Strata offices starting to run out of fizz?

Strata offices starting to run out of fizz?

The strata office sales market could be starting to run out of fizz - due to toppish prices and concerns about a future office oversupply and rising interest rates. The total debt servicing ratio also continues to clip appetites of mom and pop investors.

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At the much-hyped GSH Plaza, sales have pretty much stagnated at 60-plus office units - around the level announced six weeks ago by the consortium that is doing a major revamp of the building.

The project was launched following a VVIP party on April 8.

Talk in the market is that the commission rate for agents to find buyers in the strata project has been doubled to 3 per cent by the owner in a bid to drum up sales.

A consortium led by GSH Corporation last year paid S$550 million for the 28-storey building, which was known as Equity Plaza at the time, and is undertaking an extensive refurbishment estimated to cost S$118 million (or S$400 per square foot based on the 295,000 sq ft gross saleable area).

When contacted on Thursday, a spokesman for the consortium, Plaza Ventures Pte Ltd, confirmed that there had been not much change in the sales status "because we are now focused on negotiating whole-floor sales".

On average, there will be 10 strata office units per floor in the project. In all there will be 259 strata office units on Levels 3-28 of the building. Units range from 480-1,700 sq ft. Buyers have the option to buy entire floors (10,000 to 12,000 sq ft), thus enjoying additional discounts and floor space utilisation, according to promotional material on the development.

The spokesman declined to comment on market talk that some of the consortium members or their related parties/associates might have bought a chunk of the 60-plus units that have been sold.

Besides GSH, which controls 51 per cent of the consortium, Plaza Ventures' other shareholders are TYJ Group, a private investment vehicle of GSH chairman Sam Goi (with a 14 per cent stake) and Vibrant DB2 (35 per cent stake). Vibrant DB2 is a 51:49 partnership between listed Vibrant Group and niche property developer DB2.

GSH Plaza's attractions include its prime Raffles Place location and the bite-sized investment it offers individual investors with units as small as 480 sq ft, said observers.

So far, four caveats have been lodged based on URA Realis data. The units range from around 480 sq ft to 807 sq ft and are priced between S$1.57 million and S$2.49 million. The prices of the four units translate to S$3,009 psf to S$3,257 psf.

In early March, Plaza Ventures had said prices for the office units will range from S$2,850-3,500 psf, depending on the size of the unit and the floor it is on.

It is understood that most potential buyers found the average price of S$3,000-3,100 psf too demanding for a project with a balance lease term of only 73 years. "A price of S$2,700-2,800 psf would have been more reasonable," said one party.

Moreover, the total debt servicing ratio framework continues to make it hard for individual investors to secure big loan quantums for property purchases.

Plaza Ventures is expected to retain the first two levels, which will have 21 retail units.

At Crown at Robinson - a brand new freehold strata office project coming up on the former Chow House site at 140 Robinson Road - sales are also said to have been slow. Prices of office units in the development range from S$3,348 psf to S$3,634 psf based on the seven caveats reflected in URA Realis so far.

As early as next month, SEB could begin strata sales at Anson House. The 13-storey building is on a site with a balance lease term of 81 years. Word on the street is that SEB is awaiting approval for strata subdivision from the authorities.

The strata units are expected to mirror existing tenancies with the minimum size exceeding 1,000 sq ft. Full-floor units will be 7,600-plus sq ft. Asking prices are S$2,900 psf and above.

The offices are located on Levels 5 to 13. Car park lots fill Levels 2, 3 and 4. On the first level are three retail units, which will also be made available for sale at prices exceeding S$4,000 psf.

Source: AsiaOne Business News, May 29, 2015.


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