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It seems that every new development in town is touting a soho concept, but are you really getting a home and office in one? We get the facts from the industry experts.
Bandied about like a proper term, “Soho” is actually an acronym for “Small Office Home Office”. According to the Urban Redevelopment Authority (URA) website as at 2011, the URA does not specifically approve a development for “Soho” use; it is approved either for office or residential purposes, but not both. However, you can use your residence as a home office, subject to URA’s regulations, by applying through its Home Office scheme.
What most developers are offering is really Soho-style living. Jacky Chew, a property sales marketing executive at Far East Organization, explains, "These days, ‘Soho’ is commonly used as a lifestyle term to describe a place where you can work, live and play. The higher ceiling gives you more freedom for space planning, as you can build a platform for a bed while working in a home office under it. It appeals to a new breed of cosmopolitan urbanites who want it all – location, connectivity and flexible space.”
Indeed, some people buy such units because they are lured by the misconception (or the salesman’s pitch) that they can build a second
level to expand their living space and hence lower the unit’s psf price. However, investors should be aware that often, what is actually allowed is a temporary platform and not really a permanent mezzanine floor.
Last year, a group of 12 buyers of single level units at One North Residences filed a complaint with the Council for Estate Agencies (CEA) and the URA seeking compensation from the developer, Vista Development. The homeowners claimed that they were told they could build a second level when they bought their properties, which had a ceiling height of 4.7m, but were later disallowed to when they collected their keys. This was because the developer had already built to the maximum gross floor area (GFA), so constructing the mezzanines would flout the law. Besides, any large loft structures that would form part of the structural element of the building needed planning permission from the URA, which would not have been granted in this case.
The only way out is to build a temporary platform. Developments such as Far East Organisation’s The Hillier and the Soho units at Watertown now market their units complete with the built-in platform. As these are temporary structures that can be dismantled, they are considered part of the interior design and do not require planning permission from the URA. So, before you pull out your cheque book, make sure that you understand what you’re buying and know the government regulations, or your loft-living dream could well remain a lofty ambition.
Commercial vs Residential SOHOs
What, then, are the differences between an approved Soho and a residential one? Lawrence Tan, a sales director at DTZ Debenham Tie Leung, explains: “An ‘approved’ Soho property is actually a commercial property used as an offi ce.” Some examples are Soho@The Central at Clarke Quay, Southbank at North Bridge Road and the upcoming PS100 at Tanjong Pagar. Owners can freely run a business from it without having to apply for a special permit. It is also built to comply with all the safety requirements of a commercial building. Condominium facilities such as a pool, gym and security proved big draws for Peter Tay, director of Autumn School.
Peter leased a unit at SOHO@The Central three years ago for his school, which runs design thinking programmes. “I prefer the Soho to the commercial offices I’d previously rented,” he says. “I have my own washroom and pantry, plus the 4.5m-high ceiling makes the unit feel more spacious. I can also opt to build a platform to maximise the vertical space. Besides, the lack of pillars makes it easier for me to plan the space – we can accommodate up to 20 students here.” Peter’s neighbours include law firms, investment companies and PR companies. He pays about $4,000 a month for his 600sqf unit, which he says is cheaper than renting a regular office in the vicinity.
Residential Sohos, or Soho-style residences, are basically private homes. Homeowners or tenants who want to run select small-scale businesses from their place of residence must meet the conditions of the URA’s Home Office scheme. For instance, the place has to be used primarily as a home, and a maximum of only two other non-residents can be engaged in the business. You also cannot erect business signage, unlike at commercial Sohos.
Eddy Kuswandi, who owns EJ Werkshop Interiors, bought a 624sqf residential Soho unit at Regency Suites in Tiong Bahru three years ago for $618,000 as he liked its high ceiling, which let him build a platform as his bedroom. Like most of his neighbours, he uses it purely as a residence although a handful run graphic design and shipping businesses from home.
Can my home be converted to a home office?
Yes, as long as you fulfil the URA’s requirements. The Sail at Marina Bay is one such residential project-turned-hotspot for home offices. Says Eunice Chen, senior team director at Global Property Strategic Alliance, “For small companies that don’t need a big home office but want a prestigious address and also to be close to their clients in the CBD area, renting a unit at The Sail makes good sense.” A studio apartment of 614sqf currently leases for about $4,000 to $4,500; working out to about $6.50psf compared to the $9 to $12psf commanded by nearby Shenton Way offices.
Growing Interest
Sexy marketing has definitely built the hype – developers are cleverly branding units smaller than 500sqf as Sohos to make them sound more exclusive. The petite units’ lower prices make them more attractive to investors with smaller budgets.
Lawrence says that although less than 10 per cent of his clientele currently rent or buy Soho units, this fi gure is increasing. More urbanites now want to use their primary residence as their offi ce. This may also explain why developers are offering Soho-style living away from the business districts, such as The Hillier in Hillview and Guillemard Edge in Geylang.
With so many Sohos on the market, however, Eunice Chen, a senior team director at Global Property Strategic Alliance, foresees that rents will come down. It all ultimately boils down to location. “Buying in a unit in the CBD or Marina area is a heavier investment, but it would attract tenants from the financial hub who have deeper pockets,” she says. “They are also easier to let.” Eunice reckons that Sohos in the heartlands are likely to attract home dwellers who work in a business, industrial or aerospace hub close by. “Or, it may draw small start-ups with tight budgets that want to run their businesses from home,” says Eunice, who cautions that investors should question whether these start-ups can fulfil their lease terms or pay the rent on time.
Must-Know For Investors
“As Soho properties are commercial in nature, potential buyers can’t use their CPF savings to pay for them,” says Lawrence. Loans for commercial properties also tend to have higher interest rates of between 2 to 3 per cent, and banks offer a lower loan-to-value ratio of 70 per cent maximum on them. In comparison, loan interest rates for residential properties are about 1 to 1.5 per cent, and banks offer loans of up to 80 per cent. In most instances, you’d also need to pay GST on commercial properties if the seller is GST-registered.
Buying a residential Soho, just like purchasing any private residential property, is subject to the same rules and taxes (see sidebar). If you intend to buy a residential Soho and use it as a home office, Eddy advises: “Consider the location, accessibility and amenities. If you’re expecting clients to visit your home office, consider a Soho in a central location. You must also accept that there will be outsiders walking along the common spaces.” Quips Peter, “Your clients may see your neighbours hanging out their laundry in a residential Soho, but you’ll never face this problem at a commercial Soho.”
Finally, do be wary of the marketing pitch. “I was keen to invest in a 600sqf Soho-style unit as the sales agent assured me that I could use it as a home or an offi ce for my interior design company,” says designer Adam Neo. “I later found out that I had to use it primarily as a residence, but it was too small for my family of five. Also, under the URA’s rules, I can only have two staff working onsite, which will affect my expansion plans.” He is now looking at buying or renting a commercial Soho instead. “I still like the idea of working in a Soho instead of a regular office – I can hold poolside meetings with my clients or hit the gym with my staff at lunchtime!”