Home Builders Looking To Buy Ageing CBD Offices

Home Builders Looking To Buy Ageing CBD Offices

SINGAPORE – Old office buildings in the city-state’s central business district (CBD) and single-owner land parcels are on the radar of home builders due to the robust housing market, reported The Business Times on noon today (29 December).

According to Cushman & Wakefield’s (C&W) Executive Director of capital markets Shaun Poh, the recent S$93 million sale of the Guillemard-Jalan Molek site has triggered a wave of interest by home builders, especially medium-sized firms, to scout for plots that can help them take advantage of the current cycle.

These include single-owner sites and ageing CBD offices that are eligible for the CBD Incentive Scheme, which grants a bonus plot ratio of 25 to 30 percent if the owner redevelops these commercial properties into mixed-use developments including residential.

Meanwhile, C&W’s Research Head for Singapore and Southeast Asia Christine Li said that office properties remained as an appealing asset class this year, and that the office market is poised to see more deals in 2021.

In fact, she shared that there’s a growing interest in office space by institutional players, affluent individuals and family offices, as well as opportunistic private-equity investors.

In its 2021 market outlook, C&W expects that the housing investment market will see greater activity in early next year as residential transactions remain strong.

During the third quarter, private home prices edged up by 0.8 percent on a quarterly basis, pushing prices to its peak since Q3 2013. For the entire year, total home sales are projected to reach roughly 20,000 units (for both primary and secondary market), said the property consultancy.

Moreover, C&W’s Li revealed that the en bloc residential market is back on the spotlight after a 3-year hiatus.

“Signs are pointing to a possible reactivation of collective sale tenders but the long gestation period makes government land sales and private plots a preferred choice at the moment,” she noted.

The property consultancy believes that home builders can offload a total of 9,800 to 10,000 houses for the entire year on the primary market. It could even surpass the 9,912 units transacted in 2019 despite this year’s sluggish economic situation.

Excluding related-party deals but including property investment trust mergers, residential transactions accounted for the lion’s share (43 percent) of investment activity for the entire year.
Furthermore, shophouse investment sales surged by nearly 6-fold to S$252 million in Q4 2020 compared to just S$44 million during the previous quarter.

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