The strata office scene in Singapore has been witnessing a surge in investment interest in recent years. In less than five years, since January 2010, developers have sold 1,208 units of new strata office space, almost twice the 693 units sold in the 15 years preceding 2010. Although strata office space is not new in the market, it accounts for a tiny proportion of the overall stock of office space, which is dominated by larger en bloc developments. The limited availability of strata office space hence attracts the likes of investors searching for alternative asset classes and business owners looking for a suitable space to house their operations over the long term. The healthy demand has likewise supported the appreciation of prices for strata office space, creating a cycle that has drawn more capital into the market.
Already, some strata office space sold by developers in recent years has been divested for profit way ahead of its completion. A transaction is classified as a sub-sale if resold prior to completion of the development. Based on the latest sub-sales data released by the authorities, strata office space developments currently under construction resold for an average 13.6% gain. Projects in the suburbs posted an average gain of 14.2%, ahead of the 9% gain recorded by similar projects in the CBD. Nevertheless, based on sub-sales records since 1995, completed strata office projects have historically posted average gains of 22.1% during their sub-sales period.
As such, prices for strata office space currently under construction could have more room for growth, playing catch-up to past averages. The potential growth may also be boosted by the limited availability of new strata office space expected in the near term.
About the author
Cedric Chng is Senior Research Analyst for JLL, based in Singapore.