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Consider The Rentability Of An Affordable
Commercial Property
THE STAR:
By Housing Investments
By Thean Lee Cheng | Oct 22, 2011
Although global sentiments remain weak for the moment, it is business as usual as developers
move ahead with their property launches. In the Klang Valley in the next couple of months
and even into the new year, developers will be offering apartments with small built-up areas.
These are essentially serviced apartments but developers prefer to call them by various other
names.
5. Some of these names include the following - versatile office suites, small office home office
(or Soho), lifestyle suites, small office versatile office or office suites. Whatever names they
are called, all of them share several features.
These properties are built on commercial titles, not residential titles. Because they are on land
with commercial title, utility charges will be 25% to 30% higher than if they were built on
residential land. And because they are located on commercial land, developers offer that
“office” component, hence the name small office, home office. Maintenance charges will also
be higher compared with projects on residential titles.
A second feature they share is the built-up area. Most of these units are sized between 400sq
ft and 600sq ft. Some may be as large as 800sq ft or even larger. Generally, however, they
tend to hover around 500sq ft. Most of them will be one-room or studio apartments. Those
with larger built-up areas may have two rooms.
One may ask, if they are so small, how can it be a home and an office at the same time? This
goes back to the land title again.
The built-up of these properties are cut rather small because of high land cost. If the
developer were to offer a three-bedroom apartment of about 1,200sq ft, these properties may
be out of the reach of many. As it is, it is the smaller units which tend to sell faster.
A close scrutiny will show that most of these units are located in pretty urban or commercial
areas which means there are conveniences close by. In the case of Section 13, Petaling Jaya,
properties like Centrestage, which is currently being constructed, will be close to the Section
14 commercial area.
But besides Section 14, there are also the commercial areas of Section 17, Section 19 and
SEA Park within a 10km radius.
The project will, therefore, leverage on the old commercial areas in the vicinity. Two blocks
are being developed by Tetap Tiara Sdn Bhd, the developer who built the Jaya One
commercial blocks located at the Jalan University-Jalan 13/6 corner. Other serviced
apartment projects are being planned in Section 13.
Over in Ampang, Kuala Lumpur, serviced apartment projects are being planned in and
around that area. The projects will leverage on the commercial areas in that locality.
Developers are also featuring its proximity to the Petronas Twin Towers as a selling point.
Serviced apartments are also being launched in relatively new areas in and around the Klang
Valley. This includes Empire City by the Subang-based Empire group. Empire City is located
on 25 acres of commercial land opposite Damansara Perdana. Blocks of office towers,
serviced apartments and a hotel will be located along the Lebuhraya Damansara-Puchong.
In Sri Damansara, TA Global Bhd will be having serviced apartments too. There will be other
similar projects in Kota Damansara.
The proliferation of these 500 sq ft apartments is also as a result of the financial crisis.
Developers have learned that smaller units are easier to rent and sell than a 2,500 sq ft unit.
The many empty condominiums around the Petronas Twin Towers is an example. Most of
6. the units there are 2,000sq ft and above. Now those who are planning projects there are
building units under 2,000sq ft. By cutting the size small, these smaller units are also more
affordable.
Here then is the catch. Buyers, fearing that property prices may go up further, are going for
these smaller units with the hope to either flip sell them after completion, or to rent them out.
But while developers are able to make their projects affordable, can they make them
rentable?
Most of these small units are priced around RM500,000. At that price, they have tempted
many into signing on the dotted line. But the buyer must also consider the fact that instead of
one big 2,500sq ft unit, there are now five small units, which means there are now a large
number of small apartments.
The density has increased. The higher the density, the longer it will take to rent out that unit,
or to sell later on. Instead of one owner offering to rent or sell his 2,500 sq ft unit, a buyer is
now competing with four others to rent, or to sell, their units.
So do not make a decision because you can afford that RM500,000 unit, but consider
rentability and other factors that contribute to that rentability, like accessibility and the
availability of basic amenities.
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