Rising of a new trend in development; another Titanic?
SO WHAT is all this hype surrounding SoHo about? Lately, it seems that developers are banking their resources on this relatively new concept of residential-cum-office units and the take-up rate is not too shabby either. But is this concept here to stay or is this just a passing fad?
SoHo is the acronym for Small Office Home Office. But there’s actually more to the SoHo family than many would know of. SoVo and SoFo are examples where the word Home is replaced with Versatile and Flexible respectively. Then, there are Designer Suites, Signature Suites, and more names that are yet to be coined.
Nevertheless, each of them offers a similar function. And because there is no official or legal definition of what makes a SoHo, it is typical for developers to market them as a new concept using different names.
Taking a peek back in history reveals that the SoHo concept first originated in New York City, back in the 70’s where warehouses and factories in an area formerly known as Cast Iron District was converted into artists’ lofts and art galleries and shortly after, some were made into homes.
In the mid-80’s, breakthroughs in telecommunications plus the arrival of the personal computer and fax machines gave way to companies to decentralize thus needing smaller office spaces and by the turn of the millennium, the Internet offered small offices to compete on the world stage. It also created opportunities for new business start-ups.
In Malaysia, the trend picked up roughly five years ago, when the Strata Titles Act was passed in 2007 to accommodate stratified landed development.
SoHo, in a way, is like a serviced residence where it is residential units sitting on commercial land. However, it is generally smaller in size. For example, SoHo units at Mah Sing’s M City feature built-ups of 781 to 1,330 sq ft while OSK Property’s Atria SoFo Suites offer a wider range between 488 to 1,343 sq ft. Then the SoFos at SP Setia’s Trefoil come with built-ups ranging from 485 to 790 sq ft.
According to Sarky, these bite-sized units have fared pretty well among property buyers due to the cheaper prices making it an entry-level investment.
Not neglecting the fundamentals of price per square foot however, you will see that it may be cheaper for a unit, but in exchange, you are buying into a smaller sized unit. Case for example, a SoFo unit of 488 sq ft in Petaling Jaya was selling at RM360,800 when it was launched at the end of last year. This would mean it is priced at approximately RM739 per sq ft. Simply put, there is no increase in price but it is reduced in size.
Unlike other developments, SoHo offers a dual function – as a home or an office. And Adzman Shah believes that is why it is popular. “The dual function means that you are attracting two groups of tenants; those who choose to live in it and those who want to run a business out of it.”
Adzman also notes that SoHos are more popular in fringe area of the city such as Subang Jaya and Kota Damansara where its price per square foot is still relatively cheaper.
Similarly, Govin Bala, too believes the concept is a smart one especially now with the oversupply in office space. “Instead of building a whole block of offices and leaving it vacant, with SoHo units, at least half of it would be occupied by residents who choose to live there,” says Govin. It seems quite a promising stance from the looks of it.
Having said that, Emmanuel gives an ostensibly opposite view; suggesting that the dual function concept might not work here in Malaysia.
“If an office occupies at one of the units, and they get a neighbor of a few college students who are constantly rowdy, noisy and messy, with their shoes strewn all over the corridor, the office next door who is trying to run a decent business may be affected and may not be presentable to visitors,” shares Emmanuel, giving a worst case scenario.
Another factor to ponder on is whether SoHo units grew because of a good practical development concept or born out of necessity. According to Emmanuel, it could be because residential land is running out that they have to build on commercial land.
The question of sustainability of SoHos may then come into play. Looking at the take-up rate of recent launches, it is essential to take a step back and evaluate if it is a wise move to invest in one. “What happens when all these finally complete in about two to three years time?” asks Emmanuel. “Will we see an oversupply?”
Govin agrees that it is still too young to actually know how well it will perform in the long run. While our premonitions of the future is far from certain, it is also important to look at current issues with this much talked about concept.
In 2007, the HDA or Housing Development (Control and Licensing) Act 1966 was amended to include serviced apartments, thus protecting buyers of such properties. SoHos on the other hand, is still a debatable topic. One of the more prominent matters that arise from this is the mortgage interest rates whereby banks and financial institutions might charge commercial interest rates on the loans which are higher than residential home loans.
Despite these issues, recent launches of such properties have seen spectacular take-up rates, with some sold out within a day. Surely there must be some truth to the concept if it is getting such a reception, or are these people buying for the sake of buying and because they can afford it?
We think the SoHo boat deserves a tighter scrutiny and meticulous calculations before jumping into it. Whether this boat floats or sinks when it is out on the open seas, we can only vaguely predict. Life jacket anyone?