Have you ever wondered how the clinics that private specialists operate out of came about? They are definitely not government-sponsored like public hospitals and polyclinics, so who do they belong to?
What are Medical Suites?
For the uninitiated, there exists a special class of commercial real estate in Singapore known as Medical Suites that is reserved exclusively for the provision of health and medical services. However, due to the rarity of such units, transactions are scarce and not many people (including real estate agents) are well-informed about this specific class of property. Most people would assume that these are the retail or industrial type of commercial properties, and for a good reason.
They share similar characteristics – Additional Buyer’s Stamp Duty (ABSD) and Seller’s Stamp Duty (SSD) do not apply. Only Buyer’s Stamp Duty (BSD) on commercial properties would apply. The unique selling point of medical suites is primarily the tenant profile. Tenants will typically be private healthcare practices and medical clinics that will likely sign long-term leases due to their business requirements, which would help to ensure a stable stream of rental income. Such rental contracts usually include floating rates, which means rental will be adjusted to market rate periodically.
Medical suites are typically only sold to medical practitioners, but a small portion of these can be purchased by private owners as investment properties. This leads us to recall how we sold one such Medical Suite in Novena Medical Centre earlier this year.
About The Unit
The Medical Suite that we were contacted to sell was located in Novena Medical Centre, part of the upcoming world-class integrated medical hub called Health City Novena. Located right above Novena MRT station, the 904 Sqft unit was a 99-year leasehold property with 80 years balance lease. It is also a rare high-floor unit that is close to the lift lobby for maximum footfall and visibility. A huge advantage was that it is integrated with Square 2 Shopping Mall, which is even rarer to find.
Furthermore, Tan Tock Seng Hospital is located right across the street from Novena Medical Centre. What this means for investors is that the close proximity of a hospital, with a good mix of specialists, would make a medical suite more appealing and leasable to tenants.
The owner originally bought it as an investment property under a GST-registered entity, but was looking to exit. As mentioned earlier, commercial properties like medical suites are not subjected to ABSD. Buyers can purchase and exit at any time as there is no SSD involved either – they can technically buy today and sell tomorrow if they wish to. The only stamp duty to take note of is the BSD for commercial properties. And since the owner is GST-registered, GST would be applicable for the purchase, but this can be claimed back if the buyer purchases under a GST-registered entity as well.
The unit was also tenanted by a clinic, which had signed a long-term tenancy agreement for six years, with under two years left on the lease. This meant that the buyer would not be able to purchase the unit for their own use immediately.
The Process
Based on these factors, we angled the marketing towards investors and highlighted the unique selling points in our Signature Home Tour Video. Looking back at the sale, the biggest challenge was that medical suites were not a very notable or well-known investment tool even in the commercial property sphere. Therefore, it became even more crucial for us to educate potential investors and help them understand that by investing in a medical suite, they are venturing into two industries simultaneously – real estate and the healthcare industry.
While the real estate industry is volatile and subjected to both micro and macro-concerns, the healthcare industry is resilient and robust. Private healthcare is a necessity for our infrastructure, and with Singapore’s ageing population, demand for healthcare services will only increase from here. Besides, although not as aggressive as other commercial properties such as shophouses, medical suites command a stable tenant pool – a huge advantage especially for investors, who are our main target audience.
With that said, it was still a niche asset class targeting a very niche group of buyers. The volume of transactions was extremely low and the last transaction was in the early 2010s, which made it even more challenging to market. We received very few enquiries after the listing went up, which was within expectations.
With the help of creative social media marketing and our Signature Home Tour Video, we conducted several viewings over the next few months.
The Deal
The eventual buyer was a doctor buying the medical suite for his son who was still in medical school. He liked that the listing had a current tenancy to help cover his investment costs and had the potential to continue renting out until his son was ready to set up his practice. Furthermore, with the looming GST increase plus capital appreciation of the unit amid overcapacity woes and concerns about a possible Covid-19 surge, we conveyed that now was the best time to buy.
While every deal has a certain degree of luck involved, our team reduced the reliance on luck by working smartly. Knowing who our target audience was, we were able to zoom in on this niche group of potential buyers and this also allowed us to utilise effective social media marketing strategies to push the property up.
This deal has reaffirmed us of the power of creative social media marketing as well as follow-ups with buyers and co-brokers to garner interest in the property.
Meet the Agents
This sale was conducted by Patricia Kong and Shawn Tay from our PropertyLimBrothers Inside Sales Team. Patricia, a seasoned professional in the commercial space, is presently looking to develop herself even further in the residential sector. Shawn, who enjoys the dynamic and flexible nature of real estate, shares the same grit in exploring different areas and improving himself as a salesperson.
If you have a property that you want to exit from or are looking to expand your property portfolio, feel free to contact us here. PropertyLimBrothers, always happy to show you the place.
