habitat by honestbee which incorporates retail operations in an industrial setting is a key example.
The modernisation of Singapore’s manufacturing sector has increasingly led to a change in leasing requirements, where tenants are on the lookout for buildings with higher specifications, according to an industry report by CBRE.
Along with the phase out of sunset industries, occupier movement from older buildings to new-builds have become more active, contributing to higher vacancies in older buildings. As at Q1 2019, vacant industrial stock stood at 53.97 million sqft, data showed.
But to prevent these buildings from becoming obsolete, landlords are considering alternative uses, with the re-adaptive use of older buildings posing as a win-win for both landlords and occupiers.
“Industrial landlords could benefit from signing leases with a wider pool of tenants, which compromise retailers who are able to qualify for both the 40% ancillary space and 60% industrial space,” CBRE Southeast Asia’s head of research Desmond Sim explained. “This could be beneficial for cost-conscious occupiers who can reap substantial savings, particularly in a rising business cost environment.”
honestbee reportedly became the first startup to receive approvals to incorporate a large-scale retail operation in an industrial building in a move that suggests a growing flexibility in the use of industrial space.
In October 2018, honestbee launched habitat by honestbee, a high-tech supermarket and dining concept which took up 60,000 sqft in 34 Boon Leat Terrace. Dubbed as “NewGen Retail” by honestbee’s CEO and founder Joel Sng, habitat also features two “world firsts”: a cashless checkout experience called AutoCheckout and a robotic collection point called RoboCollect.
According to Sim, honestbee had the support of Enterprise Singapore (ESG), and they adhered to planning guidelines where its premise within Boon Leat Terrace is within the maximum 40% allowable for ancillary use in an industrial building.
“These jointly supported their case towards the use of industrial space for their retail warehouse facility. A plus point is that the site is located on privately-owned industrial land, which omits the typical leasing encumbrances imposed by JTC land,” Sim highlighted.
CBRE further noted that the establishment of habitat rejuvenated the Pasir Panjang precinct, which is predominantly an industrial area.
“honestbee, as a precedent case, could spark more retail businesses exploring the location of their brick-and-mortar stores in industrial warehouse,” Sim noted.
Similarly, one precinct that has undergone notable transformation within the Hougang Planning Areas is Tai Seng, which is also predominantly an industrial area comprising a number of B1 or B2 sites with a white component. CBRE Research noted that this has allowed the emergence of industrial buildings with retail shopfronts, and thus the precinct boasts a mixture of old and new food establishments in the retail podium of industrial buildings.
Food factories and central kitchens can also be commonly found in the Tai Seng precinct, driven by the rising popularity of food delivery services and the need for food and beverage (F&B) operators to streamline their operations to lower property costs.
“Together with the government’s push for greater productivity and innovation in Singapore’s food industry, this burgeoning market has become a niche segment on its own,” Sim said.
Regulatory challenges to revitalising industrial spaces
However, the authorities have maintained that whilst flexibility is essential to support core industrial activities and pilot new ideas for businesses, certain factors still have to be taken into account including base case, maintaining balance and catalyst.
Contrary to popular belief, retail use in industrial space is not as common as it is perceived. To be eligible for a change of use, interested parties must keep the retail component within the maximum 40% allowable ancillary use in an industrial premise.
“Land that is zoned B1 or B2 is still primarily used for industrial activities, so as to safeguard the interests of core manufacturing and industrial businesses,” Sim explained. “It is important to note that development charge is payable for the conversion from industrial to commercial use, as the land will typically be rezoned to a use of higher value.”
Apart from considering the context of the site, another factor that the Urban Redevelopment Authority (URA) takes into consideration is the impact on the surroundings. Sim highlighted that in this context, it is essential for industrial buildings to maintain a reasonable balance of retail and warehouse, such that the new business must not affect the building or its surroundings.
“Lastly, interested parties, who have support from economic agencies such as ESG, will have an edge for assessment. Their case will be further strengthened if the proposal has strong merits in the areas of business innovation, productivity and technology,” Sim said. “This is to encourage businesses to boost productivity whilst reducing reliance on labour, which is a vision that the Singapore government has been pioneering since 2009.”
Do you know more about this story? Contact us anonymously through this link.