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Developer will sell one tower entirely as serviced residences

FAR East Organization says it will launch Orchard Scotts soon, and one tower will be entirely sold as serviced residences.

Far East has not released details on the launch but says that it intends to blend private residences and serviced suites with hotel-styled luxury for the first tower.

The news comes shortly after City Developments Ltd launched St Regis Residences, which also offers hotel-style services, and achieved good take-up.

It may be too early to say if this is the start of a trend but serviced residences will certainly be more attractive to buyers in terms of leasing and investment potential and so other developers are likely to follow suit.

Tay Huey Ying, associate director of research and consultancy at Colliers International, says it would be a ‘good trend’ as it ‘take the hassle away from property investors’.

‘These investors will not need to worry about management and maintenance issues,’ she added.

Far East may also offer leasing services or guaranteed rental returns. On this, Ms Tay says the concept is not new, and is usually done without fanfare.

She does not think the trend will develop along the lines of ‘condotels’ which are residential apartments leased out on a short-term basis, as there are currently restrictions on this.

‘Mid- to long-term leases should not be an issue,’ she said. A typical lease is about two to three years, she added.

Jones Lang LaSalle regional director and head of investments (capital markets) Lui Seng Fatt notes that rental yields for serviced residences could indeed be more attractive, at around 4.5 per cent.

Already, he says that non-serviced residences like Wing Tai’s Light @ Cairnhill are fetching rental yields of 4 per cent. And the actual rental could be twice as much, at about $10 psf per month. ‘There will be investors who are happy to park their money and wait for capital gain,’ he said.

Still, Mr Lui says that not all developments are good candidates for becoming serviced residences. As a rough guide, he says that properties within one kilometre of the Orchard Road/Scotts Road junction are more likely candidates.

Highlighting that serviced residences are not common here, Mr Lui added: ‘In the past, it was difficult in terms of management.’ In this light, Far East, which already owns hotels and serviced apartments, could be at an advantage as it will have economies of scale.

Mr Lui expects response for Orchard Scotts to be good. Earlier estimates put the average price at around $1,000 psf but this could now be as high as $1,500.

Source : Business Times - 20 Jun 2006