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At the 30-storey Samsung Hub, a Grade-A office tower at the corner of Church Street in Singapore, an entire floor measuring a total of 13,132 sq ft on the 20th level was sold at end-August for close to S$36.77 million, or S$2,800 psf. The buyer of the 999-year leasehold office space is said to be an overseas investor who bought the space for personal use. The deal was brokered by Tang Wei Leng, executive director of investment services at Colliers International. It has set a new price benchmark for the building as well as the CBD.
Prior to that, the other whole-floor transactions at Samsung Hub were on the 13th and 14th levels, both measuring 13,111 sq ft each and sold for S$33.43 million (S$2,550 psf) each. CB Richard Ellis had brokered the sale, and the buyer is said to be Arch Capital, a property fund linked to the Ayala Group of the Philippines. “The strata-titled office market is still quite vibrant and active,” says Jeremy Lake, executive director of investment properties at CBRE.
Suntec City is also another popular choice for investors looking at Grade-A strata office space. At Suntec Tower Three, a 4,833 sq ft 99-year leasehold space on the 35th level changed hands for more than S$12.8 million (S$2,650 psf), according to a caveat lodged in early August. In July, a smaller unit of 2,928 sq ft on the 36th level of Tower Three was sold for S$8.052 million, or an average of S$2,750 psf. This is the highest price psf achieved since January 2000, when a 2,314 sq ft unit on the 18th floor of Suntec Tower One was sold for close to S$6.55 million, or S$2,830 psf.
CBRE is marketing an entire floor of 10,097 sq ft on the 35th level of Suntec Tower Two. The space will be sold with existing tenancy at the committed rental rate of S$6.50 psf a month, with the lease expiring in January 2013. The space is available for sale via private treaty. The indicative price is S$2,800 psf, or an absolute price tag of S$28.27 million.
Meanwhile, another 10,097 sq ft unit on the 41st level of Suntec Tower Two was put up for sale by tender, which closed on Sept 28. The unit has panoramic views of the Marina Bay area, including the Marina Bay Sands, says Susie Mok, director of investment sales at Savills Singapore, who is marketing the space. The indicative price of the floor was S$28 million, which works out to S$2,773 psf. The floor will also be sold with existing tenancy at an average rate of S$6.50 psf a month. The leases will expire in 2013.
“There are very few such whole-floor units available for sale on such a high floor,” says Mok. “It would appeal to business occupiers looking for a premium office space.” Besides local companies, there was also interest from mainland Chinese companies that like the location and views, she adds.
There are many China-based businesses looking at buying their own office premises, and they tend to be attracted to the likes of Suntec City and Samsung Hub, which is probably one of the newer Grade-A office buildings with strata-titled space in the CBD, observes CBRE’s Lake.
There are also investors who had otherwise been interested in the condominium or bungalow market but were driven to the commercial sector because of government measures in mid-January that introduced a hefty seller’s stamp duty, financing restrictions, and other attempts at slowing down the residential market.
“These factors have curtailed their enthusiasm for the [residential] sector, and generated new entrants to the strata-titled market because in the commercial sector, you can get even better financing terms,” says Lake. “As an end-user, you might be able to get 80% loan-to-value ratio, and as an investor, 70% financing.”
In addition, property yields for strata office space are still hovering around 3.5%, compared with residential, which may be just 1% to 2%. “So, actually those looking at alternatives to residential find it quite refreshing to consider the commercial sector,” adds Lake.
Shaun Poh, DTZ’s head of investment advisory services, agrees. “There’s still a steady demand for strata office space even though the market is a bit jittery,” he says. “There’s still plenty of liquidity in the market, borrowing cost is still low, and there are business owners who are still interested in buying office space for their own use. It’s also the preferred choice for foreign investors who are not familiar with the strata-titled industrial space, which is seeing interest mainly from local investors.”
