HUNGRYFORLESS

PENTUPRENTALDEMANDFOR
SHOEBOXUNITS

SEPTEMBER2013/ISSUE5

SQUAREFOOTRESEARCHPTE.LTD.
Phone:+6562232163
Website:www.squarefoot.com.sg

Rentalcontractssignedforshoeboxunitsmorethandoubledin1H13comparedto1H12.Thesurge
in volume is attributed to the increase in shoebox unit supply from newly completed projects, the
strongrentaltakeupratesuggestsapentupdemandforsuchunitsintherentalmarket.
SEPTEMBER2013

RENTALMARKET

HUNGRYFORLESS,PENTUPDEMANDFORSHOEBOXUNITS
MarketOverview
Rental demand continued to
strengthen despite a slowing
economy. A total of 12,352
rental contracts in the non
landed private residential
market have been reported in
thesecondquarterofthisyear,
a growth of 16.7% qoq or
11.6%yoy.Overall,therental
demandfornonlandedprivate
residential units in 1H13 has
remainedpositive,withatotal
of 22,937 rental contracts
signed, a 10.2% rise compared
to1H12.

BreakdownbyUnitSize
Breaking down rental demand
by unit sizes, shoebox units
grew by a staggering 93% yo
y, outshining the other unit
sizes(seeTable1).

Despite having the lowest

marketshareof3.3%,shoebox
units contributed as much as
26% of the total rental growth
from1H12to1H13.
Rental demand for shoebox
units first spiked in 2H12,
where the number of rental
contracts signed increased by
more than twofold to 797
from388in1H12.
This surge in rental contracts
signed is mostly attributed to
new shoebox units completed
in the second half of 2012,
which contributed 55% and
35% of the total shoebox
rental demand in 2H12 and
1H13,respectively.
The significant increase in
shoebox units available in the
rental market from newly
completed projects supports
the notion that a substantial

45,000
40,000
35,000

25,000
20,000

UnitSize
(sqft)

1H12

1H13

Growth

300500

388

748

93%

500800

2,391

2,663

11%

8001,000

4,350

4,687

8%

1,0001,400

6,741

6,867

2%

>1,400

5,629

5,829

4%

*Excludeunitsizeswithlessthan15rental

contractssigned
Source:URA,SquareFootResearch
Figure2:Rentalcontractssignedforshoebox
units,Q1'12toQ2'13
800
600
400
200
0
1H2012

2H2012

1H2013

Source:URA,SquareFootResearch

Figure1:RentalVolume,Q1'2000toQ2'2013

30,000

Table1: Rentalcontractssignedbyunitsize

Q4

percentage of shoebox units

are bought for investment
purposes.Contrarytosceptical
sentimentsontheinvestability
of shoebox units, the hike in
rental contracts signed seems
toindicatethatthereisapent
updemandforsuchunits,and
that investors are enjoying
goodreturns.
ShoeboxUnits

Q3

15,000

Q2

10,000

Q1

5,000
0

Source:URA,SquareFootResearch

SEPTEMBER2013HUNGRYFORLESS,PENTUPRENTALDEMANDFORSHOEBOXUNITS

Shoeboxunitsareattractiveto
tenantsastheybridgethegap
between room and apartment
rental,offeringtheprivacythat
islackinginroomrentalandat
a lower rent compared to
largerapartment.
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RENTALMARKET

HUNGRYFORLESS,PENTUPDEMANDFORSHOEBOXUNITS
Pitched as the Boutique
Luxury Residences, shoebox
units are usually creatively
designed with a modern
outlook to compensate its
small area. These units are
primarily targeted at young
single professionals or couples
without kids seeking for
accommodations that are
conveniently situated near
their workplace, within city
fringe,attheexpenseofspace.
APracticalChoice
Culturally, how accepting
tenants are to shoebox units
affectsitsdemandintherental
market. The concept of
shoeboxunitsisnotsomething
unique to Singapore but
prevalentworldwideespecially
in busy cities and countries
wherelandisprecious.
Driven by practicality and
sustainability, expatriates in
Singaporemayturntocheaper
accommodationsasthecostof
living continues to rise.
According to Mercers 2013
Cost of Living survey,
Singapore is now the second
mostexpensivecityinAsiaand
the fifth most costly location
worldwide.
For expatriates living alone or
with their spouse, a well
equipped unit with adequate
living space may suffice.

