Commercial & Industrial Property News Update

Singapore - URA To Consider Tighter Advertising Rules For Industrial Properties

September 14, 2012

As more investors switch to industrial properties, unclear advertising is leading inexperienced buyers to pay for unusable space.

The Urban Redevelopment Authority (URA) is keeping an eye on the advertising practices of agents marketing industrial properties, in lieu of a decision to tighten rules regarding the transparency of marketing materials used.

The Authority was called to action because many inexperienced buyers are confused over the actual amount of usable floor area included in the offer price. Investors have complained against the practice of agents marketing the entire floor area of the property, even though it includes void areas that often cannot be used.

An Investor, Ms Chong, paid over SGD 6 million for two units with a total floor area of about 5,100 sq ft at Apex @ Henderson.

However, 35% to 40% of the space in each of her units were void space, which could not be used. Chong said that her agent had not informed her of the void space, causing her to pay SGD 2.3 million for space which she can't use.

"Why did the agents not make this clear at the start? How can you buy something that you're not getting? I think the regulators need to do something about this," she said, adding that she has lodged a complaint with the URA over the matter.

Property experts said that it is legal to include void space in the total floor area when marketing industrial units. Void space is often found in units with high ceiling heights, allowing buyers to double the floor area through the addition of mezzanine floors.

Some developers, therefore, base the price per square foot on the total floor area, including void space and other unusable areas such as air-con ledges.

However, some units have their total gross floor area maxed out by the developer, leaving buyers without the ability to build the mezzanine floors, even though they have already paid for the space.

Experts said that selling void space in this manner is allowed, but stressed that buyers must be told clearly what is the actual usable area they are paying for.

The introduction of residential cooling measures have caused an influx of new investors and inexperienced agents.

The URA said that advertising units for sale based on total area does not give prospective buyers a clear picture of the gross floor area of the property. It said it is looking into tightening rules so as to ensure buyers receive detailed information on floor areas.

It has also urged developers of commercial and industrial properties to provide more information to buyers to help them make their decisions.

"Traditionally, industrial and commercial property buyers are more sophisticated and discerning investors from the business sector," said a URA spokesman.

"We have, therefore, not amended our rules to mandate a more detailed breakdown of floor areas... We are monitoring public feedback to see if there is a need to do so," he added.

Tags: Industrial property, Warehouse for sale, Income properties

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