As the noose tightens around the residential property market, investors may consider shifting their focus onto commercial properties, in particular office spaces. Q3 figures have shown that selling prices and rental of office spaces have been growing at a record pace.
In land-scarce Singapore, the growing number of businesses means the demand for office space will continue to rise. And as space decreases, prices increase. In Q3 alone, office space rental prices rose by 1.6 per cent. Part of the reason could be that major buildings such as the NOL Building and Havelock II have been undergoing renovation and thus the office space crunch has led to businesses having to look for alternative spaces within a short time period.
Despite luxury properties in the downtown and CBD areas faring poorly of late, Grade A office rents in these areas have been travelling the opposite direction – upwards. Office spaces in the central region have been more in demand than rentals in other regions despite the higher rental prices. Central districts office rentals have risen 2.8 per cent while those at the fringe of the city have risen 1.9 per cent.
Retail space however, is another creature altogether. As most retail space income comes also from the tenant’s sales and margins have been narrow due to higher operating and labour costs. And with the introduction of many more mixed-use developments come 2016, supply may overtake demand and reduce the rarity of these spaces. Especially as online shopping takes off in a big way locally, retail spaces, unless in high traffic areas or exclusive trendy enclaves, may find themselves fighting for the same audience.