Setting up shop in homes

Damansara Utama in Petaling Jaya, more popularly known as DU, is often recognised for its Damansara Uptown commercial square, which has been around for more than two decades. The commercial centre, comprising mainly 4-storey shopoffices and office towers, is still a hive of activity.

In the words of its developer See Hoy Chan Sdn Bhd, “a successful commercial area is always busy”. Inevitably, success will bring the usual crop of problems such as traffic congestion, lack of parking space, limited premises to let and expensive rents.

Fortunately, the availability of bungalows and semi-detached houses near such commercial areas is helping ease some of the pressures. (This is because the Selangor government is  allowing certain residential areas to be used for limited commercial activities.) For example, bungalows in SS2 and on Jalan Gasing have been turned into business premises for florists, clinics, bridal galleries and even furniture showrooms.

City & Country understands that the town planning department of MBPJ (Petaling Jaya City Council) is tasked with identifying residential roads that can be gazetted for limited commercial use. However, the type of activities that are allowed must follow the guidelines set by MBPJ.

In DU, there are about 30 freehold 2-storey semidees in Jalan SS21/1, which are ideal for conversion into offices for small and medium enterprises (SMEs). According to an owner, who did not want to be identified, he had been planning to relocate his company to the shopoffices in Damansara Uptown five years ago but had difficulty getting suitable premises there.

Then he saw the row of semidees on Jalan SS21/1, located opposite a stretch of shopoffices that house companies like TM, Wondermilk and Institute Advertising Communication Training.

Seeing business potential in this row of houses, this astute investor purchased an intermediate 40ft by 100ft semidee, with a built-up of 7,000 sq ft, for RM1 million in 2004. He spent an additional RM400,000 to RM500,000 on renovation and has since converted it into his office.

Ingredients for success

Adrian Wang, CBD Properties Sdn Bhd principal, says demand for commercial space in Damansara Uptown far exceeds supply. This has prompted a number of SMEs to opt for the row of semidees on Jalan SS21/1, he adds.

He tells City & Country that the area “has all the ingredients for success” — it faces a main road, has easy access to amenities available in Damansara Uptown and ample parking space.

“The compound of the semidees can easily accommodate eight cars and are certainly ideal for SMEs. With amenities like banks, food stalls, and public transport available at Damansara Uptown, businesses here will benefit,” says Wang.

Business operators who are reluctant to pay over RM2 million for an en-bloc shopoffice in Damansara Uptown may seriously want to consider opting for semidees since the price is said to be more affordable.
K K Loh, a senior real estate negotiator with The One Property Sdn Bhd, also believes that the semidees on Jalan SS21/1 are ideal for commercial use.

“As more and more companies move to operate their businesses from homes, the semidees here are an ideal choice — they offer private parking and are also cheaper than the rented shopoffices in Damansara Uptown,” he says.

According to Loh, the rent for an en-bloc intermediate 4-storey shopoffice on Jalan SS21/1A, a service road running parallel to Jalan SS21/1, is about RM9,000. Shopoffices on Jalan SS21/1A are said to be less popular than the shopoffices facing Damansara Uptown office towers.

 “The rent for a bare and basic semidee, which has the potential to operate a business on a limited scale, can start from as low as RM5,000. With the current economic downturn, it makes sense for companies to rent space on Jalan SS21/1 to minimise operating costs,” he adds.

For those who stay in the semidees on Jalan SS21/1, CBD Properties’ Wang reckons that the rent is between RM2,400 and RM3,000. “A home located on a busy road will not be ideal for residential use because of the traffic congestion and noise,” he adds.

Higher prices

During a recent walkabout on Jalan SS21/1, an owner tells City and Country that she recently put up her semidee for sale at RM1.6 million. Though she has received many enquiries from interested buyers, she is not in a hurry to sell and will not reduce her selling price.

“As my property can be used for business operation and has been renovated, I believe the rent can easily be between RM5,000 and RM6,000,” she says. The property has a land area of 4,050 sq ft and built-up of 3,000 sq ft.

According to Wang, a bare and basic semidee on Jalan SS21/1 was transacted for RM1.45 million at end-2008. The average units have land areas of 4,500 sq ft and built-ups of 3,500 sq ft, with current asking prices of between RM1.4 million and RM1.5 million.

“Although these homes are quite old, the businesses that started to take shape since 2007 have helped to boost property values. Before 2007, the asking prices for residential homes here were between RM900,000 and RM1 million,” he says.

According to Wang, a corner unit with land area of 7,000 to 8,000 sq ft can easily go for RM2.2 million to RM2.3 million even in today’s economic climate. Suited for showroom use, the rent can be as much as RM11,000 to RM12,000 a month.

An owner bought an adjoining semidee for more than RM1.2 million for investment purposes last year. After completing renovation totalling RM400,000, he is now letting it out for RM10,000 monthly.

There are currently more than five businesses operating from the semidees on Jalan SS21/1, including a used-car dealer, a florist-cum-café, furniture dealers, a home interior outfit and a law firm. There are also about 10 semidees on the same stretch up for sale and lease.

According to Wang, most of the empty lots are for lease as the owners foresee property values going up. “For the first owners, these units have virtually no holding cost if they are not in a hurry to sell. If the economy improves in three years’ time, the owners can enjoy capital gains of up to 20% while rental yields will increase by 30%,” he says.

Both Wang and Loh foresee the stretch of semidees on Jalan SS21/1 eventually being converted for commercial use.

“Usually, the local authorities will allow such residential properties to conduct limited showroom-based business activities, including furniture and bridal shops,” says Wang.

New business theme

However, he says the commercial stretch in DU will not be as successful as those in SS2, where monthly rents can reach RM15,000. This is because of the limited supply of properties in DU which suffers traffic congestion during peak hours.

All that the semidees on Jalan SS21/1 need for success is a “pull factor”, says Wang. Citing commercial stretches in SS2, Jalan Gasing and Bangsar’s Jalan Maarof which are popular for bridal, furniture and car showrooms, he believes a theme is needed to boost business traffic.

“The problem in DU is that there is no theme to attract customers. To differentiate itself from the norm, the business here should focus on interior and renovation works. For instance, businesses dealing with tiles, sanitary fittings and construction can create a focal point for those looking to renovate or move into their homes,” says Wang.

He believes there are more homes located in other areas in PJ that possess the potential to be gazetted for limited commercial use. Among them are Jalan SS1/11 in Kampung Tunku and Jalan 21/37 in Sea Park.
“The properties in these two areas are mostly semidees and bungalows located on the main roads. Traffic volume is high and there is a LRT station on Jalan 21/37,” says Wang, adding that these are ideal for office use.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 748, March 30-April 5, 2009.