ST : Hot property

28 Jan 2011,
Hot property

57% jump in commercial real estate transactions last year with sales more than doubling to $2.5 billion
By Esther Teo

INVESTORS streamed back into the commercial property market last year on the back of the economic rebound and the improving rents it brought.

A new report said the number of transactions of strata-titled commercial real estate - shops, shophouses and offices - jumped 57 per cent to 1,219 last year over a muted 2009.

The total value of sales more than doubled to $2.5 billion.

But the robust figures are still well below the record 1,849 transactions totalling $8.7 billion that took place in the boom year of 2007.

Experts say investors favour strata-titled units because they are a relatively cheap way to enter the commercial market and are not affected by the Government's recent cooling measures. Estimated rental yields of between 4 per cent and 6 per cent - trumping the residential sector's 3 per cent - have spurred interest as well.

Offices were the star performer last year with transactions up 85 per cent over 2009 to 387 while their total value rocketed 165 per cent to $850 million.

Knight Frank's data showed that most transactions were between $1 million and $2 million.

These comprised units from $1,500 to $2,000 per sq ft (psf) and typically less than 1,000 sq ft in buildings such as The Central and International Plaza, the report noted.

Ms Mary Sai, Knight Frank's executive director and head of auction (commercial), said the number of units sold to foreigners last year jumped 130 per cent.

'(This is) not surprising as the number of foreigners in Singapore has increased over the year and residential prices have also achieved new record highs,' she said.

Strata-titled shops also performed well with the value of sales up 92 per cent to $533 million while transaction numbers surged 58 per cent to 484.

Most were priced under $1 million and are the sort of unit found in buildings like Bukit Timah Shopping Centre, People's Park Complex and Golden Mile Complex.

But sales of units between $1 million and $1.9 million recorded the fastest growth.

These shops are typically found in central areas with plenty of passers-by or in malls like Sim Lim Square or Holland Road Shopping Centre that have affluent neighbourhoods within striking distance.

Shophouses were also popular last year with 348 transactions worth $1.1 billion, up from 262 sales totalling $611 million in 2009.

Most sales were between $1 million and $5 million and in areas such as Boat Quay, Chinatown and Tanjong Pagar.

'Shophouses in these areas are popular because of their limited supply, good lettability, strong demand from food and beverage tenants and potential capital appreciation for freehold properties,' said Ms Sai.

Joo Chiat Road was the most popular street for shophouses with 22 transactions, while Duxton Road and Geylang Road also attracted buyers.

Property developer Far East Organization said industrial properties and offices are attracting growing interest as they are exempt from the cooling measures.

Knight Frank said the outlook remains bright thanks to the sound economy while the new residential cooling measures are likely to continue diverting investors to commercial units.

esthert@sph.com.sg