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Paragon to convert 3 floors of offices to medical suites - Jul 28, 2008 (ST)

BackJul 28, 2008

The Straits Times / The Business Times News On SPH

Paragon to convert 3 floors of offices to medical suites

Move spurred by strong demand in healthy sector, say market watchers.

By Joyce Teo
Jul 28, 2008
The Straits Times

PARAGON Shopping Centre, known as much for its medical centre as for its upscale shops, is allocating more space for medical suites.

The mall is converting three more floors of office space into medical suites, as and when the particular office leases expire.

'It is a reaction to the strong demand for medical suites,' said Ms Linda Kwan, general manager of the mall.

The mall, which is right next to Mount Elizabeth Hospital, already has 12 floors of medical suites after it added one floor last July.

Before that, it had converted four floors of office space into medical suites over a two-year period. All its suites, which are for lease only, have been fully let.

'The medical industry here continues to be healthy. The fact that landlords are looking to convert offices to medical suites bears this out,' said property consultancy firm CB Richard Ellis (CBRE).

'Capital values for medical suites are still holding firm despite the current market uncertainty.'

Medical suites are among the most expensive properties to purchase here on a per sq ft basis. A few transactions at Mount Elizabeth Medical Centre were recorded above $4,500 psf in the second half, compared with deals at below $4,000 psf in the first half.

One deal there, for a 657 sq ft suite, set a record price of $5,292 psf in March.

But not all medical suites command the same price.

While the Mount Elizabeth Medical Centre has aged, it still commands a premium owing to its branding and central location.

At nearby Lucky Plaza, a firm linked to Hong Leong Group - which owns 56 medical suites there - has sold eight out of 13 put on sale since last April. The most recent deal was done in April at $3,200 psf.

'The location is superb but it has been an uphill task for them because of doctors' reaction to the image of the mall,' said a market watcher.

At Novena Medical Centre, suites have sold for more than $2,500 psf, up from their launch price of $1,600 psf in 2005.

Asking rents for medical suites are holding well in general, with Paragon commanding around $14 psf to $16 psf, up from $10 psf to $12 psf more than a year ago.

'We believe rents will remain firm in the short to medium term,' said CBRE Research. Given limited supply, values of medical suites will hold up well, it added.

More players are entering the market. Far East Organization, which owns Novena Medical Centre, has said it plans to have 64 more clinics at its new hotel in Sinaran Drive by 2010.

Over at Farrer Road, a group of doctors and investors has teamed up to build a 'mediplex', with a hospital, hotel and specialist medical centre rolled into one. It will house 210 medical suites.