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Singapore witnessed moderate demand for strata office and retail units in 1H 2015 as the price expectations of sellers remain high while buyers were less than upbeat of the market considering the rising stock and vacancy rates in the office and retail sector, said Knight Frank in a report.
The report noted that the Total Debt Servicing Ratio (TDSR) regulation continued to put a lid on demand from private individuals.
A total of 115 caveats lodged for strata-titled office spaces In 1H 2015, down 65.4 percent from that a year ago with 332 caveats. On a half-year basis, transaction volume fell 37.8 percent.
Nonetheless, average prices of strata office held firm at S$2,536 per sq ft in 1H 2015 from $2,330 per sq ft in 2H 2014.
Knight Frank attributed the decline in new sale volume to fewer new strata office project launches, while the fall in demand for resale units is due to the cautious approach from prospective buyers “as they witness current owners of newly completed office projects taking longer than expected to source for tenants, and often at lower than expected rents.”
Notably, the proportion of companies and foreigners purchasing strata-titled offices climbed by 1.1 and 0.4 percentage points respectively in 1H 2015, while the proportion of Singaporean purchasers fell 1.5 percentage points.
“The overall office market remains largely dominated by developers and Real Estate Investment Trusts (REITs). Strata office units typically appeal to companies with preferences for medium-sized office spaces of approximately 500 sq ft and up,” it said.
Meanwhile, transaction volume of strata retail units fell 52.2 percent to 119 caveats lodged in 1H 2015 from 249 in 2H 2014.
Knight Frank noted that as owners of newly completed strata retail projects struggle to attract tenants, “prospective investors are also taking a cautionary approach, resulting in softening demand.”
With this, Knight Frank expects the backdrop for the retail segment to remain challenging in 2015, with island-wide occupancy rate reaching a new low of 92.8 percent in Q2 2015.
“Overall sale transaction volume of strata office and retail units in 2H 2015 is anticipated to remain flat at 180 to 220 units, bringing the total transaction volume to approximately 420 to 470 units for the full year of 2015,” it said.
“Demand for space is moderating in general, amid an uncertain economic outlook. Further, savvy buyers are also observed to be less interested in the strata commercial market, as they become cognisant of the high vacancy rates in several recently-completed commercial projects,” added Knight Frank.
Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this or other stories email nikki@propertyguru.com.sg.
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