Buyers forced to second-guess volatile market
By BRIAN PATRICK
UP to 14 floors of the Lippo Centre are vacant because property market speculators cannot decide what to do with their investments.
Chris Marriott, a partner at Brooke Hillier Parker property consultants, said: ''Investors are sitting back and contemplating their future.
''They're asking themselves: 'should I sell now or do I lease?' They're trying to second-guess the commercial market.'' Mr Marriott said many speculators jumped into the market 12 months ago, buying vacant floors in buildings like the Lippo Centre and Nine Queen's Road Central, for about $9,000 per square foot. But suddenly, large and steadily growing profits are no longer a certainty. Moreover, some realtors are asking the Government to levy fines as high as 50 per cent of the market rental rate on investors who sit on vacant office space.
The government will not comment on any new regulations, but investors are worried that measures much like the ones introduced in the residential market - to reduce the amount of speculation - could be unilaterally imposed.
''So the question they are trying to answer is whether they should take the book profit or settle for a healthy yield by leasing out the vacant floor - it's a financial dilemma,'' Mr Marriott said.
''It's my view that most of these investors are financially stable. For them it is a matter of second-guessing what the investors on the other floors are doing and how it may affect their profit.'' Mr Marriott said that premier office space was now selling for about $14,000 per sq ft although, with the market so quiet, the price achieved could be lower. But the bottom line is that an investor can unload vacant office space for about a $5,000 book value profit - a one-off windfall that would get him out of the volatile market.
Grade A office space is, however, leasing for about $80 per sq ft, which would offer the investor-turned-landlord about a 10.5 per cent annual yield.