Results 1 to 2 of 2

Thread: Speculation rising in commercial property

  1. #1
    Join Date
    Oct 2011
    Posts
    10,829

    Default Speculation rising in commercial property

    http://www.straitstimes.com/premium/...perty-20120925

    Speculation rising in commercial property

    Owners hold commercial, industrial units for barely three months before flipping them

    Published on Sep 25, 2012

    By Esther Teo Property Reporter


    SPECULATION seems rife in the strata- titled commercial and industrial property sectors with many new units being held for barely three months before they are flipped.

    Commercial units launched this year are being held for only an average of 60 days before being sold - a huge drop from 2010 when owners kept them for about 440 days.

    Similarly, new strata-titled industrial units have been held for just 78 days this year, down from 461 days in 2010, according to an analysis of new sale caveats by Dennis Wee Group (DWG).

    The shortest time for which a strata unit was held before being sold was just four days - with the buyer likely to have assigned his option to another investor.

    Mr Lee Sze Teck, DWG's senior manager of training, research and consultancy, noted that individual investors prefer buying uncompleted commercial or industrial units because the upfront cash amount is lower, since the units are paid for progressively as construction is carried out.

    This lets them flip the unit more easily, he added.

    DWG also found that 198 profitable transactions and 13 unprofitable ones have been made in the industrial property sector from launches since 2010.

    Six of the units that ended in the red were from Harvest @ Woodlands in Woodlands Industrial Park. One unit in the development lost $42,700.

    But the 60-year leasehold project also lodged 44 profitable transactions, with one gaining $376,000 in capital value.

    Net profits for the overall strata-titled industrial market ranged from $2,700 to $689,000 while losses came in at between $8,600 and $322,000 from 2010 till now, DWG said.

    Projects launched in 2010 also seem to have attained the best returns, the report added.

    "This is probably because they enjoy the first mover advantage and profited from spillover demand because of regulations in the residential market in 2011 and 2012," Mr Lee said.

    He was referring to the slew of cooling measures that have diverted residential investors to alternative segments.

    Mr Lee also noted that developers have shrunk the size of some strata-titled commercial units to keep the investment quantum affordable.

    "This is particularly striking in the strata shop units where the smallest unit is only 5 sq m or 54 sq ft," Mr Lee added. "One cannot help but think which trade is suited to operating in a 5 sq m retail unit and yet able to generate enough profits to service the loan."

    The upcoming supply of office, retail and industrial space is likely to affect selling prices and rents, which is another concern investors should note, said DWG.

    Around 7.1 million sq ft of office space, 5.1 million sq ft of shop space and more than 10 million sq ft of industrial space will be completed in the next few years.

    "This supply excludes any potential new launches in the future. This will put a cap on any upside on prices and rents," Mr Lee said.

    "Furthermore, the Urban Redevelopment Authority (URA) is clamping down on unauthorised users of industrial space. These users will have to move if they receive a notice from URA. This will increase the supply of industrial space for sale or lease and put downward pressure on prices and rents."

    But not all investors have plans to flip units for short-term gains.

    Industrial investor Christopher Soh, 62, who works as a director of a manufacturing firm, bought two strata-titled industrial units in Jurong two years ago. He describes himself as a long-term investor and not a speculator.

    He plans to lease out his units when they are completed but does not rule out selling them if an "attractive enough" price is offered.

    [email protected]

  2. #2
    Join Date
    Oct 2011
    Posts
    10,829

    Default Speculators turn to commercial, industrial space

    http://www.businesstimes.com.sg/prem...space-20120925

    Published September 25, 2012

    Speculators turn to commercial, industrial space

    Holding period just 2-3 months for 2012 projects, from over 440 days for 2010

    By Mindy Tan


    THE strata commercial and industrial markets appear to be getting speculative, as investors shift their focus away from the private residential market in search of better returns.

    Reflecting this trend, the holding period for strata commercial units has been dropping steadily from an average of 440 days for projects launched in 2010, to 324 days for projects launched last year, and 60 days for projects launched in 2012.

    However, the number of profitable and unprofitable transactions is almost equal, based on projects launched from 2010 to 2012. Of the 14 profitable and 12 unprofitable strata commercial unit transactions, the net returns range from $9,777 and $251,227 for the profitable transactions, said Dennis Wee Group (DWG). Losses were between $21,517 and $194,763.

    Industrial strata transactions seemed to perform better, with 198 profitable transactions and 13 unprofitable deals, though net returns for profitable transactions and unprofitable transactions were almost the same, at $2,652 to $689,241 and -$8,512 to -$322,215, respectively.

    "It seems that the investors of industrial units in projects launched in 2010 achieved the best net returns. This is probably because they enjoy the first-mover advantage and profited from spillover demand because of regulations in the residential market in 2011 and 2012," noted DWG.

    The holding period for strata industrial units, too, has witnessed year-on-year drops, from an average of 461 days for units bought in 2010, to 364 days in 2011, and 78 days in 2012.

    The shortest time a strata unit was held before sale was only four days, but the buyer probably assigned his option to another investor, said DWG.

    Potential investors in the sector should note that the upcoming supply of around 7.1 million square feet (sq ft) of office space, 5.1 million sq ft of shop space and more than 10 million sq ft of industrial space completing in the next few years (excluding potential new launches in the future) will put a cap on any upside in prices and rents, warned DWG.

    The Urban Redevelopment Authority (URA) is also clamping down on unauthorised users of industrial space, which could potentially increase the supply of industrial space for sale or lease, thus putting downward pressure on prices and rents.

    Some investors, particularly those who are new to the commercial and industrial sectors, may also not know what is included in the saleable area and the exact needs of businesses.

    "For example, many strata industrial units are sold on a gross basis, which may include air-con ledges, car park lots, loft spaces or roof terraces. When these are excluded, the usable space is actually much smaller," said DWG.

    "In some instances, the buyer is not able to make use of the loft space within the unit as the development has maximised its gross floor area. Similarly for the roof terrace and car park lot, the buyer will not be allowed to build a permanent structure if the gross floor area for the development has been maximised."

Similar Threads

  1. Anti-speculation property measures have their side effects
    By reporter2 in forum Singapore Private Condominium Property Discussion and News
    Replies: 0
    -: 29-01-17, 17:25
  2. Foreign buying and speculation in property market has shrunk: Khaw
    By princess_morbucks in forum Singapore Private Condominium Property Discussion and News
    Replies: 0
    -: 12-11-13, 16:10
  3. Signs of speculation in private property market
    By mr funny in forum Singapore Private Condominium Property Discussion and News
    Replies: 31
    -: 31-07-09, 09:33
  4. No sign of excessive speculation in private property: Mah
    By mr funny in forum Singapore Private Condominium Property Discussion and News
    Replies: 0
    -: 10-07-09, 13:58
  5. Property speculation - Don't get carried away
    By meesiammaihum in forum HDB, EC, commercial and industrial property discussion
    Replies: 0
    -: 28-02-07, 23:44

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •