SoHo, SoVo, SoLo or SoFo?

This article first appeared in City & Country, The Edge Malaysia Weekly, on October 1, 2018 - October 07, 2018.

Various new terms have been coined to define new commercial properties over the years

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Over the years, various new terms have been coined to define new commercial properties. The terms include small office/home office (SoHo), small office/versatile office (SoVo), small office/flexible office (SoFo) and small office/lifestyle office (SoLo). While some may think of them as a marketing gimmick, what exactly are these units and how do they differ?

JLL Malaysia managing director YY Lau explains that these terms are loosely-defined branding used as marketing tools. “The definitions do not come from the authorities, thus it is up to the developer to decide [what to name their products]. These products started to emerge in the market upon the passing of the Strata Titles Act to cover stratified landed development and the amendment of the Housing Development (Control and Licensing) (Amendment) Act in 2007,” she says.

Of all the terms, the most common is SoHo. These units are generally small and comprise a living room, bedroom and fully-fitted bathroom. Lau explains that SoHos can be used either as an office or a home.

SoFo — offering more flexibility in design and layout — usually do not have partitions. This allows owners to modify their office space according to their preferences. Lau says these units can be used as an office or home, or both.

Meanwhile, SoVos are mostly used by start-up companies as they are equipped with the required technology-related facilities. “SoVos have layouts that are very similar to SoFos, except they can only be used for commercial purposes,” says Lau.

“In a nutshell, with such small units, developers can build higher density projects and bring prices down to a more affordable range. This is a good strategy for a market hungry for affordable properties,” she adds.

According to Knight Frank Malaysia Sdn Bhd corporate services executive director Teh Young Khean, the units have commercial titles but the main difference between them is their purpose, hence the different legal protections and versions of sales and purchase agreements.

“Commercial-titled properties for residential purposes are built on land that is zoned for commercial use. Serviced apartments and SoHos fit the definition of housing accommodation and fall under the jurisdiction of the Housing Development Act (HDA),” he explains.

As they are under the HDA, SoHo units can be used for dwelling and/or certain approved businesses, and owners are entitled to the “once-in-a-lifetime” exemption on real property gains tax (RPGT).

He adds that SoVo, SoLo and SoFo are intended for office use (commercial-titled developments for non-residential purposes), which do not fall under the jurisdiction of the HDA. These units are also not designated for dwelling and owners are not entitled to the RPGT exemption.

Teh explains that when a property falls under the jurisdiction of the HDA, such as a SoHo, disputes can be brought to the Tribunal for Homebuyer Claims. “Disputes [for SoVo, SoFo and SoLo] will be settled in the courts based on the SPA signed by both parties,” he adds.

The one thing that all the products have in common is assessment fees and utility charges that are at commercial rates, which are higher than residential ones.

Rahim & Co International head of research Sulaiman Saheh observes that developers have labelled commercial units based on their unique features or flexibility of usage over the past few years.

For example, EcoFirst Consolidated Bhd defines its project, [email protected] Ukay, as a SoHo development, offering compact designer suites targeted at white-collar bachelors. The units are about 450 sq ft each.

Meanwhile, M101 Holdings Sdn Bhd’s SoFo units launched in the 78-storey M101 Skywheel in 2016 are designed as an office or residence with built-ups ranging from 400 to 800 sq ft.

Elsewhere, Ho Hup Construction Co Bhd’s Aurora SOVO @ Bukit Jalil City offers flexible office suites for both lifestyle and work with built-ups ranging from 601 to 1,305 sq ft.

“In comparing the various units offered with different labels, most of them are primarily for commercial use, with slight differences in the building specifications or amenities provided,” Sulaiman explains.

“The labels are more of a marketing tool than something to differentiate the units based on their function and design. This is similar to the introduction of serviced apartments — they differ from condominiums in that they are built on commercial land. In this case, the commercial units are either built within mixed-used developments or purpose-built-office towers.”