Paragon to convert 3 floors of offices to medical suites

July 28, 2008
Paragon to convert 3 floors of offices to medical suites
Move spurred by strong demand in healthy sector, say market watchers
By Joyce Teo

PARAGON Shopping Centre, known as much for its medical centre as for
its upscale shops, is allocating more space for medical suites.

The mall is converting three more floors of office space into medical
suites, as and when the particular office leases expire.

'It is a reaction to the strong demand for medical suites,' said Ms
Linda Kwan, general manager of the mall.

The mall, which is right next to Mount Elizabeth Hospital, already
has 12 floors of medical suites after it added one floor last July.

Before that, it had converted four floors of office space into
medical suites over a two-year period. All its suites, which are for
lease only, have been fully let.

'The medical industry here continues to be healthy. The fact that
landlords are looking to convert offices to medical suites bears this
out,' said property consultancy firm CB Richard Ellis (CBRE).

'Capital values for medical suites are still holding firm despite the
current market uncertainty.'

Medical suites are among the most expensive properties to purchase
here on a per sq ft basis. A few transactions at Mount Elizabeth
Medical Centre were recorded above $4,500 psf in the second half,
compared with deals at below $4,000 psf in the first half.

One deal there, for a 657 sq ft suite, set a record price of $5,292
psf in March.

But not all medical suites command the same price.

While the Mount Elizabeth Medical Centre has aged, it still commands
a premium owing to its branding and central location.

At nearby Lucky Plaza, a firm linked to Hong Leong Group - which owns
56 medical suites there - has sold eight out of 13 put on sale since
last April. The most recent deal was done in April at $3,200 psf.

'The location is superb but it has been an uphill task for them
because of doctors' reaction to the image of the mall,' said a market
watcher.

At Novena Medical Centre, suites have sold for more than $2,500 psf,
up from their launch price of $1,600 psf in 2005.

Asking rents for medical suites are holding well in general, with
Paragon commanding around $14 psf to $16 psf, up from $10 psf to $12
psf more than a year ago.

'We believe rents will remain firm in the short to medium term,' said
CBRE Research. Given limited supply, values of medical suites will
hold up well, it added.

More players are entering the market. Far East Organization, which
owns Novena Medical Centre, has said it plans to have 64 more clinics
at its new hotel in Sinaran Drive by 2010.

Over at Farrer Road, a group of doctors and investors has teamed up
to build a 'mediplex', with a hospital, hotel and specialist medical
centre rolled into one. It will house 210 medical suites.