Freehold, B2 Industrial Properties: Overlooked?
Updated: Nov 17, 2020
Speaking with most Singaporeans, most will agree with me that purchasing real estate is the best source for accumulating wealth, outside of other investments that require active management.
Indeed, managing your rental property still takes a lot of work. However, this is considered to be less intensive as compared to your own business or stock trading/picking.
This article will mainly focus on another form of real estate which holds a lot of promise but might have been overlooked.
I’ll skip most of the technicalities, e.g. stamp duties, GST or no GST, and focus more on the potential of freehold, B2 industrial properties.
What’s Next for Residential Property Buyers?
Most residential property buyers will soon run into a pressing issue.
High ABSD costs.
There are different remedies to these stamp duties, but they can be a hindrance in the future if you do not plan carefully.
For example, buying under trust is a common approach for property investors who have a high property count.
However, the purchase will be needed to be made in full cash. Also, purchasing a private residential property might be challenging to dispose of should your beneficiary be intending to purchase public housing. Do check out this article for more information.
First Property for Investors?
Generally, first-time property investors should avoid investing in commercial properties as it is more complicated than purchasing residential properties.
However, it provides great opportunities as a capital investment due to the low-price quantum. However, do keep in mind that Seller Stamp Duties apply for the first three years.
Shophouses along Dalhousie Lane. I am currently marketing some of these shophouses, contact me for more information!
Shophouses do provide an extremely good store of value for investors, take a look at the following data for commercial, conserved shophouses along Arab Street.
Take a look at transaction dates, 02 March 2020, and 28 September 2018. Within a short span of 1 year 6 months, the investor for 78 Arab Street made a profit of $200k!
Another example is for 68 Arab Street, 17 January 2019, and 12 May 2017. Within 1 year and 8 months, the investor made a shocking profit of $980k!
Investing in a commercial conserved shophouse is that these properties have the intrinsic value of scarcity.
Also, the following points, be it favorable or not, do matter.
As a business operator, to exercise your discretion without reporting to MCSTs
Greater flexibility to rental negotiation
In my opinion, investing in shophouses is a fantastic store of value, but the high entry costs will scare away most investors.
Relying just on the scarcity value is a dangerous game to play. Outside of looking at capital appreciation, rental yield is equally important. A reliable tenant to the property will contribute strongly to the asking price.
Conserved shophouses take a lot of sunken costs for maintenance and property tax. It might take a while before an opportunity to flip the property at a good price. This is the reason why investors who are not well prepared will face cash flow problems and eventually have to release it through a bank sale.
Freehold Industrial Properties
Freehold industrial properties are properties that I feel technically, have a lower barrier to entry. These properties can be much more affordable as there are unit prices starting from as low as $0.5 million.
However, industrial properties have much more specific requirements as there are a wide variety of uses for it. Good units typically are in high demand but do exercise caution as bad picks can go for months on the market without viewings.
Factors to consider when choosing a good industrial property
Ease of access (Ground floor, ramp up factory, flatted factory)
Which floor is it on? Higher units are more affordable
Land rent? (JTC Properties)
Freehold, B2 Industrial Properties are Better Than Conserved Shophouses
Little known by most investors is a property type called freehold, B2 industrial properties. These are properties that are even more scarce than conservation shophouses.
Kim Chuan Terrace
Mandai Industrial Estate
These B2 freehold properties are such in low supply that the transaction volume is typically averaging from 1-2 every year. You might argue that there is poor demand for such properties, but is that truly so?
Both Kim Chuan Terrace and Mandai Industrial Estate are operating close to the JTC food zones. Subject to approval, these properties can be converted for food factory use. An investor can come in and rebuilt/repurpose it for food factory strata unit sales.
One such example of recent conversion is Citrine Foodland @ 33 Kim Chuan, which had recently been approved for food factory use.
This leads to another question, is the demand for food factories in Singapore healthy? This article from the Straits Times dated 31 May 2019 provides an optimistic outlook.
The increase in e-commerce and food delivery services generates an increasing need for central kitchens.
Although conservation shophouses provide a good store of capital value, I feel that just relying on its scarcity value should not be the driving force of your real estate investments. Be prepared to have good cash flow when aiming for one.
The fundamentals of real estate investing should not be dismissed. A good investment I feel at this point should be towards B2 Industrial, freehold properties.
These properties are less in supply as compared to conservation shophouses. Furthermore, there is an additional demand for food factories, which are only located in B2 Industrial land use areas.
Kim Chuan Terrace and Mandai Industrial Estate are two areas that hold the B2, Freehold land-use status. Well-heeled investors should turn their eyes towards properties located here to evaluate their potential.
I have property and land available for sale at the above-mentioned sites in Mandai Industrial Estate and Kim Chuan Terrace! Contact me (Joshua) at +65 96329840 or send your queries to firstname.lastname@example.org! I love to connect with like-minded individuals!
The views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author’s employer, organization, committee, or other group or individual. The author does not accept any responsibility whatsoever for any harm or loss arising from accessing or relying on information contained in this blog post.