Singapore strata office unit sales drop to a measly 79 in H1 2020

This translates to a total transacted value of S$272.2m, down 42.3% from S$471.4m in H2 2019.

According to Knight Frank, the number of strata office unit transactions fell 50.0% from 158 deals in H2 2019 to a mere 79 in H1 2020.

The total transacted value was generally propped up by the five transactions at Suntec City Office Tower which amounted to S$106 million, as well as the S$49.8 million transaction of four adjoining units on Level 11 of Samsung Hub. The buyer of Level 11 at Samsung Hub was reported to be a South Korean high net worth individual (HNWI) involved in robotics.

While the volume of sales has dropped, average unit prices remained relatively resilient from January to June 2020. There was an increase of 5.7% from $2,313 per square foot (psf) in H2 2019 to S$2,445 psf in the first half of 2020.

New projects launched by developers such as the strata office units at Centrium Square and Woods Square continued to draw interest despite the COVID-19 outbreak. In H1 2020, there were 17 primary transactions for these two projects combined; the same number as recorded in H2 2019.

Other than the Suntec City strata offices, the units transacted in H1 2020 were generally characterised by their small sizes, favoured by Small-and-Medium Enterprises (SMEs) and family offices. Such units are typically owner-occupied and purchased as a hedge against volatility in office rental cycles.

Comparing Freehold & Leasehold Strata Office Performance

The 36 freehold strata office transactions in H1 2020 represented a 18.2% drop from the 44 sales in the previous period. For leasehold strata office units, the number of transactions declined by 62.3% to 43, down from 114 in H2 2019.

In H1 2020, the total transacted value and average unit price for freehold strata offices were S$106.2 million (-34.1% from H2 2019) and S$2,497 psf (+5.4% from H2 2019) respectively. For the leasehold strata offices, the total transacted value and average unit price were recorded at S$166.0 million (-46.5% from H2 2019) and S$2,413 psf (+5.7% from H2 2019) respectively in the same period.

Despite the fall in total transaction volume and sales, the average unit prices saw a slight increase. This could be attributed to the transaction of smaller size units at Far East Shopping Centre (S$4,700 psf) and People’s Park Centre (S$4,080 psf) which fetched a higher average unit price.

Outlook

In light of the COVID-19 outbreak and the consequent recessionary pressures affecting all aspects of the Singapore economy, both the transaction volume and the prices of the strata office sector are expected to moderate downwards in the next six months to a year.

The growing acceptance of working-from-home will also place added pressure on office demand, as remote working technologies mature to enable certain SMEs and small space users to reduce their commercial real estate footprints further.

Therefore, the overall volume and total transaction value in the resale market are expected to remain muted for the rest of the year, though there might be some demand for new properties due to the lack of new launches.