant. It was previously occupied by a vegetarian food catering company, which re-located to Food Xchange @ Admiralty at the end of last year.

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EP2 • THEEDGE SINGAPORE | MARCH 21, 2016

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The future of retail space

THEEDGE P R O P E R T Y PROPERTY TAKE

Affected by the waning global economic climate over the past one or two years, sales in the Singapore retail sector have been generally declining. The e-com-merce segment, however, has bucked

the downtrend.This could only have been possible with The

Fourth Industrial Revolution, more often referred to as Industrial 4.0 or the Internet of Things (IoT). Put simply, the concept of IoT is the fusion of technologies that blur the line that separates physical and digital spaces. It has brought about revolutionary changes in traditional work process-es across almost every industry in every country.

A significant factor contributing to the success of many industry leaders today is the incorpora-tion of technological advancement brought about by IoT into traditional business models. Some continue to depend heavily or solely on IoT for day-to-day operations. For instance, the largest accommodation provider, Airbnb, owns no real estate, but a customer-to-customer platform that connects the entire world. The same goes for the world’s largest taxi company, Uber, which owns no vehicles, and the most valuable retailer, Alibaba, which carries no inventory.

As for the Singapore retail sector, IoT has pro-vided an effective platform that continues to pro-mote the rapid growth of digital and more flexible retail space. Between 2009 and 2014, a handful of major online businesses, including C2C platform Carousell, multi-brand carriers Zalora and Reebonz, as well as business-to-customer platforms such as Qoo10, Rakuten and Lazada, have popped up in Singapore and gradually gained a foothold in the retail scene.

According to a recent paper released by the Competition Commission of Singapore, the size of the city state’s online retail market by end-2015 was expected to have quadrupled compared with that for 2010. Evidence suggests that e-com-merce activity will continue to grow and account for a higher percentage share of total retail sales, considering the experience of other more mature e-commerce markets.

This may appear to be good news for consumers,

who are likely to benefit from more varied choices, as well as certain retailers with limited start-up capital. For bricks-and-mortar retail stakehold-ers, however, the positive outlook for the online retail sector creates a more challenging business environment that may not necessarily work well with their strategy. Many even fear the plausible cannibalisation of online to offline sales. As a re-sult, bricks-and-mortar retailers regard click-and-buy businesses as vicious competitors that pose a threat of complete takeover.

While digital retail space has been rapidly expanding in Singapore over the past few years, its integration with physical bricks-and- mortar retail is still quite remote. In the case of land-lords, digital technology has been largely applied to providing retailers’ information via their web-site and digital screens placed in their malls to offer shoppers directions. Some have also taken the extra effort to feature various retailers’ pro-motional activities and mall events, in the hope of driving sales.

For retailers, the use of digital media to show-case products and store locations is the norm. Not many landlords and retailers, however, have expanded the level of online information to their physical store. For example, while it is common for consumers to browse an online retailer’s catalogue via its website, the same cannot be said about their experience in a physical retail store.

It does not take a lot for a bricks-and-mortar retailer to provide shoppers an online catalogue of its physical products when they enter their

shop. Physical retailers could eventually provide shoppers with a comparable level of information, search ability and integrated delivery service as their online counterparts. The next phase of IoT could possibly see physical retailers providing real-time retail information on their stock and prices di-rectly on a digital platform that is accessible and searchable by shoppers at the mall. In the foresee-able future, it should be possible to locate, using a mobile phone or other personal devices, a par-ticular product within the mall without physical-ly visiting each store to uncover its merchandise, as shoppers usually do now. Free home delivery could also be the norm, as each mall would be equipped with a centralised logistics service pro-vider who could deliver every single purchase within the mall directly to the shopper’s home in one single trip.

Hence, the concern that online could replace physical retail space has been misplaced. On the contrary, physical retail space will still be relevant — as an important avenue to showcase products and for consumers to enjoy quality services. This is also a primary reason for successful e-tailers such as Zalora and Reebonz to venture into the offline retail scene, closing the trust gap between themselves and customers while trying to reach out to a wider audience.

Malls could also become increasingly impor-tant as a social gathering spot for providing shared experiences among friends and families. Online interest groups could meet up in these physical malls for special events and social interaction. Friends could spend more time in the mall attend-ing enrichment social programmes, and not just visit for entertainment and food.

