THE 12th floor of the upcoming office project Solitaire on Cecil has been sold for S$52.3 million or S$4,196 per square foot (psf) on a strata area of 12,465 square feet (sq ft).

The transaction marks the highest psf price for an entire office floor in the Central Business District (CBD), surpassing a previous record of S$4,050 psf chalked up at Samsung Hub in 2021, marketing agent Cushman & Wakefield said on Friday (Mar 24). It is also the largest transaction by quantum price in 2023 so far.

The 20-storey freehold office project will come up on the PIL Building site along Cecil Street. The site – which was sold in early 2022 to a joint venture between TE Capital Partners and LaSalle Investment Management – is expected to be completely redeveloped from the second quarter of 2023.

When completed in late-2026, Solitaire on Cecil will comprise predominantly office space on 15 floors ranging from 11,000 sq ft to 13,000 sq ft. Rents are projected to be around S$12 psf.

According to the consultancy’s capital markets executive director Shaun Poh, the 12th floor – which comprises eight strata units with areas ranging from 1,109 sq ft to 2,530 sq ft – was sold to a foreigner.

The building’s sixth floor, which also spans a strata area of 12,465 sq ft, was sold one to two months prior for around S$48.2 million or S$3,865 psf. Negotiations are underway for several more floors, noted Poh, declining to disclose further details for now.

The deals come on the back of a slowdown in leasing activity and rent growth in Singapore’s prime office sector.

A CBRE research report on the office market, published in January, showed a moderation in the pace of rental increase for prime buildings in the Downtown Core and Orchard planning areas in the fourth quarter of last year. Median monthly rents had increased by just 0.8 per cent quarter on quarter to S$10.75 psf, from a 5.6 per cent quarter-on-quarter rise in the previous three-month period.

JLL Singapore also noted an end to five consecutive quarters of rental growth acceleration in the monthly gross effective average rental value for its Grade A CBD office basket. It said this was largely driven by mounting macroeconomic headwinds, which have dampened market confidence and prompted more occupiers to put real estate expansion and relocation plans on hold.

Some analysts also pointed out that the increase in the Urban Redevelopment Authority’s central region office rental index in the fourth quarter of 2022 – by 5.1 per cent quarter on quarter – is more likely due to relatively tight supply than buoyant leasing demand.

Throughout the year, overall office stock declined, with 86,000 square metres of space removed from the market in 2022 – the first decline since 2007. The islandwide vacancy rate also dropped to 11.3 per cent in the fourth quarter of 2022, from 11.7 per cent in the third quarter.

Still, Cushman & Wakefield remains optimistic about prospects for Solitaire on Cecil.

The project is one of the few freehold Grade A strata-titled office spaces in the CBD, the consultancy noted. It is also the first new launch of strata office projects for around six years, since the launch of Centrium Square in Serangoon and Woods Square in Woodlands.

Cushman & Wakefield added that the building’s only competition is the 30-storey Samsung Hub along Church Street, but that opened nearly two decades ago in 2006.

In the same vein, a Knight Frank report on the strata office market highlighted that similar to shophouses, more commercial retail investors are showing a preference for strata office space in the suburbs, or in well-located buildings in the CBD, as long as there is access to the MRT.

“The momentum for strata office space that started in 2021 continued in 2022, and is likely to remain steady in 2023 with an expected total transaction value ranging from S$1.1 billion to S$1.2 billion,” it said.

In March 2022, the government restricted strata subdivision of commercial properties in certain parts of the Central Area’ supply of strata-titled offices will therefore remain limited.

Article written by The Business Times published Mar 2023 can be found here.

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