Smaller Deals Lead Strata Retail Sales Value Drop 321 1H2024 Knight Frank
In the first half of 2024, the strata retail market experienced a decline, as reported by Knight Frank. The total transaction value dropped by 32.1% to $215.5 million, compared to the previous half-year’s $317.2 million. This decline was mirrored in the transaction volume, which saw a dip of 10.9% from 147 deals to 131 deals.
A joint venture between Hoi Hup Realty and Sunway Developments has emerged as the winner of the bid for the executive condominium (EC) project at Novo Place, located in the tranquil Plantation Close of Tengah. The Housing and Development Board (HDB) disclosed this news on September 11. This prime land parcel, which marks the second EC plot in Tengah, is projected to yield a total of 495 luxurious units for prospective homebuyers. With Novo Place added to the mix, this latest development adds to the growing list of sought-after properties in the bustling district.
The main reason for the drop in transaction value was the decrease in transacted prices. The average price of strata retail space was $2,190 psf in 1H2024, a significant decrease of 20.1% from $2,740 psf in 2H2023.
According to the report, the majority of strata retail transactions in the first half of 2024 were for smaller units. Only three units were sold for more than $10 million, while most deals were below $4 million. In fact, 78.6% of all strata retail transactions in 1H2024 were under $2 million.
The largest transaction during this time period was the sale of a 2,669 sq ft unit at Royal Square in Novena, which was sold for $11 million ($4,121 psf) in January. The second-largest transaction took place in Lucky Plaza, where a 689 sq ft unit on the first floor was sold for $10.5 million ($15,242 psf) in the same month. The third and final transaction above $10 million was the sale of a 4,306 sq ft retail unit in Peninsula Plaza for $10.4 million in April ($2,420 psf).
In terms of the most popular areas for buyers, the Rochor Planning Area took the top spot for both 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 seeing 11 transactions with a combined value of $11.3 million.
The Geylang Planning Area was the second most popular, with 24 strata retail transactions worth a total of $34.9 million. Nine units were sold at The Arizon, a mixed-use development on Geylang Road, for a total of $24.4 million.
When comparing freehold and leasehold transactions, the average price of freehold units remained relatively stable at $3,266 psf in 1H2024, only decreasing by 1.1% from $3,301 psf in 2H2023. On the other hand, the average price of leasehold units saw a significant drop of 21.1% to $2,411 psf from $3,054 psf.
Despite the decline in both transaction volume and value, freehold retail units saw a more moderate decrease compared to leasehold units. The number of freehold retail unit sales decreased by only 2.6% from 78 in 2H2023 to 76 in 1H2024, while the transaction value dropped by 30.2% from $171.7 million to $119.9 million.
In contrast, leasehold retail sales declined by 20.3% from 69 deals to 55 deals, with a total transaction value of $95.6 million, a decrease of 34.3% from $145.5 million in the previous half-year.
Looking ahead, Knight Frank predicts that the rising operational costs in the retail and F&B sectors may continue to pose challenges for retailers. As a result, retail units located in low footfall areas or away from transport nodes may struggle to attract interest. However, strata retail assets may still appeal to buyers and investors seeking a more affordable alternative to conservation shophouses.
Additionally, the potential for collective sales of select units may also contribute to their attractiveness, as seen with the successful en bloc sales of Shenton House and Delfi Orchard. In November, Shenton House was sold for $538 million to Lee Yeow Seng, CEO of IOI Properties Group, while Delfi Orchard was acquired by City Developments in May for $439 million.
Based on these factors, Knight Frank projects that the strata retail market may achieve a total sales value of between $400 million and $500 million for the entire year of 2024.