Orchard Towers: When the world’s oldest profession complicates the property market

Orchard Towers, a building designated as a red-light district in Singapore.Orchard Towers, a building designated as a red-light district in Singapore.

Orchard Towers, long infamous within Singapore for being zoned for legal prostitution, could see a sharp swing in its tenancy, with a large chunk of its retail space on the block.

Often referred to as “four floors of wh***s,” Orchard Towers has a storied history as a red-light district situated amid the tony Orchard Road shopping belt and surrounded by ultra-luxury condos and a nearby country club.

It’s not clear if that history will be a stumbling block for some potential buyers.

V.R. Chandran, managing director for Cosmopolitan Group, is the agent representing the seller. Chandran describes the property as spanning 22,000 square feet over four floors, with a few different clubs, as well as an around 600 square foot office.

Chandran described the earnings from the main club as “handsome,” but declined to provide exact figures.

The building, which was completed in 1973, is around 595,066 square feet over 25 floors and 361 carpark spaces, according to ST Property. Only the four retail floors are zoned for legal prostitution and much of the rest of that tower is given over to office space; the second tower contains luxury condos.

The building is strata titled, which means that retail and office space is carved up and sold much like a condominium.

Chandran said the seller was seeking upwards of around S$95 million for the property, compared with an estimated value of S$125 million. Chandran said he expected a regional buyer, potentially in the entertainment industry, would be interested.

But a potential buyer could see continuing to operate bars and clubs in the space as bringing a high level of potential reputational risk, especially as ESG — environmental, social and governance — has moved solidly to the forefront of investors’ calculations.

Orchard Towers has been the scene of incidents of trafficking over the years, and many of the sex workers are not working there legally. The government issues “yellow cards,” which are valid for less than a year, to legal sex workers, indicating they’ve undergone regular health checks. But often, people will enter Singapore and illegally take up sex work.

In 2013, a syndicate kept 26 Filipino women locked up during the day and then took them to an Orchard Towers bar at night to work as prostitutes and hostesses, according to a Straits Times report. Bar owners can not legally take a portion of sex workers’ earnings.

The building is also subject to police monitoring.

“The police have been keeping a close watch on the vice situation in the vicinity of Orchard Towers. Police will continue to carry out enforcement actions in this area, and work with the building management on measures to keep out vice activities,” the Urban Redevelopment Authority and the Singapore Police Force said in an emailed statement to Shenton Wire.

Vanessa Ho, the executive director at Project X, a non-governmental organization which advocates for sex workers, told Shenton Wire recently that exploitation of sex workers tends to run on a scale from people being completely free to come and go, to being required to pay higher fees, or to meet quotas, to more coercive environments, which can include having their passports taken away and being forced to do things they don’t want to do.

Ho said that often women are too afraid to come forward, and she cited one case where a sex worker wouldn’t file a police complaint against her agent because the agent knew her family, and she feared they would be threatened.

Any potential buyer of the retail space would need to calculate the possibility of a media backlash and repercussions to reputation if an exploitative situation came to light.

Banking on the club scene?

She also said that visitors to Orchard Towers, even the stereotypical sailors just off the boat, were often more interested in partying than prostitution.

“It’s famous for clubs [that are] open to 7-8 a.m.; others close at 4-5 a.m,” she said, but added that “night life is hard to separate from the sex industry; the lines are blurred.” Ho noted that legally, prostitution is only defined as exchanging sex for money or gifts, which can lead to murky distinctions.

Potential buyers of the bar will also need to weigh a risk to the stereotypical sailor trade: The U.S. Navy has in the past restricted its sailors from going to Orchard Towers after incidents involving the police. The U.S. Department of Defense didn’t return Shenton Wire’s emailed request for comment on whether the ban was still in effect.

Property and technology investor Alexander Karolik Shlaen, an economist and CEO of Panache Management, a luxury brands and investment adviser, said Orchard Towers has become “more of a curious site to visit than a wh***e house per se.”

He said that while it might be a “messy semi-red light district,” it doesn’t appear to affect the values of the high-end properties around it. Shlaen called it a “ridiculously small island in the middle of the most fancy area of Singapore.”

To be sure, the clientele of the four floors may not necessarily be directly engaged in the sex trade. For one, the Thai restaurants there are well-respected; the building is located near the Thai embassy. It also has its share of typical tourist-facing businesses, such as tailors, manicurists, money-changers and travel agents.

A new owner of the location could shift it to an entirely different business, such as office space, if the world’s oldest profession proves too great a weight on the property’s value or offers too much risk.

 

Orchard Towers, a building designated as a red-light district in Singapore.

Orchard Towers, a building designated as a red-light district in Singapore.

“For people who want to cater to this crowd, it’s a beautiful piece of property in a prime location,” Shlaen said, adding that as a property investment, the building’s age means it could go en bloc, which means the building would be sold in its entirety to a developer for re-development.

That generally requires owners of at least 80 percent of the property to agree to sell out; en bloc sales usually bring the sellers premiums over a property’s valuation.

“I’m skeptical that once this building goes down that it will be resurrected” as a red-light district, Shlaen said.

Analysts in general have been reluctant to talk about the Orchard Towers location, although that’s likely in part due to a dearth of data tracking strata titled retail properties, which are retail properties which have been divided and sold much like condominiums.

By way of comparison, the nearby Forum shopping mall, which spans only five retail levels, was valued at S$421 million, according to a valuation from Knight Frank at end-December.

Dragging down rents?

But there are signs the building’s history weighs on rents there.

Orchard Towers retail commercial space rents range from S$3.13 per square foot to S$14.29, according to listings on Property Guru on Wednesday.

That compares with the average retail rent in the surrounding Orchard Road shopping belt of S$15.00 per square foot in the fourth quarter, according to data from the Urban Redevelopment Authority. Even office rental rates in the area appear to outperform much of Orchard Towers’ level, with an average of S$7.10 per square foot.

Orchard Towers’ rental underperformance comes even as data from real estate services firm JLL showed Orchard Road’s retail vacancy rate dropped to only 5.1 percent in the fourth quarter of last year, its lowest since 2014 and the lowest among other regions in Singapore.

“[The shopping belt’s high occupancy rate] attests to the street’s continued appeal to new-to-market brands as well as those looking to expand their footprint in Singapore,” JLL said in a note in January.

The improved retail performance on the rest of Orchard Road comes as the city-state looks to rejuvenate the shopping belt, which has been pressured by the rise of e-commerce. That’s made luxury-brand shopping less of a must-do for tourists.

That rejuvenation plan aims to both make Orchard Road a lifestyle destination and to “bring back the orchard.”

It includes adding more arts and cultural offerings at the northwest end of the area, more street activities and better pedestrian connectivity around the Orchard and Somerset MRT, or subway, stations, and more youth-oriented activities and events.

Part of the plan calls for converting a car park into event space, and creating more green space around the southeast end of the area, near the Dhoby Ghaut MRT, including adding nutmeg and clove trees as well as themed gardens to point toward the area’s origins.

When asked by Shenton Wire, the URA didn’t comment directly on how the shopping belt’s red light district will mesh with the rejuvenation plan it launched in January. Its maps for the plans don’t label Orchard Towers, although other large properties also weren’t labeled.

Correction: This article has been updated to clarify the legal status of Orchard Towers’ four retail floors.

 

A map of the rejuvenation plan for Singapore's Orchard Road shopping belt. Credit: Urban Redevelopment Authority

A map of the rejuvenation plan for Singapore’s Orchard Road shopping belt.
Credit: Urban Redevelopment Authority

 

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