Could an en bloc lottery ticket be found in a Singapore parking lot?

DEMAND for car parks has been gaining traction among real estate investors for its low maintenance costs and recurring income.

But down the line, quiet hopes of a redevelopment windfall may also be at the back of the minds of some investors with more patient capital.

It comes as family offices are springing up as popular buyers of such property assets - which are rare because of a legal tweak that limited the number of car parks in Singapore with separate strata titles.

Property industry veteran Karamjit Singh noted that some car park buyers may be hoping to gain leverage in the event of a collective sale.

For a property to be sold en bloc, it must obtain the consent of at least 80 per cent of the owners, measured by both share value and floor area.

"Strata-titled car park spaces tend to have low share value allocations but may hold the trump card on account of the large floor area measurement," said Mr Singh.

Notably, the strata-titled basement car park of Holland Road Shopping Centre was bought in 2020 for S$17.3 million or more than S$360,000 per parking space by a family office. The car park, according to a 2019 expression of interest announcement, represents a quarter of the total strata area in the development.

According to Sammi Lim, executive director of Brilliance Capital, since the 1980s, car parks within a development were no longer allowed separate strata titles.

This makes those with separate strata titles limited in supply and highly sought after, said Ms Lim.

Naturally then, the recent car parks that changed hands are of a certain vintage.

Earlier this year, Brilliance Capital concluded the sale of a parking lot at Parklane Shopping Centre, bought by a local family office for S$16.2 million or S$70,000 per parking space.

Just last month, another car park at People's Park Complex was made available for sale, again marketed by Brilliance Capital. The multi-storey car park with a restaurant unit at People's Park Complex was put up for public tender with a guide price of S$42 million. For the car park, the price works out to about S$57,000 per parking space.

Lee Nai Jia, deputy director of the Institute of Real Estate and Urban Solutions (IREUS) at National University of Singapore, said there is a "speculative component" when buying car parks. "It is possible that the buildings may be developed to a more intensive use in the future," he noted.

Still, Dr Lee noted that while buyers would probably consider the possibility of en bloc in making their decisions, the factor is likely to be "heavily discounted".

He said: "It will be difficult for the different owners to agree on the distribution of sales proceeds, unless the reserve price is sufficiently high. But the conundrum is that a high reserve price would drive away interested investors."

Ms Lim estimated a 4 per cent gross yield return on the asset.

This is even as fewer Singapore residents are driving compared with a decade ago. The latest population census showed that about a quarter of all residents used to drive a car to work in 2010. In 2020, that shrank to about one-fifth of respondents.

She added that some buyers might be keen to convert excess parking space into higher-value uses such as skyrise greeneries, storage spaces, e-commerce spaces, car washes and capsule hotels.

Since 2016, the Urban Redevelopment Authority has allowed owners to convert surplus car parking spaces into other commercial, mixed use and hotel developments within the central area. This was in support of the government's plans for Singapore to go car-lite.

Ms Lim said: "Any en bloc is a bonus and windfall for the buyers, but may not be the immediate aim of why they enter into this purchase."

The parking lot at Holland Road Shopping Centre was sold to an ultra-high net worth family office from Hong Kong, with the deal brokered too by Brilliance Capital.

It comes as car parks are "quite actively" traded in Hong Kong, said Dr Lee, noting that such a trend is especially apparent in cities where land price is high and supply is limited.

"The Hong Kong government reduces the supply of car parks to encourage people to take public transport. However, the lack of supply ends up pushing up the prices," he said.

To add, in Hong Kong, car parks at residential developments can be sold with a separate strata title, noted Mr Singh. This encourages the trading of most car parks in the market.

Earlier in June, a single parking bay at Mount Nicholson, a luxury residential development, sold for a record HK$10 million (S$1.7 million).

That same month, Melco International, the owner of Hong Kong's Jumbo Kingdom floating restaurants, announced that it was looking to sell its 509-bay car park with a guide price of HK$500 million.

In September last year, Hong Kong tycoon King Cho also announced his plans to add 7,000 parking spaces spanning across China worth 700 million yuan (S$146.2 million) to his existing portfolio of 3,800 spaces worth between 800 million yuan and one billion yuan by the end of 2020, according to Yahoo.

READ MORE:

• Family offices driving a few car park deals; Chinatown offers latest million-dollar lot
• Price surge stokes en bloc hopes, but expectations gap a hurdle