There is potential for malls in Singapore to thrive as lifestyle and entertainment centres offer-ing highly convenient shopping amenities, a place for social activity and visual pleasures with the support of technology and digital retail space. A move in this direction will help the retail sector retain its competitiveness in the region.

Dr Chua Yang Liang is head of research, Southeast Asia, JLL and Sun Shuyu, its senior research analyst

| BY DR CHUA YANG LIANG & SUN SHUYU |

If you wish to contribute columns, please write in to propertyeditor.sg@bizedge.com

The next phase of IoT could see physical retailers providing real-time information on their stock and prices directly on a digital platform that is accessible to mall shoppers

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THEEDGE SINGAPORE | MARCH 21, 2016 • EP5

Feng shui consultants are often bombarded with questions about whether their house is facing a favourable direction or where

they should place their aquarium or which di-rection should their bed face. While these are valid questions, it is not the right way to ap-proach feng shui.

Before analysing these questions, we have to understand the concept of location and direction of a property. Location refers to the place where the property is situated and its overall environment. Direction re-fers to the orientation of a property accord-ing to its layout.

Location should come first in feng shui. Before analysing the layout of a property, we should consider its surroundings first. Moun-tains are considered the source of Qi — the beneficial energies to harness that will benefit our household or business premises. The next thing to look for would be water — streams, rivers, ponds and lakes. Water serves as the conduit in which Qi is carried.

Think of them as your resource, and your property is the device you use to harness this resource. If the resources are poor or do not exist, then it will not matter where your prop-erty sits or faces because there is simply no resource from which to harness. Having said that, you should always set realistic expec-tations, as there is no location in which the feng shui quotient is 100% positive. Of course, there are other factors to consider, such as the shape and characteristics of the mountains, or the nature of the water — is it sentimental, ag-gressive or stagnant?

Meanwhile, direction is used to maximise

the Qi intake. At the very basic, direction can help prevent troubles. For example, a certain unfavourable feature that produces Sha Qi in the West will affect the youngest daughter in the house. In such a scenario, we can come up with some remedial measure or, if there is not a youngest daughter in the house, then there is no cause for concern. Another func-tion of direction is to demarcate the property into various sectors or palaces, which can be used as reference points for the implementa-tion of various feng shui formulae such as Fly-ing Stars and 8 Mansions.

Always remember to take stock of the

EP6 • THEEDGE SINGAPORE | MARCH 21, 2016

FENG SHUI

THEEDGE P R O P E R T Y COVER STORY

Location versus direction

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| BY DATUK JOEY YAP |

surroundings in your location first before worrying about the minor details that in-volve directions. On the other hand, there are other things that a professional feng shui assessment will take into consideration to come up with a conclusion. While this may help you at least get a basic understand-ing of how to approach feng shui, you may want to seek a professional opinion to get a full picture.

Joey Yap Pte Ltd can be reached via the com-pany’s Singapore regional manager Ng Khai Yeing at khaiyeing@joeyyap.com

Islandwide vacancy rate for multiple-user factories just shy of 13% in 4Q2015

The number of unprofitable transactions for industrial properties has hovered between 10 and 20 each quarter in 2014 and 2015. Total sales volume has thinned in recent years, how-ever, as the total debt servicing ratio, rising in-terest rates and high vacancy rates dampened buying sentiment. As a result, the percentage of unprofitable transactions in 4Q2015 and the first two months of 2016 breached 10% for the first time since 1Q2011.

The biggest loss in terms of absolute quan-tum in this period accrued to a second-floor unit at Joo Seng Warehouse, a freehold devel-opment on Upper Aljunied Link. No SSD was payable for the transaction. The seller bought the property in May 1996 for $1.65 million and sold it in January this year for $1.26 million ($614 psf), resulting in a loss of about $388,000. On the other hand, the seller would also have enjoyed rental income for nearly 20 years.

The unit seems to be vacant, with no sign-board seen outside. The previous tenant is said to be a beer trading company that has since re-located to Tat Ann Building on Jalan Pemimpin.

