City centre commercial property still a potent force

by Tan Liang Tuan Gigi 11 Nov 2014

THE record-breaking sale of a floor at Samsung Hub in Church Street last week is as good a sign as any that city centre commercial real estate remains a potent force amid a general property downturn.

Investor interest in offices has grown in recent years, driven in part by cooling measures targeted at the residential market, said property consultants.

The trend is likely to continue in line with positive business sentiment and upcoming developments offering high-quality office space, said Ms Alice Tan, director and head of consultancy and research at Knight Frank.

The Samsung Hub deal underlines that trend. The 21st floor, which comprises six strata units across 12,841 sq ft, went for $3,280 per sq ft, or about $42.12 million, last week.

That was a record for entire floor sales in the 999-year leasehold building, topping the previous mark when the 18th level was sold for $3,225 psf in September.

"Samsung Hub is within a 250m radius of Raffles Place MRT station - an area where there is limited supply of office strata-units for sale, other than The Arcade and Prudential Plaza," said Mr Nicholas Mak, executive director of research and consultancy at SLP International.

Its 999-year tenure also "makes it more attractive for long-term investment", he added.

Samsung Hub, which is in the main financial district, is near other major commercial developments such as Capital Square, Prudential Tower, Republic Plaza and One Raffles Place.

Office rents in the area rose 5.6 per cent in the third quarter over the same period last year, noted Ms Tan.

She expects prices of strata-titled offices to move up by 5 to 10 per cent over the first half of next year, thanks largely to the positive outlook for the market and the "new benchmark price" for whole-floor transactions being set in Samsung Hub.

"Upcoming developments such as CapitaGreen and the new Robinson Towers would inject more vitality and contribute positively to the landscape of the traditional Raffles Place precinct in the near future," she added.

CapitaGreen, due to be completed by the end of this year, is a 99-year leasehold Grade A office tower in Market Street with a net lettable area of about 700,000 sq ft.

The redeveloped Robinson Towers in Robinson Road, also a Grade A office building, will have a gross floor area of 257,300 sq ft. It is expected to be completed in 2016.

But Ms Tan cautioned that even as commercial property is seen as a "valuable asset" owing to Singapore's long-term stability and conducive business environment, the office sector "remains susceptible to global and domestic economic cycles, which could impact future rental and price upsides if market conditions turn south".

Demand for residential property in the CBD, however, has been lacklustre in comparison.

Ms Tan noted private residential property prices in the area declined 9 per cent quarter on quarter to $2,060 psf in the third quarter, due to various property cooling measures.

In August, it was reported that developer Far East Organisation offered buyers of selected units at Altez and The Clift, two recently completed condominiums in Tanjong Pagar, a guaranteed rental yield of 4 per cent over four years. Offering a guaranteed rental yield is not a common marketing strategy in Singapore.

"The influx of completed apartments in Downtown Core as well as in the city fringe areas... has added competition in the leasing market this year," said Ms Tan.

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