Why are investors so keen on freehold strata office space in the CBD?
The strata office market saw a 10.8% increase in transactions QoQ in Q4.
The fourth quarter (Q4) of 2023 saw an estimated 82 strata office transactions, an increase from the 74 deals in the previous quarter. This shows investors' growing interest in freehold strata office spaces.
Huttons Asia Pte Ltd senior director of Data Analytics, Lee Sze Teck, attributes this surge to these properties being exempt from the Additional Buyer's Stamp Duty.
The rapid sell-out of developments such as Solitaire on Cecil, the first freehold strata office project in the CBD in eight years, exemplifies this trend, Lee added.
The project was fully sold within four months of its launch, attracting a diverse group of buyers, including Thye Hua Kwan (THK) Moral Charities, local companies, and foreign nationals.
Despite improved economic performance in Q4, many businesses remained cautious, opting to renew leases or choose flexible office solutions. The overall occupancy rate for office spaces edged up by 0.1% to 90.1%, influenced by a modest addition of 97,000 sq ft of new space.
Demand increased most notably in the Downtown Core Planning Area, where tenants moved to higher-quality buildings, benefiting from competitive rental rates.
Growth in office rents in the Central Region of Singapore moderated to 0.3% in 4Q 2023, down sharply from the 4.9% increase in the previous quarter. Tenants are resisting increases in rents to manage costs in light of the economic uncertainties.
An upcoming project, 108 Robinson Road should see a good response when launched in the next few months of 2024, Lee said.
The office market may see an injection of more than 3 million sq ft of office supply from IOI Central Boulevard Towers, Labrador Tower, Keppel South Central and Paya Lebar Green. This is probably the largest completion of office space since 2000.
According to Lee, this large supply of office space is likely to keep the growth of office rents in check and keep up downward pressure on the occupancy rate in 2024.