Healthy demand for medical suites in Singapore, but analysts warn of risks

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While demand for medical suites has remained healthy, some property analysts said sales in the segment have been affected by the curbs on mortgages announced last June.

They cautioned that investors should be aware of the risks involved before buying medical units, which can cost at least S$2 million each.

Chief orthoptist at VisionLab Orthoptic Diagnostics, Winston Wong, left the Singapore National Eye Centre about two years ago for private practice.

He currently rents a medical unit at Orchard Medical Specialist Centre at Lucky Plaza, just next to Mount Elizabeth Hospital.

“Location is key, because most of the referrals need to be coming from other medical centres — Mount Elizabeth Hospital and Paragon medical centre.

“We also have some patients coming from Camden Medical Centre as well as the Gleneagles Hospital. It is a substantial part of the business — in fact 90 per cent of the patients that we see over here are through referrals from other ophthalmologists,” said Mr Wong.

In the last two to three years, investors have taken a shine to medical suites — buying units and renting them to healthcare professionals.

Based on recent transactions, a medical suite at Orchard Medical Specialists Centre can cost about S$4,000 per square foot.

Over at Vision Exchange at Jurong East, the average selling price was S$4,498 psf.

Its developer Sim Lian Group said the medical suites have seen healthy sales with 87 per cent of units launched in Phase 1 sold to date.

Vision Exchange has a total of 53 medical suites, but Sim Lian Group has declined to reveal how many units were launched in Phase 1.

Mr Kuik Sing Beng, executive director of Sim Lian Group, said: “The medical suites at Vision Exchange cater primarily to the needs of residents living in the area and the working crowd as more businesses move to Jurong Gateway, which will be Singapore’s largest business hub outside the city.”

Mary Sai, executive director of Investment and Capital Markets at Knight Frank, said: “We have seen some of the medical suites transactions over the past few years on average trending up about 10 per cent per annum.

“Of course we have seen some have hit as high as S$7,000 plus psf, we are talking about Gleneagles Hospital, Mount Elizabeth Hospital, some of these medical suites that are located within hospital grounds — that type of location will command a premium.”

Already, medical suites are more expensive than other types of commercial property because they are fitted with customised features, which could include waste disposal system and wider corridors.

According to consultancy firm Knight Frank, the average monthly rental for medical suites in prime areas like Orchard Road is about S$15 to S$18 psf.

Meanwhile, rental in the city fringe or suburban areas is around S$10 psf.

Ku Swee Yong, CEO of Century 21 Singapore, said: “Today’s yield look like they could be at 3 to 3.5 per cent level, but including the vacancy period, I think at best, your yields are 2 to 2.5 per cent.

“The current pricing levels are definitely too high for the expected rental returns that they might get, and that is provided that on the day of TOP (Temporary Occupation Permit) and completion of the property, you can actually find a tenant.”

Medical suites near reputable hospitals tend to enjoy higher occupancy rate, while those in the central business district could face keener competition for tenants, as doctors could choose to set up their clinic in any office building in the area, and probably at a lower cost.

Some analysts said investors should note that while medical tourism presents good opportunities, that group of patients tend to prefer private hospitals.

Therefore, medical suites that are located near private hospitals will be better positioned to serve their needs.

Source : Channel News Asia | May 12, 2014

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About thomasdinnocenzi

Thomas D'Innocenzi is a highly accomplished, results-focused senior international executive with extensive experience in global sourcing and market development worldwide to meet evolving business needs. Tom has proven ability in implementing and managing profitable global sourcing operations worldwide. Extensive experience in international market development operations to accommodate rapid growth. Skilled in building top-performing teams, benchmarking performance, and restricting organizations to improve efficiency, productivity, and profitability. Experienced transition leader and change agent. As principal of Nova Advisors, LLC I’ve assembled an exemplary team that brings with them the knowledge and experience gained from starting up a Global Sourcing program with multiple Fortune 500 companies as well as the largest supplier network throughout the Asia-Pacific region. We have experience and expertise in more than a thousand medical and pharmaceutical products in manufacturing and sourcing at the best value. The right product, the right price point and the right branding fueled these successes that resulted in double-digit growth for top line sales and bottom line net margins for our customers. What sets us apart: • Our reach includes a large network of suppliers & manufacturers spanning 13 countries in Asia-Pacific region • We understand the manufacturing process and the business of the supplier and the buyer • Our company culture is based on quality assurance and our process is based on local quality control Our commitment is to be your partner offering the best products and services at the lowest cost. Contact me to discuss how we can make the global marketplace work for you. thomas@novaadvisors.com In addition, I am open to discussing opportunities in global sourcing, international marketing & sales, logistics and medical/pharma in Thailand, Vietnam, Malaysia, Philippines & Japan. Aside from my work I enjoy piano, astronomy, physics, and assisting my daughters with their studies. SPECIALTIES: Global Sourcing, Supply Chain Management, Business Development, Marketing, Logistics, Global Networking, Market Development, Healthcare Solutions, Pharmaceuticals, Medical Devices, Technology, Asia, Southeast Asia, US and Canada
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