Where are the tenants?

By Michael Lim

/ The Edge Property |

February 4, 2017 8:00 AM SGT

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Icon @ Pasir Panjang is a boutique freehold five-storey development with 31 strata shop units and 18 apartments

Two years on, strata shops at mixed-use developments Icon @ Pasir Panjang and Viva Vista are half filled

It has been almost 2½ years since the completion of Viva Vista. Even though it is located on South Buona Vista Road near the junction with Pasir Panjang Road and in the heart of an established residential neighbourhood, the owners of strata shops in the mixed-use development are still struggling to find tenants.

Viva Vista is a redevelopment of The Village Centre at Pasir Panjang. The freehold site at 3 South Buona Vista Road was purchased by listed property group Oxley Holdings in 2009. Launched in 2010, the mixeduse development was fully sold on the first day of preview.

Viva Vista has 144 residential units and 106 strata commercial units

The triangular shaped site with a gross floor area of 97,022 sq ft has been redeveloped into a five-storey project with 144 apartments on the second to fifth levels and 106 strata shops on the first and basement levels. The project was completed in September 2014.

Of the 106 strata shops at Viva Vista, 41 are located on the first level and 65 on the basement level. Today, 27 of the 41 shops on the first level have been taken up. The single-largest occupier is Food Joy minimart, which is owned and operated by Food Joy Pte Ltd. The company also distributes chocolate bars such as Bounty, Mars and Snickers.

Owner-occupiers versus investors

The minimart occupies five adjoining shop units fronting South Buona Vista Road while the remaining three units owned by Food Joy Pte Ltd have been leased to maid agency Rooftop Recruiters, a traditional Chinese medicine practitioner and a trading company. The three units that were leased range in size from 172 to 215 sq ft. They were leased at $1,600 to $1,900 per month, which is 20% to 24% lower than the asking rents of $2,000 to $2,500 about 18 months ago, notes Sam Tng, deputy director of OrangeTee, the marketing agent for the units purchased by Food Joy.

Food Joy minimart occupies five shop units and it opened six months ago

Existing retail tenants on the first level of Viva Vista include The Drone Shop, which now occupies two units; a Pet Lovers’ Centre, which occupies four adjoining units; Tiong Hoe Tailor; and Sow & Reap café. New tenants on the first level are Food Joy minimart, Rooftop Recruiters, Petite Petale florist, Vista Medical Centre and Zig hair salon.

The Village Centre used to house a Cold Storage supermarket, F&B outlets and shops, recounts OrangeTee’s Tng. “Ideally, Viva Vista ought to be positioned as a neighbourhood mall with a supermarket, F&B outlets and convenience stores to cater for the residents in the area,” he says.

The challenge with a strata-titled development, however, is that the units have been carved up and sold to individual investors.

Getting the individual owners to agree on a rental rate is the biggest hurdle when it comes to securing a tenant that requires a large space involving several units, says Tng. Hence, the difficulty in getting anchor tenants such as a supermarket unless there is an owner of multiple units within the development.

This was the case for Food Joy Pte Ltd, which decided to operate its own minimart there after failing to find tenants or to sell the eight adjoining units at Viva Vista at the desired asking price of $3,600 to $3,800 psf in the last two years since the project was first completed, says Tng.

Plummeting rents

Units at Viva Vista that do not have road frontage have been rented for as low as $700 to $900 a month, compared with the initial asking rent of $1,000 to $1,200 more than two years ago.

The other challenge at Viva Vista is that the retail units are not designed for F&B operations. The owners can lease their units to a café, dessert shop or juice bar, but not to full-fledged restaurants.

This laundry shop was only one of two units open on a Thursday afternoon in the basement of Viva Vista

On the basement level of Viva Vista, 18 of the 65 units have been leased so far. They include a launderette called the Laundry Club, liquor importer ICM, car dealership Stellar Motors, The Wicked Cream dessert shop and video production house Blackhole Conceptz. Most of the businesses there are not even open every day of the week, and many shops still bear the “For Sale/For Rent” sign.

According to Tng, some of the investors of units on the basement level have reduced their asking rents from $1,000 a month to just $300 a month for tenants who use the premises as storage space or as a small office. “There is no actual retail trade, and it becomes a vicious circle,” he says. “When people visit the basement level and see the closed or empty shops, they are not likely to revisit the place.”

In an attempt to get owners to open their shops more regularly and to draw people to the basement level, some of the agents got together with a pop-up operator to organise a month-long bazaar there, says T J Neo, senior marketing consultant at Huttons Asia, who is marketing several units at Viva Vista on behalf of the landlords. However, the response was lukewarm and not all unit owners were keen, he adds.

Owners need to collaborate Neo reckons the unit owners at Viva Vista need to work together to position the mall as the “go-to place” for a particular trade — either a music school or an enrichment centre. He cites a number of strata shopping malls that have positioned themselves successfully as a niche mall, such as Queensway Shopping Centre for sports-related goods and Sim Lim Square for electronic products.

“The unit owners at Viva Vista need to realise that their individual units are small and they would need to cooperate and amalgamate to form bigger units to attract tenants. Most important of all, they need to agree on the per square foot rental rate,” he says. “We have had tenants who were keen to lease a bigger space, but the individual owners could not agree on the rent.”

Icon @ Pasir Panjang is a boutique freehold five-storey development with 31 strata shop units and 18 apartments

Adjacent to Viva Vista is Icon @ Pasir Panjang, a freehold five-storey mixed-use development with 31 strata shop units on the first two levels and 18 apartments on the three upper floors. Developed by listed property company Fragrance Group, the project was completed in September 2015. It is a redevelopment of 14 two-storey shophouses located on Pasir Panjang Road that Fragrance acquired in 2009 for $23 million.

Of the 15 ground-floor shop units at Icon @ Pasir Panjang, five are now occupied. There is a Killiney Kopitiam, The Pirate Sheep restaurant and bar, Jurong Provision Store, Nail Studio Libra and Sawasdee Artistry Massage & Reflexology spa. There is also a gym, F45 Training South Buona Vista, on the second level. However, many of the shop units, especially on the second level, still bear the “For Sale/For Rent” sign.

At Icon @ Pasir Panjang Five, of the 15 ground-floor shop units, five — Killiney Kopitiam, The Pirate Sheep restaurant and bar, E Jurong Provision Store, Nail Studio Libra and Sawasdee Artistry — have opened

According to property agents, the first-level shops at Icon @ Pasir Panjang fronting Pasir Panjang Road see better foot traffic as they face a bus stop and a public car park is located just across the road.

Still, shop owners have problems securing tenants. The result is that many have slashed their asking rents. For instance, the monthly asking rent for ground-floor shop units was recently listed at $3,000 to $4,000, down from $6,000 to $7,000 18 months ago.

Residents, however, are happy with the opening of Food Joy minimart at Viva Vista and Jurong Provision Store at Icon @ Pasir Panjang as it allows them to buy their daily necessities without having to drive all the way to VivoCity, says May Sai, executive director of investment and capital markets at Knight Frank, who lives in a nearby housing estate. “It will take time for the units to fill up and for rents to stabilise,” she notes.

This article appeared in The Edge Property Pullout, Issue 765 (Feb 6, 2017) of The Edge Singapore

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