URA keeping an eye on industrial sector

Move comes amid unhappiness over agents using void space to seal deals

Published on Sep 11, 2012

By Esther Teo, Property reporter

THE authorities are keeping a close eye on the transparency of marketing material in the hot new area of industrial property.

The Urban Redevelopment Authority (URA) says it may look at extending to the industrial market the practice in the residential sector of ensuring buyers get 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.

Some investors are unhappy that property agents market the total floor area of some strata-titled industrial properties - which includes void areas - even though this space often cannot be used.

While it is legal to include void areas in advertising, URA wants to ensure buyers get clear information, especially as less sophisticated investors enter the market.

Experts say void areas are often found in high-ceiling units, giving owners the option to double the floor area, as a mezzanine level can be built in some cases.

Some developers, therefore, base the per sq ft (psf) price of an industrial unit on the total floor area - which includes the gross floor area and other areas such as air-con ledges and void space.

But confusion arises when the developer has maxed out the total gross floor area of a project and a buyer will not be able to build the mezzanine level after all, even after paying for the void space.

Experts say selling void space like this is allowed. However, buyers must be clearly informed about what exactly is usable area, especially now that many retail investors have entered the industrial market in response to residential cooling measures.

An investor who wanted to be known as Ms Chong bought two units with a total floor area of about 5,100 sq ft at Apex @ Henderson for more than $6million.

She said her agent had not informed her of the void space, which turned out to be 35 to 40per cent of each of her units. So she forked out about $2.3 million for void space which she thought would be usable area.

"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. She has since lodged a complaint with the URA.

But the developer of Apex @ Henderson, Alexis Development, says all buyers are required to sign a side letter with the option, acknowledging that the area they are buying includes void space.

A spokesman added that a detailed breakdown of space was available at the showflat, and that agents were given a marketing kit indicating the amount of void space each unit had.

Ms Chong, however, said she had not had time to look through every clause at the time of purchase and had trusted that the agent would disclose important information to her.

A URA spokesman 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.

In private housing developments, rules require developers to give a detailed breakdown of key areas in a unit, such as bedrooms, balconies and bay windows.

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

"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."

Ms Purnima Shantilal, director of licensing and investigations with the Council for Estate Agencies, said it has received 35 complaints relating to industrial properties since the start of last year. However, most of these involve the wrongful marketing of industrial units for office use.

An industry player said the issue has arisen with the recent confluence of more retail investors, inexperienced agents, and sky-high industrial prices.

"Developers who include void areas in their psf prices tend to be new entrants to the industrial market," he said. "The price lists of more traditional developers usually reflect only usable area."

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