The largest strata commercial transaction last year was the sale of 163 units at The Adelphi, a 10-storey office-cum-retail development at the corner of Coleman Street and North Bridge Road, in the Civic District. The units were purchased by the 50:50 joint venture between listed conglomerate Guthrie GTS and Sun Venture Property from giant developer CapitaLand last December for S$218.132 million. The number of units involved was 77 retail shops totalling 43,045 sq ft and 86 office units totalling 135,022 sq ft. The deal was brokered by CBRE.
In March this year, the joint-venture partners appointed CBRE to sell the strata units at The Adelphi on their behalf. In the space of the last six months, as at end-September, CBRE had sold 35 office units worth S$113.39 million, with a total sale area of 58,738 sq ft. Prices achieved ranged from S$1,675 to S$2,320 psf.
There are another 35 office units available for sale at The Adelphi, with units measuring 495 to 3,455 sq ft. Asking prices are said to be from S$1,800 to S$2,450 psf. There is a whole floor space of 25,370 sq ft on the topmost level of the 10-storey building. Such penthouse floors are rarely available on the market, notes CBRE’s Lake. Several parties have already expressed interest in the space, which has an indicative price of S$2,150 psf.
CBRE also sold eight retail units at The Adelphi worth S$13.18 million and covering a total area of 4,617 sq ft. Prices achieved ranged from S$1,814 to S$4,040 psf. Five other shop units are up for sale, with sizes ranging from 398 to 4,090 sq ft. Asking prices are from S$2,000 to S$4,255 psf. Total gross sales achieved from the divestments of both strata office and retail space at The Adelphi amounts to S$126.58 million so far, according to CBRE.
So far, there has been an even split between the number of owner-occupiers and investors, notes CBRE’s Lake. The profile of buyers covers a wide spectrum — from law firms, insurance companies and consultancies to high-net-worth investors and local enterprises. There are also several foreign buyers. “Depending on your budget, the strata-titled commercial space is a fairly liquid market, and it’s quite easy to enter,” he adds.
Some key attractions of The Adelphi are its 999-year leasehold tenure, which some consider equivalent to freehold, and that it is within walking distance of City Hall MRT station and Interchange. Across the street is the Capitol Theatre site, which is undergoing a S$750 million makeover into a mixed-use development with a retail mall, restaurants, a 250-room luxury hotel, and high-end residences. The new repositioned Capitol site is scheduled to open in 2H2014.
Adjacent to The Adelphi are the Supreme Court and City Hall buildings, which will be linked to the upcoming National Art Gallery. With both the National Art Gallery and Capitol site expected to be completed by 2014, all of Civic District will be rejuvenated. “And that’s what is creating some excitement among investors,” notes Lake.
Meanwhile, adjacent to the Capitol site is the 31-year-old Peninsula Plaza, also a 999-year leasehold mixed-use complex. Despite its age, it still sees interest from business owners, retailers and investors as it has a catchment of its own. The most recent transaction of a shop unit was of a 463 sq ft unit on the fourth level that changed hands for S$1.78 million (S$3,846 psf) in August. Interestingly, the highest price psf achieved for a shop unit was in May, when a 592 sq ft space on the first level was sold for S$3.256 million (S$5,500 psf).
As for strata-titled office units at Peninsula Plaza, the most recent transaction was of a 495 sq ft unit also on the fourth level and sold for S$1.14 million (S$2,302 psf) in July. It is the highest price psf achieved since late 2007, when a 614 sq ft unit on the third level changed hands for S$1.52 million (S$2,477 psf).
CBRE’s Lake says the strata office space is “quite active”. “A business owner with a bit of cash sitting in a bank earning next to nothing [given the near-zero interest rate] may be tempted to say, ‘Why don’t we use some of this cash to buy our own office premises?’ This wave is something we’re seeing — be it at Samsung Hub, Suntec City or The Adelphi,” he says.
Cecilia Chow is the editor of City & Country The Edge Singapore
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 879, Oct 10-16, 2011