Convenience and affordability

aretheirmainpriority.
Shoeboxunits,thus,mayseem
as an attractive option, given
its contemporary design,
affordable rental as well as its
location.
LocationMatters
Currently, about three quarter
of the estimated 150 projects
comprising shoebox units are
located in the Central Region.
Out of the 50 projects
completed since 2012, 38 of
themarelocatedintheCentral
Region whereas the remaining
are located outside of the
CentralRegion.
Based on the total rental
contracts signed in the past 6
quarters, the Central Region
saw a higher rental takeup
rate compared to Outside of
CentralRegion.
Figure3:Rentaltakeuprateof
shoeboxunitscompletedsince2012

CoreCentralRegion
Therentaltakeupratefornew
projects with shoebox units in
district 9 and 10 is strong.
Vivacesawa91%takeuprate
basedonthenumberofrental
contracts signed versus the
estimated number of shoebox
units available. It is interesting
to note that the number of
rentalcontractssignedwithina
year for RV Suites exceeded
thenumberofshoeboxunitsin
the project. This may be due
to rental contracts that are
shortterm in nature (6
months) that have expired or
early termination on rental
contracts. Whichever the case
may be, the high replacement
rate is yet another indication
that rental demand for such
unitsisstrong.

Figure4:Rentaltakeuprateof
shoeboxunitscompletedsince2012

OutsideofCentralRegion

CentralRegion

Unleased
35%
Unleased
48%

Leased
52%

Leased
65%

Source:URA,SquareFootResearch

SEPTEMBER2013HUNGRYFORLESS,PENTUPRENTALDEMANDFORSHOEBOXUNITS

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RENTALMARKET

HUNGRYFORLESS,PENTUPDEMANDFORSHOEBOXUNITS
RestofCentralRegion

Conclusion

Ranked by rental demand, the

top two projects with shoebox
unitscompletedsince2012are
Centra Suites with 88% rental
takeup rate and Centra
Studios at 81%. Both projects
are coincidentally located in
district14.Thereareatotalof
6 new projects with shoebox
units completed since 2012 in
district 14, with an average
takeup rate of 65.8% as of
1H13.

Rentaldemandremainsstrong
in 1H13 on the back of an
increasing trend since 2007.
Thenumberofrentalcontracts
signed for shoebox units
increased by more than two
fold compared to a year ago,
indicating a pentup demand
forsuchunits.

OutsideofCentralRegion
Suites @ East Coast tops the
list in OCR with a rental take
up rate of 68%. Siglap V
achieved 63.8% rental takeup
rate for its shoebox units
despite entering the market
only in 2013. Although
shoebox units fetch a higher
persquarefoot rental, the
lower rental quantum is really
the key in keeping demand
alive.

Rental demand going forward

is likely to remain buoyant as
job market prospects remain
positive in Singapore. In
addition, restrictions imposed
on
residential
property
purchases by permanent
residents and foreigners may
furtherfuelrentaldemand.
However, with record high
numberofprojectscompleting
in 2014/2015, the surge in
overall supply may drive rents
down, offering tenants a
greater variety of choices
beyond shoebox units at
increasingly competitive rental
prices, this may ultimately
affect the draw towards
shoeboxunits.

