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 international consultant with extensive experience in global sourcing and business development worldwide to meet evolving business needs. Tom has proven ability in implementing and managing profitable global marketing and sourcing operations. He has extensive experience in international business development to accommodate rapid growth. Skilled in building top-performing teams, bench-marking performance, and developing organizations to improve efficiency, productivity, and profitability. Experienced transition leader and change agent. Tom founded Nova Advisors with the mission of providing expert Global Business Development consulting services for companies seeking to expand their market share as an independent consultant. Tom has a network of experts and advisors throughout the Asia-Pacific region and North America. His expertise includes business development, global sourcing, manufacturing, commodities, logistics, QA/QC, FDA, regulatory compliance, sustainability, and supply chain optimization. Tom is experienced in the medical device, apparel, consumer goods and technology services verticals helping companies advance their global sourcing capabilities and develop new markets through a local and sustained approach. Located in SE Asia and the United States, Tom expands market reach to drive sales. His global sourcing strategy includes directly negotiating with commodity suppliers, supply chain networks and distributors for optimal terms based on his expertise and first-hand knowledge of the players. Contact Tom to use his consulting service to increase your global market and make global sourcing profitable for you in the Asia Pacific Region and the United States. http://www.NovaAdvisors.com thomas@NovaAdvisors.com USA Direct: +1.904.479.3600 SINGAPORE: +65.6818.6396 THAILAND: +662.207.9269
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