Singapore

IT takes plenty of guts, foresight and vision to transform unused spaces off the beaten track into attractive office areas, but this is what LHN Group has been excelling in over the past few years.

Specialising in what they term "space optimisation", LHN Group's unique business model entails taking master leases for unused and under-utilised industrial, commercial and residential spaces, enhancing them to increase their net lettable space and value, and then leasing them out to sub-tenants.

The family business has undergone a significant transformation since it started in the early 1990s, say group managing director Kelvin Lim and group deputy managing director Jess Lim.

 

"The company was started by our father, and was originally in the saw-mill and timber trading business," says Mr Lim.

"As the operations wound down, he found that the excess factory space, once renovated, could be rented out for additional income and started doing so in 1991."

Back in the early 1990s, their father saw the potential business in providing business space to businesses operating in "kampungs" which were undergoing relocation and urbanisation.

In the late 1990s, as Singapore started to recover from the 1997 Asian financial crisis, the company saw that there were many opportunities in providing business space as there was rapid growth attributed to new foreign direct investment.

"At the same time, there was a wave of local entrepreneurs who started to set up new businesses. Hence in 1999, we made the decision to pursue our space optimisation business," says Ms Lim.

The company has grown from strength to strength since their early days, adding a variety of support services to complement space optimisation as their core business. The firm branched into providing logistics solutions in 2003, which provides transportation, warehousing and container depot services.

In 2006, LHN Group extended their business and expertise to include addition and alteration work. This enabled the company to spruce up spaces and increase the net lettable area.

"This way, we are able to increase the value of each property by having more productive space," says Mr Lim.

The same year, the company also started to offer commercial and residential space in addition to industrial space.

"As a master leaser, we also provide support services such as facilities management through our facilities management business segment. Within this service, we generate higher value for the asset by up-keeping the property for our landlords as well. This in turn provides a stress-free and productive environment for our tenants," says Mr Lim.

Keeping it green

In 2012, as an extension of their space optimisation business, LHN Group launched GreenHub, their brand of suited offices. GreenHubs in Singapore and Jakarta are set in tranquil and green environments located in their city fringes and equipped with world-class business amenities.

"Our target customers are firms which have the potential to become international players. GreenHub offers them a conducive serviced office environment including secretarial support, facilities management and security, which enables them to focus fully on growing their business," says Mr Lim.

The company has since opened two more GreenHub offices in Singapore and opened their first GreenHub office in Indonesia in the middle of 2014. Today, LHN Group manages 4.5 million square feet of net lettable space and employs more than 300 staff.

Small and newly-started businesses tend to have tighter budget constraints, and small-medium sized enterprises (SMEs) are increasingly looking at how to make their space more productive. This is where LHN Group can play a meaningful and valuable role, say Mr and Ms Lim.

"Within our portfolio, we provide suitable spaces that can cater to every stage of an SME's life cycle. In that sense, we are able to grow with our clients," they explain.

For example, companies which are in the exploration stage may use GreenHub's virtual office services to suss out new markets. Once they have ascertained that there is potential for growth, they may rent a small serviced office space from GreenHub with a few workstations. As the business grows to a certain volume, they can then lease traditional spaces from LHN Group's space optimisation business arm.

"SMEs are very drawn to our city fringe locations due to the value and services that we are able to offer. As these locations are not in the prime CBD area, the rent is lower and they can save on things like parking as well," says Mr Lim.

According to him, the flexibility they offer to SMEs is a big draw as the company can cater to their space usage trends. In addition, transparency by having no hidden costs is another factor.

Out of the old

Mr Lim adds that more recently, they have noticed a trend of SMEs expressing a greater acceptance of commercial space in refurbished old buildings, especially when such properties are well-designed and laid out.

"We do find that old buildings are usually unused and under-utilised only in terms of its plot ratio, not net lettable area and layout. We also feel an affinity towards old buildings especially if they bear old architectural designs and rich histories," says Mr Lim.

One of their refurbished spaces is Phoenix Park, a commercial property at Tanglin Road that formerly housed the Ministry of Home Affairs. After their enhancement initiative, the property now has a net lettable space of 125,000 sq ft, from 110,000 sq ft previously. It offers amply spaced out premises with plenty of parking space and currently houses a mix of tenants including enrichment centres for children as well as other commercial businesses.

"The location is very near to Orchard Road and boasts lush greenery. As such, we have managed to attract a lot of companies in the creative line as they require a quiet and peaceful environment to carry out their work," says Mr Lim.

Also, despite the proximity to Orchard Road, their rents are not high.

"Overall, we enjoy an average occupancy of over 90 per cent across all our properties," he says.

Despite the impressive growth achieved in such a short span of time, LHN Group does not intend to be content with the status quo.

The company is looking to set up their space optimisation business in all markets and their strategy is to use GreenHub as a vehicle to expand throughout South-east Asia.

In addition, the company is exploring the feasibility of becoming landlords themselves and applying their space optimisation knowhow on their own properties. "In the long term, we want to be a regional group regarded and renowned for being a one-stop real estate management services company," says Mr Lim.