The Tong Building at the junction of Orchard Road and Mount Elizabeth
An Orchard Road office floor has sold to a local healthcare group for S$31.3 million ($24 million), deal broker Savills confirmed Friday, as Singapore’s strata market shows signs of picking up amid a broader commercial real estate recovery.
Parkway Hospitals bought the single floor at the Tong Building and secured a rare medical change-of-use approval, Savills said in a release. The acquisition is expected to benefit from Orchard Road’s growing importance as a medical hub, said Yap Hui Yee, the consultancy’s executive director of investment sales and capital markets, as the famed shopping strip continues to be a hotspot for conversions to higher-value uses.
“There are fewer than 2,000 medical suites in Singapore, with approximately 50 percent located within hospital-supported buildings,” Yap said. “This leaves around 1,000 medical units available on the open market, highlighting the scarcity and value of such medical spaces.”
The sale of the Tong Building’s sixth storey by Nanyang Holdings was first reported by Bloomberg on Tuesday, with the purchase price for the space’s 6,867 square feet (638 square metres) of floor area setting a new high of S$4,562 per square foot for the city’s strata office market.
Rare Commodities
Sales of full office floors are comparatively rare in Southeast Asia’s best-known retail corridor, and the market has been further constricted by the government’s decision in 2022 to ban development of new strata commercial properties in Singapore’s top business hubs, including Orchard Road.
Yap Hui Yee, executive director of investment sales and capital markets at Savills Singapore
The previous major strata deal at the Tong Building, which sits at the junction of Orchard Road and Mount Elizabeth, was in 2017 when local property firm Top Global Ltd purchased the 6,103 square foot 18th storey for S$23.3 million.
“The building’s proximity to Mount Elizabeth Hospital further boosts its strategic value,” Yap said.
The latest trade at the Orchard Road tower dethroned the city’s reigning champ among strata office deals, the S$4,325 per square foot sale of the top floor at the 20-storey Solitaire on Cecil, an under-construction project of TE Capital and LaSalle Investment Management in the central business district.
The Orchard area also played host to the biggest office deal announced in the city-state last year, TE Capital and LaSalle’s acquisition of the VisionCrest Commercial building for S$450 million ($331 million). The partners are upgrading the asset to bolster its green credentials.
The government is encouraging redevelopment and rejuvenation along Orchard Road as part of plans to transform the area into a “green oasis in the city” through a programme scheduled for completion in 2025.
End Users First in Line
A pair of big-ticket deals jolted Singapore’s slumbering market in the second quarter, led by Mapletree Pan Asia Commercial Trust’s sale of the Mapletree Anson office tower in the Tanjong Pagar area to regional private equity titan PAG for S$775 million ($574 million) ― a deal ranking as the city’s largest office transaction in two years.
In the other transaction, City Developments Ltd bought out the Delfi Orchard tower for S$439 million, with the Singaporean giant believed to be planning to combine the mixed residential and commercial complex with the neighbouring Orchard Hotel Singapore to create a residential, commercial and hotel project.
With strata offices in the city-state trading at 2.5 to 3 percent net yields, single floors for sale remain less than compelling for pure investors, according to Jeremy Lake, managing director for investment sales and capital markets at Savills Singapore.
“The motivation to buy for an end user is stronger than it is for an investor at this point in time,” Lake said at last week’s Mingtiandi Singapore Forum. “Things can change.”
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