Values of commercial bungalows rising

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IF you drove around the older sections of Petaling Jaya in Selangor, you will not fail to notice the rows of eye-catching commercial bungalows along the thoroughfares. Such properties can also be spotted in popular Kuala Lumpur, suburb Bangsar and in its vicinity.

Of late, growing demand for these bungalows has pushed prices up. Their rental rates have also been on an upward trend, in tandem with the capital appreciation everywhere else in the Klang Valley.

Chan, who runs a bridal shop in a commercial bungalow in Petaling Jaya, tells City & Country that business has been good since his company moved in. "We enjoy better publicity. There is more space for me to showcase our goods and services."

She also notes that in this business, customers appreciate the cosiness and privacy that a commercial bungalow provides.

City & Country met up with two agents in the industry, to better understand the trend.

How commercial bungalows came to be

About a generation ago, these bungalows were built solely for residential use. However, as the children raised in these homes grew, so did the surrounding areas. With the upgrading of infrastructure, widening of roads and the subsequent increase in car ownership, the people who owned homes that fronted main roads faced an unusual predicament.

Increased activity around their homes led to noise and air pollution and made it difficult for them to even get in or out of their driveways.

In 2003, as part of planning control, the local authorities proposed to rezone bungalows in certain areas of Petaling Jaya and Kuala Lumpur, for limited commercial use. The units had to front a main road and the owners were required to renew their permits on a year-to-year basis. The businesses also could not affect the residents in the area or create commercial waste, noise and traffic.

The façades of the commercial bungalows had to be neat and harmonise with the neighbouring houses as well, while the businesses were restricted to art galleries, showrooms (except for cars), agency firms (including travel, marketing and advertising) and professional services such as law, accounting, consultancy, engineering, planning, architecture and interior design.High growth

Shawn Lee, marketing manager of Real Estate Finders, who specialises in commercial bungalows, says there is a misconception that there was a switch in the title of these bungalows, from residential to commercial.

The fact is the bungalows still have a residential title, but have been awarded a temporary commercial licence in the limited commercial zone. And the licence is given by the local authority and not the land office.

According to Lee, tenants with high-end businesses prefer to establish themselves in such areas as Jalan Maarof in Bangsar, and in the vicinity of Kuala Lumpur city.

However, businesses targeting middle to high-income households, choose to be located in Petaling Jaya — in such areas as SS2, Jalan Kemajuan, Jalan Gasing and Jalan Universiti.

While 2-storey bungalows in Petaling Jaya have garnered good demand (compared to the single storey types), the local council has imposed restrictions on the expansion of the existing built-up of such properties, Lee points out.

Victor Lim, managing director of iProp Realty Sdn Bhd, feels that land sizes from 5,000 to 15,000 sq ft are the more popular choice.

On capital appreciation, he opines that growth has been tremendous. "This is due to the fact that commercial properties are getting more expensive," he says, adding that commercial bungalows usually command cheaper rents than shops, but not always.

Lim says 10 years ago, a 3-storey shop in SS2, Petaling Jaya, was going for RM1.5 million to RM2 million. Nowadays, the asking rate could be as high as RM4 million, he adds.

Just a decade ago, tenants only needed to pay between RM75,000 and RM100,000 rent per annum (based on 5% rental yield per annum) to run their business in a shop. Now, they need to pay at least RM150,000 to RM200,000 per annum. That comes up to an average of RM13,000 to RM16,000 a month.

Looking into the crystal ball

Both Lee and Lim believe the value of commercial bungalows has appreciated greatly, especially in Petaling Jaya, due to limited supply and high demand.

The projected price growth is 7% to 10% per annum, depending on the location, says Lim, adding that the demand for commercial bungalows will definitely be strong, due to their small number, and high prices and rental rates.

According to Lee, after the successful urban renewal of Section 13 in Petaling Jaya, there are now plans for a facelift in its other prominent areas, namely Sections 12, 14 and 17.

Last year, Petaling Jaya still offered land for limited commercial zoning with prices ranging from RM250 to RM500 psf — much lower than other limited commercial areas such as Jalan Maarof and Kuala Lumpur city, with prices ranging from RM850 to RM1,300 psf.

The proposed renewal and regeneration will subsequently boost the prices of properties within a 5km radius of Petaling Jaya, says Lee, adding that most commercial bungalows in this city have bigger land areas which offer opportunities for future business expansion.

He believes that Jalan Maarof will continue to grow, thanks to its prominent address and good demand. However, the turnover rate of tenants is high, he says.

He adds that commercial bungalow plots in Kuala Lumpur could be turned into actual commercial plots, if the need arises.

Where the commercial bungalows are located

The commercial bungalows are mostly located in Petaling Jaya, Bangsar and Kuala Lumpur city.

The permitted limited commercial bungalow areas in Petaling Jaya are certain parts of Jalan Selangor, Jalan Othman, Jalan Penchala, Jalan 20/7, Jalan 21/1, Jalan SS2/24, Jalan Universiti, Jalan Utara and Jalan Timur.

The whole stretch of bungalows in Lorong Utara, Jalan Kemajuan, Jalan Pasar, Jalan Datuk Abu Bakar and Jalan Gasing are commercial zones.

Jalan Maarof and certain parts of Lorong Maarof in Bangsar are limited commercial bungalow areas. The limited commercial bungalows in Kuala Lumpur city are centred around Jalan Kemuning, Jalan Inai (off Jalan Imbi) and Jalan Ampang.

Their plus and minus points

Advantages:

• Customisable car park lots for customers and staff• High visibility and free publicity• Added privacy for customers — less human traffic also creates a feeling of exclusivity• Savings on operational cost — there is no need to pay extra for the building and facilities maintenance. Also, residential rates still apply to quit rent, assessment, water and electrical charges.• End users can design the bungalows with characteristics that reflect their business• Flexibility of alteration and use of space• Better working conditions — more ventilation and natural light• Flexibility in office file storage and expansion of workspaceDisadvantages:

• Limited to certain kinds of businesses• Strict zoning in certain neighbourhoods. For example, car showrooms and restaurants are strictly prohibited in MBPJ territory, as they create high traffic and affect residents in the vicinity.• Risk of not being able to renew the permit if the local authorities find a breach of regulations, or if the business faces strong objection from its neighbours.

This story first appeared in The Edge weekly edition of Aug 26-Sept 1, 2013.