A resale at the recently completed PS 100 commercial block posted a loss of about $430,500 late last month – a stark sign of the lacklustre strata office market.
The building in Peck Seah Street sold all 100 of its office units on its launch weekend in 2012 at the height of the market.
PS 100 was completed in the fourth quarter of last year and only about 20 units are occupied.
The 517 sq ft unit went for $1.73 million at launch but was sold at $1.3 million on Sept 20.
The struggles at PS 100 are symptomatic of the strata office market across the island.
The segment suffers from lack of rental demand, as smaller firms are not opening or expanding here.
At Robinson Square, which was completed in the first quarter of last year, about 10 of 32 office units appear to be occupied. It too is fully sold.
An owner of two units at the building who wanted to be known as Mr Tan, is one of the luckier investors. He had asked for rents of $9 to $10 per sq ft (psf) per month when the building was first completed – and which was promised when he bought the units at $2,800 psf.
Today, he is getting about $7.70 psf per month for the two units, which are leased out to a Korean company. “I didn’t wait for higher rents. Whatever I could get, I just took. Of course, other owners don’t like it and ask why I am lowering the rents,” he said.
Even at International Plaza – known as the barometer of the strata office market – two units fronting the lobby have sold for about $1,715 psf over the past half a year, although a third went for about $1,930 psf.
Most lobby frontage units rarely come up for sale in the building, and could fetch above $2,000 psf in better times.
Sales are also relatively slow at Prudential Tower. The last caveated transaction was six months ago.
But older buildings are taking the brunt of the downswing, with prices at least 35 to 40 per cent below their level at the peak in 2013.
Prices at High Street Centre in North Bridge Road went as low as $1,350 psf in March, well under the $1,900 to $2,000 psf range that could be seen in 2013.
Rents of these spaces have fallen as well.
Strata office median rents in Bencoolen, Upper Cross and Coleman streets were 6 per cent to 10.4 per cent lower year on year in the first quarter of this year.
While sales volumes of strata office units in the first half of this year were little changed compared with a year earlier, total transaction value fell 20.1 per cent to $400.2 million.
The number of transactions for the segment last year was the lowest since 2009.
The imposition of the Total Debt Servicing Ratio in June 2013 certainly dampened volumes but last year’s showing may also be attributed to factors like the increase in office space in the past few years, growing popularity of service offices and fewer strata office launches.
Adapted from: The Straits Times, 3 October 2016