Is strata-office space getting a little too crowded?

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/ The Edge Property
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May 26, 2015 12:00 PM SGT
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There has been a deluge of strata-office projects for sale in and around the CBD Core.
In March, GSH Plaza was launched for sale on a strata-title basis.
The building is undergoing refurbishments and on completion late next year, there will be 259 office units from the third to 28th floors, and 21 retail and F&B units on the first and second levels.
The 99-year leasehold building (with effect from 1989) was the former Equity Plaza, which a GSH Corp-led consortium had purchased last June for $550 million.
Of 100 strata-office units released in GSH Plaza, more than 60 have been sold so far, with prices said to be in the range of $3,200 to $3,500 psf.
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Following the success of Guthrie GTS’ strata-office forays with Sun Venture at The Adelphi and Burlington Square, Guthrie GTS purchased the former 2HR (previously known as Apollo Centre) for $282.88 million in 2013 in a deal brokered by CBRE.
The former 2HR has been rebranded Havelock II and is in the midst of a $40 million upgrade that will be completed next year.
A total of 94 strata-office units have been offered for sale since last August, of which a third have been taken up.
Units range in size from 312 to 2,357 sq ft and have been sold at prices ranging from $2,300 to $2,700 psf, notes Sammi Lim, associate director of investment properties at CBRE, which is also marketing the strata-office units.
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Guthrie has 151 retail units for sale as well, with sizes ranging from 150 to 1,335 sq ft and transaction prices ranging from $3,549 to $6,243 psf, according to caveats lodged.
The 99-year lease on the building is with effect from 1983.
In May last year, a KOP-led consortium, which included Lian Beng Group, purchased a 92.8% stake in Prudential Tower for $512 million.
A 5,952 sq ft, half-floor unit on the 11th floor was sold last October for $2,750 psf, and a second half-floor unit on the 19th floor of 5,016 sq ft was sold for $2,802 psf, according to a caveat lodged on April 15.
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KOP is looking at further subdivision of units for sale.
The building has another 80 years on its 99-year lease.
Anson House, a 13-storey office building on Anson Road, was purchased by German investment management firm SEB Asset Management for $172 million last July.
It will also be carved up into strata-office units for sale.
The 99- year lease on the building started from 1997, hence it has 81 years left.
JLL is the marketing agent for the property.
The average sale price for strata units at Anson House is $2,900 psf, says Anthony Barr, JLL’s regional director of investments.
Some of the units are sold with existing tenancy, while others are sold with vacant possession.
“There is demand for this type of asset from investors and tenants looking to switch to ownership,” he notes.
The former Chow House on Robinson Road, which was purchased by a WyWy Group-led consortium in 2010 for $175 million, is being redeveloped into the new Crown Robinson.
Of 80 strata-office units in the tower, only those from the eighth to 10th levels have been made available for sale to individual buyers.
The units from the 11th to 17th floors are being reserved for bulk purchases.
The appointed marketing agent is Huttons Asia.
The building is located between Oxley Holdings’ newly completed Robinson Square and the upcoming Oxley Tower.
Given that it is a freehold development, the indicative selling price for the strata-office units at Crown Robinson is said to be from $3,400 to $3,700 psf.
There are also six retail shops and two F&B units within the development, but they will not be put up for sale.
Word on the street is that the 50-storey AXA Tower, which was purchased at the beginning of the year by a Perennial Real Estate-led consortium for $1.17 billion, is also exploring the possibility of subdivision for strata sale of office units.
That could add another 675,000 sq ft of strata-office space on the market, estimates a property consultant.
Mary Sai, executive director of investment and capital markets at Knight Frank, says: “There is no lack of demand, but with the recent acceleration of new supply of strata-office units on the market, buyers have a lot more choices.”
According to Christine Li, director of research at Cushman & Wakefield, the 0.63% q-o-q increase in prices of office space in the Central area in 1Q2015 compared with 2.45% in the previous quarter, “is a sign that market prices could be peaking soon after increasing 54.7% from the previous trough in 3Q2009”.
And if AXA Tower were to be included, the total stock of strata-office space available on the market could increase to 1.5 million sq ft, estimates a property consultant.
“The concern is buyers who had purchased strata-office units in projects such as PS100, Robinson Square and SBF Centre, which were launched a few years ago and are now being completed,” he says.
“If these investors can’t secure tenants for their units, they will try to offload them in the secondary market, and this will put further pressure on prices.”
This article appeared in the City & Country of Issue 675 (May 4) of The Edge Singapore.

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