The next highest loss was traced to a ground floor unit at Block 53 Paya Ubi Industrial Park — a 60-year leasehold factory. The seller pur-chased the unit in March 2013 at $1.66 million and sold it in January this year for $1.36 mil-lion ($272 psf). This resulted in a loss of about

$373,000 after a 5% SSD. This unit seems vacant too, with the shutter down during office hours.

Occupying the third spot was a third-floor unit at KB Industrial Building — a 60-year leasehold factory on Kaki Bukit Road 1. The seller could have incurred a loss of more than $200,000, having purchased the unit at $1.76 million in December 1996 and sold it in Oc-

tober 2015 at $1.53 million ($337 psf). Once again, the property seems to have been sold with vacant possession. The previous tenant is understood to be an electronics firm that re-cently downsized and relocated to Brightway Building on Lorong Bakar Batu.

The islandwide vacancy rate for multiple-us-er factories was just shy of 13%, or 14.2 mil-

lion sq ft, in 4Q2015, according to the latest statistics by URA. Warehouses performed bet-ter, with a vacancy rate of 8.6%, or 8.2 mil-lion sq ft. Meanwhile, the Purchasing Manag-ers’ Index, the barometer for manufacturing activity, stood at 48.5 in February, reflecting the eighth month of contraction. It was also the lowest level seen since December 2012.

FROM PAGE EP1

Sold with an SSD of $73,200, the 15 Woodlands Loop unit was previously occupied by a catering company

No signboard is seen outside the unit at Joo Seng Ware-house. The seller incurred losses of about $388,000.

A vacant unit at Paya Ubi Industrial Park was also sold at a hefty loss

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THEEDGE SINGAPORE | MARCH 21, 2016 • EP7

THEEDGE P R O P E R T Y DEAL WATCH

Pasir Ris condo selling at below $800 psf| BY METTA LEE |

A 1,259 sq ft, three-bedroom unit at Livia has been listed on TheEdge-Property.com at $1 million, or $794 psf. The Edge Fair Value, a valuation tool on TheEdgeProperty.com, puts

the indicative value of the property at slight-ly below $900 psf.

The most recent transaction at Livia was in January this year when a 1,324 sq ft unit on a low floor changed hands for $1.15 million, or $869 psf. In December, a 1,259 sq ft mid-floor was transacted at $1.07 million, or $850 psf. The 724-unit condominium was launched in the sec-ond half of 2008 at an average price of $650 psf.

Livia is a 99-year-leasehold condominium located at Pasir Ris Grove. It was completed in 2011. Amenities in the area include White Sands Mall, Tampines Eco Trail and Pasir Ris Town Park. There are a number of schools with-in a 1km radius of the property, namely Cor-al Primary School, Elias Park Primary School, Meridian Primary School and Park View Pri-mary School.

Five 1,200 to 1,300 sq ft units at Livia

Historical transactions of units in 4Q2015 and January 2016 at Livia

Recent rental contracts for 1,200 to 1,300 sq ft units at Livia

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CONTRACT DATE FLOOR AREA (SQ FT) PRICE ($) PRICE ($ PSF)Jan 15, 2016 Low 1,324 1,150,000 869Dec 4, 2015 Mid 1,259 1,070,000 850Dec 1, 2015 Low 1,324 1,245,000 940Nov 20, 2015 Low 1,927 1,570,000 815Oct 26, 2015 Mid 883 838,000 949Oct 20, 2015 Low 1,410 1,220,000 865Oct 7, 2015 Mid 1,539 1,409,000 915

LEASE DATE MONTHLY RENT ($) ($ PSF)January 2016 2,900 2.30January 2016 2,700 2.20January 2016 2,700 2.20December 2015 3,100 2.50December 2015 2,800 2.20

*Low floors: L1 to 7, Mid floors: L8 to 15, High floors: L16 & above

The most recent transaction at Livia was in January this year when a 1,324 sq ft unit on a low floor changed hands for $1.15 millionwere let out in December 2015 and January

2016 at an average rent of $2,840, or $2.28 psf, per month. Based on the listing price of $1 million, the average rent translates into

a potential gross rental yield of 3.4%.

Scan the QR code for value deals at Livia and nearby projects

As TheEdgeProperty.com is not party to the con-tract between the client and agent, it is unable to verify information provided by the agent

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