A $35 million Hong Kong Street shophouse with hotel and restaurant tenants is on the market

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The 2023 Singapore Grand Prix benefited not only the luxury hotels but also the budget ones as well. In Hongkong Street, many boutique hotels also had high occupancy and some were running at full capacity including Fragrance Hotel Riverside at 20 Hongkong Street, Bluewaters Pods Hotel located at 38 Hongkong Street, Hotel Nuve Elements located at 41 Hongkong Street and Hotel Bencoolen located at 47 Hongkong Street.

Restaurants and bars on Hongkong Street include a cocktail bar on the 28th floor of Hongkong Street (voted one of Asia’s 50 top bars of 2023), Greek restaurant Vios by Blu Kouzina on 31 Hongkong Street, Italian restaurant Amo located at 33 Hongkong Street, Korean bistro bar Soollounge2 on 38 Hongkong Street and Japanese restaurant Mizume located at 41 Hongkong Street.

It is located just off New Bridge Road, Hongkong Street is just three minutes away to Clarke Quay MRT station and Clarke Quay Central Mall. Then, you’re an easy stroll to the affluent bars, restaurants and clubs in Clarke Quay, Robertson Quay and Boat Quay along the Singapore River. Marina Bay, the Core CBD, Chinatown and Marina Bay are also nearby.

“Hotels located on Hongkong Street are extremely popular with American and European travelers who are looking for to experience living in a historical zone in the middle of Clarke Quay,” says Sammi Lim, founder and director of Brilliance Capital.

From January through July, the average rate for rooms has increased by 25.2% y-o-y to $275.21 and the average occupancy rate of 80.09%, up 10.7% per year, as per Singapore Tourism Board statistics. Hotel rates across all categories have increased in following the Covid revival.

Since since then, there’s been increasing interest from investors in the hospitality industry as per Briilliance Capital’s Lim. The owners of the shophouse at 41 Hongkong Street are hoping to draw some of this interest from investors and put the property for sale. The sale will be through the expression of interest (EOI) and Brilliance Capital as the exclusive marketing agent. The EOI will close on November 9.

Lower Circular Secondary Settlement
Hongkong Street, off New Bridge Road is situated inside New Bridge Road is located within the Upper Circular Conservation Area. It is regarded as an additional Settlement which is comparable with Balestier, Beach Road, Joo Chiat and Geylang -which was established in the period between 1900 and 1960 when the city’s centre grew to the west.

In contrast to the shophouses in those Historic Districts, which have strict conservation regulations The shophouses in Secondary Settlements have greater redevelopment potential, for instance, adding an extension of six stories to the rear, insofar as the front facade remains.

The owners at 41 Hongkong Street purchased the property in the past decade it was used by a dry goods store as well as the higher floors in the shophouse with four levels were let to a hostel for backpackers. operator.

However, in the year 2016 the owners opted to go through an overhaul of $5 million which lasted for three years. This included adding a six-storey rear extension as well as installing an elevator to each floor. The property is designated for commercial use and has an area ratio of 4.2 according to the Master Plan 2019. The total constructed-up area is 8,872 square feet.

Approval granted for Hotel, F&B operations
A few years back, the city obtained approval for hotel use on upper floors, and F&B usage on ground level. “Hotel licenses are very restricted and various restrictions are put at the sites,” says Lim. “Hence, properties with a hotel license are highly valuable.”

The Temporary Occupation Permit was obtained in October of 2019. The owners also extended the lease with a new 99 years as of December 2018. Upper floors let to the hotel with 30 rooms Nuve Elements, while Japanese restaurant Mizume was able to take over the ground floor.

The fifth floor is home to the reception of the hotel, which has an open-air terrace that has been transformed into an indoor nursery where plants are sold. The rooftop terrace on the floor on which it is transformed into a spa complete with a Jacuzzi for guests of the hotel to take in the city view.

41 Hongkong Street is on the market for $33 million, which is equivalent to $3,945 per square foot based on the constructed area.

After deducting the cost of F&B room of 1,051 square feet (excluding any common area) on the first floor, estimated at $5,800 per square foot or the total amount of $6.1 million Brilliance Capital’s Lim estimates the cost of the hotel component located at 41 Hongkong Street to be about $963,000 for each key.

Revitalization on Hongkong Street

The revival of Hongkong Street began a decade ago, when a minimum of 13 shophouses were sold between the years 2010 and 2011, according to Lim. Another wave occurred in the year 2018, when at least four shops were sold: 43 Hongkong Street for $7 million in March 2018. This was then six Hongkong Street for $13.75 million (May 2018) 9, Hongkong Street for $18.8 million (June 2018) and 28 Hongkong Street for $9 million (October 2018).

This year, additional shops on Hongkong Street have been put up for sale. In April, a shophouse located at 18, Hongkong Street was sold for $9.6 million. The property is situated on a 1,884 square foot site with 99 years of lease beginning January 1st, 1951. This means that the property has a remaining 27 years on the lease. The walk-up property is a gross surface area of 507 4 square feet and brings the total cost to $1,892 per sq ft.

In the 18th floor of Hongkong Street, City Backpackers @ Clarke Quay leased the shophouse for seven years. The lease includes permission for the hostel’s planning operation end in 2024. It is possible that the property could be transformed to create a brand new structure that has a six-storey rear extension according to Krystal Khor director of Mondania who brokered the deal.

Price difference between leasehold and freehold
17. Hongkong Street was put up for sale on September 6 by CBRE. The shophouse is situated on land of 1,793 square feet and has a built-up total of 7,950 square feet. In the URA Master Plan 2019, the property is classified as commercial property with the plot ratio being 4.2.

Its ground level of the 5-storey structure located at 17 Hongkong Street has been leased to Japanese Omakase restaurant Kappo Shunsui. Meanwhile, the upper floors are leased as offices to companies that deal in a variety of trades. The property located at 17 Hongkong Street is on the market for $47.5 million, which amounts to $5,975 per square foot based on floor space.

With the high cost of the freehold property, “a price below $4,000 for an almost fresh 99 year leasehold property located in the CBD region is deemed attractive” According to the Brilliance Capital’s Lim.

The shophouse located at 41 Hongkong Street is likely to draw hotel and shophouse investors. Lim believes there is a chance of family-owned offices being a part of the mix as well. It could be a possibility to hold the property as a long-term investment and possibly turning the building into one office to use in the near future.

Lim also believes in the return of investors who had been withdrawn from her Singapore property market in the last three years. “They thought that prices had been raised to unreasonably high levels for some shops, and we now know why,” she says. Lim is referring to the scandal of money laundering this month, which saw 10 suspects who were originally originated from Fujian, China, arrested in Singapore and $1.8 billion in assets which included high-priced real estate confiscated.

“These real buyers are returning to the market and as sellers become more real in their prices, we believe that the cost gap can be reduced,” Lim adds.