Increasing interest in small office space

Hopes of recovery in commercial unit sector turning it into alternative investment

Investing in a condominium unit may be popular here, but some buyers are opting for a very different part of the property market.

They have turned to the office sector to pick up strata-titled office units as an alternative form of investment, as hopes of a recovery in the office market grow this year.

These strata offices are units in an office building that have been sold piecemeal unlike most office blocks, which are wholly owned by an investor or developer.

Indeed, the strata office sector was the only commercial unit sector that staged an improvement in sales activity in the first half of this year, compared with the second half of last year, said Knight Frank.

Its latest data showed that 163 strata offices changed hands in the first six months of this year, which was 16 per cent more than in the previous six-month period.

The value of these deals reached $368 million, up 73 per cent from the second half of last year.

Strata offices priced from $1 million to less than $2 million attracted the largest group of buyers at 59 deals in the first half, it said.

Buyers also like strata offices priced from $500,000 to less than $1 million. There were 44 deals in this price band in the first half.

For instance, caveats show that a 441 sq ft unit at the 999-year leasehold Peninsula Plaza went for $663,000 or $1,502 per sq ft in late April.

Knight Frank’s executive director, auctions (commercial), Ms Mary Sai, said the volume improved from the low numbers registered last year when sales slowed substantially owing to a lacklustre office market.

Said DTZ’s senior director for investment advisory services & auction, Mr Shaun Poh: ‘We see more people looking at strata offices for investment. The commercial market has gone down quite substantially so people are looking at a recovery.’

Stronger signs of a sustained economic recovery this year, including an improved business climate, are supporting the office market, said Ms Sai.

Experts said prices of strata offices have generally risen and moved ahead of rents.

‘Yields are low now at 3 per cent, but investors are buying now in anticipation of higher yields of 4, 5 per cent,’ said Mr Poh.

Source: Sunday Times, 4 Jul 2010