Property investors turn to medical suites as alternative investment

Occupancy rate jumped to 84.6%.

Singapore’s reputation as a safe medical hub bodes well for the local property market which has been badly hit by a slew of cooling measures. But the demand is not just from medical professionals but also from staunch property investors who are eyeing big gains from this alternative asset class.

According to Grace Ng, Deputy Managing Director at Colliers International, Singapore’s ageing population adds lustre to the medical suites sector.

“Demand from doctors (owner occupiers) comes from those who may be renting premises like Paragon/Camden, those who want to expand from smaller to bigger premises or set-up group practice, and those aspiring public hospital doctors who want to set up their own practice,” said Ng.

Meanwhile, interest from property investors can be attributed to scarcity and potential capital appreciation, added Ng.

This was echoed by Mary Sai, executive director for Investment & Capital Transactions at Knight Frank, who said that unlike residential properties, medical suites are commercial properties that are not touched by cooling measures.

She also cited Singapore’s growing medical tourism as another factor which led to the rise of this asset class. The total stock of medical suites in Singapore as of 1Q 2014 is estimated to be close to 1,600 units, according to data obtained from Colliers International.

Additionally, the upcoming supply of new medical suites from 2Q 2014 to 2018 is estimated to be about 560 units. Some upcoming projects include the Connexion and Farrer Square Medical Suites at the Farrer Park area, Vision Exchange in the Jurong East area as well as Mediplex @ SBF Centre at Robinson area.

Currently, there average islandwide occupancy rate of medical suites is estimated at 84.6%. This is up from about 81.3% in 1Q 2013.

The average transacted prices of some major medical suites projects last year range between $3,670 psf and $7,100 psf.

“Prices of medical suites have been rising steadily with the launches of new developments alongside the prime properties in recent years,” said Sai.

Recently, Far East Orchard’s Mediplex@SBF has sold 27 of its 48 suites. Prices for medical suites, which are located at levels 3 to 5, start from SGD3, 800 psf.

Maybank Kim Eng noted that this represents a favorable price, although the SBF Centre is not within walking distance to any medical hospital.

“Previous 2012 transactions at Parkway Novena (Mount E Novena), Novena Medical Centre and Novena Specialist Centre were contracted at SGD3,700-SGD4,201 psf. FEOR believes that medical services have yet to make inroads into this high-density urban centre,” said Maybank.