Buying a 30 years leasehold industrial space.

Here’s a brief, practical round-up for anyone considering buying a 30-year leasehold industrial unit in Singapore — like those at Shine@Tuas South — with a focus on lease decay and lease extension possibilities:

Shine@Tuas South a 30 year leasehold B2 ramp up project.

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1. What You’re Buying

• Tenure: 30-year leasehold (usually from Developer).

• Usage: Typically B2 industrial (for heavier manufacturing, engineering, storage).

• Price: Lower per sf compared to freehold or 60-year leasehold industrial properties.

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2. Lease Decay — What to Expect

• Lease starts depreciating visibly after 10 years for some projects.

• Critical thresholds:

• 15 years left: Steeper value drop; reduced buyer interest.

• 10 years left: Financing is difficult; mostly cash buyers.

• <5 years: Market value falls sharply; hard to sell.

Summary: Buy with a clear plan — either use fully within the lease period or exit by Year 15–18.

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3. Can the Lease Be Extended?

• Possible, but not guaranteed.

• More difficult for strata-titled (multi-unit) developments unless:

• Majority of owners apply together through MCST,

• Strong business case (economic contribution, upgrading plans),

• JTC’s strategic intent aligns with site redevelopment or retention.

• Costs: Lease top-ups may cost S$50,000–S$100,000 or more per unit, depending on land value and how early you apply.

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4. Key Pros and Cons

✅ Pros

• Lower upfront cost.

• Good for short-to-mid term business use (e.g. 10–15 years).

• Usually located in established industrial clusters.

⚠️ Cons

• Lease decay hurts resale value.

• Limited financing options after 20 years.

• Lease extension not automatic, uncertain outcome.

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5. Recommendation

• Buy only if you:

• Have a clear 10–15 year business plan,

• Can afford to hold even if resale value drops,

• Are aware that lease extension is not assured.

• Ideal for: Businesses needing space, not investors seeking long-term capital gains.

Here’s a checklist and a simple calculator you can use to evaluate whether buying a 30-year leasehold industrial unit (like at Shine@Tuas South) is suitable for you — based on lease decay risk, costs, and business plans.

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1. Buyer’s Evaluation Checklist

A. Business Use

• Do you need the space for your own operations?

• Will you use it for at least the next 3-5 years?

• Are you comfortable exiting before the lease drops below 15 years?

B. Financial Readiness

• Can you afford higher cash outlay if financing is limited?

• Are you aware that resale value will decline over time?

• Do you have reserve funds to consider future lease extension (if available)?

C. Lease Risk Awareness

• Do you know the lease expiry date?

• Have you checked if other nearby project have successfully applied for lease extensions?

• Are you prepared that lease extensions are not guaranteed?

D. Exit Strategy

• Do you plan to sell before the lease drops below 15 years?

• Do you have a backup plan if resale is difficult later?

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2. Simple Lease Decay & Extension Calculator

Step A: Input Your Unit Details

Field	Example
Unit size	2000sqft
Purchase price	S$700,000
Lease start	2015
Lease expiry	2045
Year of Purchase	2025

Remaining lease = 2045 - 2025 = 20 years

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Step B: Estimate Future Value Loss

Remaining Lease	Estimated Resale Value (psf)	Total Value (for 2,000 sqft)
20 years (now)	S$350	S$700,000
15 years (2030)	S$280	S$560,000
10 years (2035)	S$200	S$400,000
5 years (2040)	S$120	S$240,000

Step C: Estimate Lease Extension Cost

Lease to Top Up	10 years
Land value estimate (2025)	S$130–S$150 psf (industrial B2)
Extension cost (approx)	~20% of land value
Total top-up premium	~S$60,000–S$80,000 (est.)

Summary Output

• Use: Good for 10-15 years business operations.

• Resale: Likely ~20–40% lower in 5–10 years.

• Extension: Uncertain, but budget ~S$60–80k if granted.

The above is based on straight line lease decay, but we mustn't neglect a significant factor call INFLATION. Inflation is a friend for property ownership.

Incorporating inflation into future resale value projections can adjust nominal values upward, but it won’t fully offset the effects of lease decay. Here’s a breakdown:

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1. Inflation Effect on Resale Value

Assume average inflation is 2.5% annually.

Year	Lease Years Left	Price Without Inflation	Adjusted Price (w/ 2.5% Inflation)
2025	20	S$350 psf	S$350 psf
2030	15	S$280 psf	~S$316 psf
2035	10	S$200 psf	~S$260 psf
2040	5	S$120 psf	~S$157 psf

So yes — inflation can make the nominal resale price look higher in future dollars. But here’s the catch…

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2. Lease Decay Still Outpaces Inflation

• Real value (adjusted for inflation) still drops significantly due to:

• Diminishing lease length.

• Limited financing options for buyers.

• Weaker demand for short-lease properties.

Example:

Even if your 2035 unit is worth S$260 psf in inflated dollars, its real purchasing power is still worse than today’s S$350 psf.

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3. Buyer Behavior Ignores Inflation

Buyers base offers on:

• Remaining lease,

• Bank loan eligibility,

• Market comparables,

• Immediate affordability — not future dollar adjustments.

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Conclusion

Inflation can help soften the impact of lease decay in dollar terms, but:

• It won’t restore full value.

• It doesn’t change financing limits or buyer sentiment.

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( Disclaimer : All this response is generated by Chat GPT ver 4. Only for reference only please check with your respective agent for more details analysis. )