$31m coffee shop? Experts say not all coffee shops are property gold mines
$31 million coffee shop price tag rare, buyers are often seasoned investors who know how to turn a profit
The hefty $31 million price tag paid for a Bukit Batok coffee shop does not mean all coffee shops are gold mines, said property experts.
The roughly $6,856 per sq ft paid last month for the 19-stall Yong Xing Coffee Shop at Bukit Batok Street 11 makes it the most expensive here.
But coffee shops are a niche sector of the property market, industry experts told The New Paper.
Mr Eugene Lim, ERA Realty's key executive officer, said the demand for coffee shops is relatively low.
He said: "The volume and frequency of coffee shop transactions is very small compared to residential or commercial properties."
Mr Lim added that buyers tend to be parties who are familiar with the business.
"Buyers are usually seasoned investors and operators, or if they are a new group, they may be breakaways from a larger and more experienced group."
And these buyers do not simply shell out money, many are actually active investors, said Mr Ku Swee Yong, chief executive officer of Century 21 Singapore.
Mr Ku explained: "A lot of them operate their own assets.
"It's very likely that they run at least one stall themselves to recoup their investment.
"If they run the drinks stall, they can make a net profit of $10,000 a month."
Mr Ong Kah Seng, director of property market research company R'ST Research, pointed to the low maintenance cost of coffee shops - "compared to commercial properties" - as the key reason why buyers are willing to fork out sky-high prices.
He said: "They also have no air-conditioning so their running costs may be comparatively lower."
Mr Ong added that the coffee shop business is attractive to investors as it is relatively low-risk.
"For buyers who know what they're doing, they have a tried-and-tested formula that doesn't require much tweaking."
The $31 millionpaid is a sharp increase from the previous record of $23.8 million, set in 2013 for a coffee shop at Hougang Avenue 4. (See report on facing page.)
But these prices are exceptions rather than the norm, said Mr Ong.
He said: "In far-flung areas like Bukit Batok, where food and beverage options are limited, prices are driven up by the location. But I don't think most coffee shops will fetch such high prices."
Likewise, Mr Hong Poh Hin, 60, vice-chairman of Foochow Coffee Restaurant and Bar Merchants Association, which represents more than 400 coffee shop owners here, does not foresee a sustained rise in coffee shop prices.
Mr Hong said: "Ultimately, the price depends on the location and return on investment, but the market is quite stable now.
"The most important thing is to avoid passing on the extra costs to the customers."
"In far-flung areas like Bukit Batok, where food and beverage options are limited, prices are driven up by the location. But I don't think most coffee shops will fetch such high prices."
- Mr Ong Kah Seng, director of property market research company R'ST Research
Patrons don't mind slight price hike
Patrons of Bukit Batok's Yong Xing Coffee Shop can stop worrying about extreme price hikes if the previous record holder at Hougang is anything to go by.
Prices at Broadway Food Centre, the Hougang Avenue 4 coffee shop, have increased by only 10 or 20 cents on average, The New Paper observed.
For example, a bowl of ban mian now costs $3, compared to $2.80 two years ago and a bowl of wonton noodles that used to be priced at $3 is now $3.20.
Stallholders declined to comment on the rental fees at the coffee shop, but Mr Ong Kah Seng, director of R'ST Research, estimated that monthly rentals can range from $4,000 for a normal stall to $6,000 for larger stalls such as the drinks or tze char stall.
A manager of the Western cuisine stall, who wanted to be known only as Ms Liew, 33, said that although costs of running the stall might rise, they cannot raise their prices by too much.
"This is not a restaurant. We can't raise prices (too high) because it's a coffee shop and if we do, people wouldn't come," she said.
However, a worker at the Geylang Prawn Noodle stall who wanted to be known as Ms Yue, said that even though they have raised prices by 20 cents, the number of customers is still the same.
"All of them are familiar customers and they all live nearby... (They) can come eat here seven days a week," said the worker who is in her 50s, speaking in Mandarin.
"As long as (the food) is good, the customers will keep coming back."
Business was indeed brisk when TNP visited on Tuesday afternoon and most tables were occupied.
Patrons whom TNP spoke to did not seem to be affected by the price increase.
The change in price has been negligible to some customers, such as Mr Yap Keat Yap, 73, who has been going to the coffee shop before it changed hands.
"I don't think there has been a change in prices. I have not noticed," he said.
Mr Brandon Toh, 20, who has been frequenting the coffee shop for about 10 years, said: "I noticed the price difference (compared to two years ago), but I don't really feel the pinch."