Service apartments in demand

Property
Published April 6, 2006


Service apartments in demand

By HENG HUA THONG


STRONG demand for service apartments has boosted occupancy rates to an average 87.8 per cent islandwide last year, from the 80-plus per cent in 2004. The strongest rise was seen in the Orchard/Scotts Road area followed by the East Coast.


With higher occupancies, rentals also increased for almost all bedroom types, with penthouses recording the highest increase. This is in line with the rise in hotel room rates as well as prime residential rents.

Demand for service apartments come from several sources - business travellers, tourists, expatriates and their families, those seeking medical treatment or even locals who require temporary residence while their homes are being renovated.

In 2005, Singapore saw a record 8.93 million visitors, a growth of 7.4 per cent. Asian travellers, at 6.5 million, continue to make up the majority of visitors. Spurred by budget airfares, this segment made up 73 per cent of visitors here, up 7 per cent over 2004.

The number of service apartments islandwide remained at just over 4,000 units as at end-2005. About 40 per cent of them are in the Orchard/Scotts Road area. Another 40 per cent are found in the Havelock/Chinatown/River Valley Road area. A total of 302 units are scheduled for completion between 2006 and 2008 and this would help ease an imminent increase in demand.





Interestingly, some developers with unsold units in their residential portfolios are trying to sell or lease them to tenants with optional services. This brings in some rental income for the developers while enhancing the attractiveness of these units to potential buyers. These 'apartments with services', which total about 400, offer services such as housekeeping, Internet and cable channels.

With corporate and other travel expected to increase, demand for service apartments should remain strong in the next few years. Occupancies and rentals should continue to improve, with limited new supply coming onstream.

Heng Hua Thong is executive director, DTZ Debenham Tie Leung (SEA) Pte Ltd