Investing in a condo unit may be popular, but some homebuyers are choosing a very different part of the real estate market.
They have turned to the office sector to pick up strata-titled office units as another form of investment, as hopes of a recovery within the office market grow this year.
Strata offices are units within an office building that have been sold piecemeal unlike many office blocks, which are wholly-owned by a developer or investor.
According to Knight Frank, the strata office sector was the only commercial unit to see an improvement in sales activity in H1 2010, compared with H2 2009.
Based on its latest data, 163 strata offices were purchased in the first six months of 2010, 16 percent more than in the previous six-month period.
The value of the deals reached $368 million, representing a 73 percent increase from the second half of 2009.
Strata offices offered from $1 million to less than $2 million attracted 59 deals in the first half, said Knight Frank, while strata offices priced from $500,000 to less than $1 million attracted 44 deals.
Ms. Mary Sai, executive director for auctions at Knight Frank, said the volume improved from the low numbers recorded in 2009 when sales slowed down due to a lacklustre office market.
“We see more people looking at strata offices for investment. The commercial market has gone down quite substantially so people are looking at a recovery,” said Mr. Shaun Poh, senior director for investment advisory services and auction at DTZ.
The office market is supported by stronger signs of a sustained economic recovery, which include a better business climate, said Ms. Sai.
Experts said strata office prices have generally increased and moved ahead of rents.
“Yields are low now at 3 per cent, but investors are buying now in anticipation of higher yields of 4, 5 per cent,” said Mr. Poh.