Demand for strata industrial units could prove risky

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After the implementation of the additional buyer’s stamp duty (ABSD) to cool the private home market, other property types, such as strata industrial, shop and office units, have been expecting an inflow of more duties.

In light of rising prices in the sector, authorities have started setting certain restrictions.

Some developers have started to sell small strata office and industrial units catering to demand from those looking to avoid the government’s cooling measures, which target the private residential sector.

Strata commercial and industrial units appeal to property investors and speculators with deep pockets.

Excessive investment demand, however, has potential dangers. It could drive up the properties’ prices, which may be expensive for genuine industrialists and other businesses, whether they buy or rent the spaces.

As they have paid high prices for strata industrial units, investors will also expect high rentals. Should they plan to flip the units, prices may be too expensive for end-users in the market.

As developers compete for land to build strata office or industrial projects, bids for such sites will also drive up at Government Land Sales (GLS) tenders, which are a primary source of such land. Steep amounts paid by developers for the sites will naturally lead to high selling prices, creating a cycle and saddling end-user businesses with higher occupation costs.

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