Strata Office Units In Singapore’s Central Area Expected To Become Pricier

SINGAPORE – Some property experts think that the Urban Redevelopment Authority’s (URA) ban on the strata subdivision of commercial properties in the city-state’s Central Area would lead to an increase in prices for such properties located there, particularly office spaces, reported The Business Times on Wednesday noon (16 March, SGT).

For instance, Cushman & Wakefield’s (C&W) Research Head for Singapore Wong Xian Yang believes the existing strata units, especially offices, will become more sought-after due to the dearth of upcoming stock.

Colliers agrees that the prices of existing strata units will likely rise. It also anticipates stronger demand for strata office units from family offices, private wealth, and individual investors, as most office buildings in the Central Area are already owned by major landlords and real estate investment trusts (REITs).

The real estate consultancy also expects some spillover investor demand from Singapore’s private residential market because of the cooling measures announced in December 2021. Hence, it forecasted that the local strata office market will likely remain well supported by both investor and owner-occupier demand for the rest of this year.

Meanwhile, Tan Hong Boon, Executive Director for Singapore capital markets at Jones Lang LaSalle (JLL) thinks that the new restriction won’t impact the land values of affected commercial properties and mixed-use developments in an en bloc sale.

“Existing old strata-titled developments in these prime areas that are aiming for a collective sale are likely to target the large developers and institutional buyers with a long-term investment objective,” he explained.

However, the URA’s new rule could decrease the chances of a successful collective sales for commercial buildings in affected areas, said Nicholas Mak, Head of research and consultancy at ERA Realty.

This is because some property developers, after buying a building, opts to redevelop the property into individual strata units, as this can provide a relatively high rate of return when selling versus holding the property to generate rental income.

Therefore, the ban on the strata subdivision of commercial properties in Singapore’s Central Area could greatly reduce developers’ appetite for properties situated there, Mak concluded.