SEPTEMBER2013HUNGRYFORLESS,PENTUPRENTALDEMANDFORSHOEBOXUNITS

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SHOEBOXRENTALTAKEUP

CENTRALREGION
Projectname

ALEXIS
CAVANSUITES
CITYLOFT
PARCSOMME
VIVACE
RVSUITES*
SUITES@SHREWSBURY
AIRSTREAM
BLISSLOFT
DOMUS
OPALSUITES
SUITES@TOPAZ
THEVERVE
8@WOODLEIGH
CASAAERATA
CENTRASTUDIOS
CENTRASUITES
LABRISA
SUITES@CHANGI
TREASURES@G19
BELLACASITA
ISUITES@MARSHALL
ONANSUITES
STUDIOS@TEMBELING
SUITES@KATONG
THOMSONVTWO
SUITESDELAUREL
LOFT@RANGOON
LEICESTERSUITES

Postal Comple
district tion
year
3
8
8
8
9
10
11
12
12
12
12
12
12
13
14
14
14
14
14
14
15
15
15
15
15
20
21
8
13

2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2013
2013

Totalno.
ofunits

293
36
40
30
85
96
15
70
48
104
19
46
106
330
78
51
62
84
44
27
57
32
29
25
51
74
72
24
47

Est.no.
of
shoebox
units
112
33
34
18
62
15
12
41
12
26
16
33
34
28
40
48
58
38
40
24
24
15
3
13
36
45
11
22
41

No.of
rental
contracts
signed
77
24
29
10
57
18
7
21
7
9
12
15
15
20
27
39
51
19
21
13
16
12
2
7
25
31
5
12
2

Rental
take
up
rate1
68.8%
72.7%
85.3%
55.6%
91.9%

58.3%
51.2%
58.3%
34.6%
75.0%
45.5%
44.1%
71.4%
67.5%
81.3%
87.9%
50.0%
52.5%
54.2%
66.7%
80.0%
66.7%
53.8%
69.4%
68.9%
45.5%
54.5%
4.9%

Avg.
rental2

$3,130
$2,530
$2,640
$2,750
$3,340
$3,400
$2,740
$2,450
$2,790
$3,280
$2,440
$2,410
$2,800
$2,840
$2,510
$2,540
$2,610
$2,560
$2,540
$2,570
$2,680
$2,480
$2,480
$2,690
$2,510
$2,700
$2,660
$2,890
$2,750

Basedontransactioninthepast6quarters,Source:URA,SquareFootResearch
Note:(1)Rentaltakeuprateiscomputedbasedonthepercentageofrentalcontractssignedovertheestimatednumberof
shoeboxunitsavailableintheproject.(2)Averagerentalhasbeenroundeddowntothenearesttens.*Rentaltakeuprate
forRVsuiteshasexceeded100%,presumablyduetonewcontractssignedinreplacementofoldcontractsthathaveexpired
orterminated.

SEPTEMBER2013HUNGRYFORLESS,PENTUPRENTALDEMANDFORSHOEBOXUNITS

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SHOEBOXTAKEUPRATE

OUTSIDEOFCENTRALREGION
Projectname

PALMERAEAST
SUITES@EUNOS
ESPIRASUITES
HERITAGEEAST
SUITES@EASTCOAST
OPTIMA
ISUITES@TANI
PRIMORESIDENCES
RESIDENCESBOTANIQUE
CASPIAN
SIGLAPV

Postal Comple
district
tion
year
14
14
15
15
15
16
19
19
19
22
15

2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2013

Totalno.
ofunits

32
28
46
65
116
297
20
64
81
712
114

No.of Rental
Est.no.
Avg.
rental take rental2
of
up
shoebox contracts
signed rate1
units
15
6 40.0% $2,770
18
11 61.1% $2,590
30
11 36.7% $2,690
44
19 43.2% $2,590
70
48 68.6% $2,320
24
15 62.5% $3,190
8
2 25.0% $2,550
15
4 26.7% $2,550
3
2 66.7% $2,800
18
7 38.9% $2,770
19
12 63.2% $2,480

Basedontransactioninthepast6quarters,Source:URA,SquareFootResearch
Note:(1)Rentaltakeuprateiscomputedbasedonthepercentageofrentalcontractssignedovertheestimatednumberof
shoeboxunitsavailableintheproject.(2)Averagerentalhasbeenroundedtothenearesttens.

SEPTEMBER2013HUNGRYFORLESS,PENTUPRENTALDEMANDFORSHOEBOXUNITS

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APPENDIX

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SEPTEMBER2013HUNGRYFORLESS,PENTUPRENTALDEMANDFORSHOEBOXUNITS

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