Smaller deals lead strata retail sales value to drop 32.1% in 1H2024: Knight Frank
The strata retail market saw a decline in the first half of the year, with total transaction value dropping 32.1% to $215.5 million in 1H2024 compared to $317.2 million recorded in 2H2023, according to a Knight Frank report.
The decline comes as the market saw transaction volume dropping to 131 deals in 1H2024, a dip of 10.9% from 147 deals in 2H2023.
The fall in transaction value was also due to lower transacted prices. The average price of strata retail space stood at $2,190 psf in 1H2024, 20.1% lower from $2,740 psf in 2H2023.
Read also: Manufacturing rebound boosts industrial sales and rents in 2Q2024: Knight Frank
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The report notes that most strata retail transactions in the first half of 2024 occurred at a smaller quantum. Only three units changed hands for more than $10 million, while most deals occurred below $4 million. The report adds that some 78.6% of strata retail transactions in 1H2024 were under $2 million.
The largest strata retail deal in 1H2024 was the sale of a 2,669 sq ft unit at Royal Square at Novena for $11 million ($4,121 psf) in January. The same month, the second-largest strata retail transaction took place in Lucky Plaza when a 689 sq ft unit on the first floor was sold for $10.5 million ($15,242 psf).
The third and final transaction worth over $10 million was the sale of a 4,306 sq ft retail unit in Peninsula Plaza. The retail space in Basement 1 was sold for $10.4 million in April, reflecting a price of $2,420 psf.
The Rochor Planning Area registered the most interest among buyers in the market, topping the list in terms of sales value and transaction volume for 1H2024. A total of 27 strata retail deals worth $44.1 million were recorded in the area. Notably, Parklane Shopping Mall on Selegie Road saw 11 transactions with a combined value of $11.3 million.
The second most popular area was the Geylang Planning Area, which saw 24 strata retail transactions worth a total of $34.9 million. Nine strata retail units were sold at The Arizon, a mixed-use development on Geylang Road, with a value of $24.4 million.
Comparison between freehold and leasehold transactions revealed that the average price of freehold units held relatively steady at $3,266 psf in 1H2024, easing just 1.1% from $3,301 psf in 2H2023. In contrast, the average psf-price of leasehold units suffered a 21.1% drop to $2,411 psf from $3,054 psf across the same period.
Read also: Prime retail rents islandwide up 0.9% in 2Q2024: Knight Frank
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Freehold retail units also saw a more moderate decline in transaction volume and total transaction value. Freehold retail unit sales declined just 2.6% h-o-h to 76 transactions in 1H2024 from 78 transactions in 2H2023, while transaction value dropped 30.2% to $119.9 million from $171.7 million over the same period.
In comparison, sales for leasehold retail dropped by 20.3%, from 69 deals in 2H2023 to 55 in 1H2024. The total transaction value for the segment dropped 34.3% from $145.5 million to $95.6 million over the same period.
In terms of market outlook, Knight Frank notes that rising operational costs in the retail and F&B sectors are posing a challenging environment for retailers. As such, it predicts that retail units located away from transport nodes or in low footfall areas will likely struggle to draw interest. However, strata retail assets may still be attractive to buyers and investors seeking a less costly alternative to conservation shophouses.
Furthermore, the collective sale potential of select units may also factor into their appeal, given the successful en bloc sales of Shenton House and Delfi Orchard. Shenton House, located in the CBD, was sold for $538 million last November to Lee Yeow Seng, CEO of IOI Properties Group. Delfi Orchard, located on Orchard Road, was acquired by City Developments in May for $439 million.
Knight Frank projects that the strata retail market may achieve a total sales value of between $400 million and $500 million for the whole of 2024.
The report notes that most strata retail transactions in the first half of 2024 occurred at a smaller quantum. Only three units changed hands for more than $10 million, while most deals occurred below $4 million. The report adds that some 78.6% of strata retail transactions in 1H2024 were under $2 million.
The largest strata retail deal in 1H2024 was the sale of a 2,669 sq ft unit at Royal Square at Novena for $11 million ($4,121 psf) in January. The same month, the second-largest strata retail transaction took place in Lucky Plaza when a 689 sq ft unit on the first floor was sold for $10.5 million ($15,242 psf).
The third and final transaction worth over $10 million was the sale of a 4,306 sq ft retail unit in Peninsula Plaza. The retail space in Basement 1 was sold for $10.4 million in April, reflecting a price of $2,420 psf.
The Rochor Planning Area registered the most interest among buyers in the market, topping the list in terms of sales value and transaction volume for 1H2024. A total of 27 strata retail deals worth $44.1 million were recorded in the area. Notably, Parklane Shopping Mall on Selegie Road saw 11 transactions with a combined value of $11.3 million.
The second most popular area was the Geylang Planning Area, which saw 24 strata retail transactions worth a total of $34.9 million. Nine strata retail units were sold at The Arizon, a mixed-use development on Geylang Road, with a value of $24.4 million.
Comparison between freehold and leasehold transactions revealed that the average price of freehold units held relatively steady at $3,266 psf in 1H2024, easing just 1.1% from $3,301 psf in 2H2023. In contrast, the average psf-price of leasehold units suffered a 21.1% drop to $2,411 psf from $3,054 psf across the same period.
Read also: Prime retail rents islandwide up 0.9% in 2Q2024: Knight Frank
Advertisement
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Freehold retail units also saw a more moderate decline in transaction volume and total transaction value. Freehold retail unit sales declined just 2.6% h-o-h to 76 transactions in 1H2024 from 78 transactions in 2H2023, while transaction value dropped 30.2% to $119.9 million from $171.7 million over the same period.
In comparison, sales for leasehold retail dropped by 20.3%, from 69 deals in 2H2023 to 55 in 1H2024. The total transaction value for the segment dropped 34.3% from $145.5 million to $95.6 million over the same period.
In terms of market outlook, Knight Frank notes that rising operational costs in the retail and F&B sectors are posing a challenging environment for retailers. As such, it predicts that retail units located away from transport nodes or in low footfall areas will likely struggle to draw interest. However, strata retail assets may still be attractive to buyers and investors seeking a less costly alternative to conservation shophouses.
Furthermore, the collective sale potential of select units may also factor into their appeal, given the successful en bloc sales of Shenton House and Delfi Orchard. Shenton House, located in the CBD, was sold for $538 million last November to Lee Yeow Seng, CEO of IOI Properties Group. Delfi Orchard, located on Orchard Road, was acquired by City Developments in May for $439 million.
Knight Frank projects that the strata retail market may achieve a total sales value of between $400 million and $500 million for the whole of 2024.