Smaller Deals Lead Strata Retail Sales Value Drop 321 1H2024 Knight Frank
According to a report by Knight Frank, the strata retail market experienced a decline in the first half of the year. This was evident from the total transaction value dropping by 32.1% to $215.5 million in 1H2024, in comparison to $317.2 million recorded in 2H2023. The decrease was also reflected in the volume of transactions, which saw a dip of 10.9% to 131 deals in 1H2024 from 147 deals in 2H2023.
The reason for the drop in transaction value can be attributed to the lower transacted prices. The average price of strata retail space stood at $2,190 psf in 1H2024, showing a 20.1% decrease from $2,740 psf in 2H2023.
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The report also highlighted that the majority of the strata retail transactions in the first half of 2024 were for smaller quantum. A mere three units were sold for more than $10 million, with most deals occurring below $4 million. It further stated that 78.6% of transactions were for under $2 million.
The biggest deal in 1H2024 was for a 2,669 sq ft unit at Royal Square at Novena, which was sold for $11 million ($4,121 psf) in January. The second-largest transaction was for a 689 sq ft unit on the first floor of Lucky Plaza, which fetched $10.5 million ($15,242 psf) in the same month. The third and final transaction was for a 4,306 sq ft retail unit in Peninsula Plaza, which was sold for $10.4 million in April ($2,420 psf).
In terms of location, the Rochor Planning Area saw the most interest from buyers, recording the highest sales value and transaction volume in 1H2024. A total of 27 strata retail deals worth $44.1 million were recorded in the area, with Parklane Shopping Mall on Selegie Road accounting for 11 transactions with a combined value of $11.3 million.
The second most popular area was the Geylang Planning Area, where 24 strata retail transactions took place with a total value of $34.9 million. Majority of these deals (nine) occurred at The Arizon, a mixed-use development on Geylang Road, with a value of $24.4 million.
A comparison between freehold and leasehold transactions revealed that the average price of freehold units remained relatively stable at $3,266 psf in 1H2024, dropping by just 1.1% from $3,301 psf in 2H2023. In contrast, the average psf-price of leasehold units decreased by 21.1% to $2,411 psf from $3,054 psf in the same period.
Freehold retail units also saw a smaller decrease in transaction volume and total transaction value. While transaction value dropped by 30.2% to $119.9 million in 1H2024 from $171.7 million in 2H2023, the number of transactions declined by only 2.6% to 76 deals from 78 deals.
On the other hand, leasehold retail transactions saw a sharper decrease, with a 20.3% drop in sales from 69 deals in 2H2023 to 55 deals in 1H2024. The total transaction value for this segment also fell by 34.3% from $145.5 million to $95.6 million over the same period.
Looking ahead, Knight Frank predicts that the challenging retail and F&B environment, caused by rising operational costs, may make it difficult for retailers to thrive. As a result, retail units located away from transport nodes or in low footfall areas may struggle to attract buyers. However, strata retail assets may still be sought after by buyers and investors looking for a more affordable alternative to conservation shophouses.
Furthermore, the potential for collective sales may also add to the appeal of select units, as seen in the successful en bloc sales of Shenton House and Delfi Orchard. Shenton House, located in the CBD, was sold for $538 million to Lee Yeow Seng, CEO of IOI Properties Group, in November last year. Delfi Orchard, situated on Orchard Road, was acquired by City Developments for $439 million in May.
Going forward, Knight Frank predicts that the strata retail market may achieve a total sales value of between $400 million and $500 million for the whole of 2024.
