Smaller Deals Lead Strata Retail Sales Value Drop 321 1H2024 Knight Frank
According to a recent report by Knight Frank, the strata retail market experienced a decline in the first half of the year. The total transaction value dropped by 32.1% to $215.5 million in 1H2024, compared to $317.2 million recorded in 2H2023.
This decline was attributed to a decrease in transaction volume, which dipped by 10.9% from 147 deals in 2H2023 to 131 deals in 1H2024. The average price of strata retail space also saw a decrease of 20.1% from $2,740 psf in 2H2023 to $2,190 psf in 1H2024.
The report emphasized that the majority of strata retail transactions in the first half of 2024 were for smaller units. In fact, only three units were sold for more than $10 million, while most deals fell below $4 million. Additionally, 78.6% of strata retail transactions in 1H2024 were below $2 million.
The largest strata retail transaction 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. In the same month, the second-largest transaction took place in Lucky Plaza, with a 689 sq ft unit on the first floor 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 for $10.4 million in April, reflecting a price of $2,420 psf.
The Rochor Planning Area recorded the highest interest among buyers, leading the market in terms of both sales value and transaction volume for 1H2024. A total of 27 strata retail deals worth $44.1 million were recorded in this area, with Parklane Shopping Mall on Selegie Road seeing 11 transactions worth a combined $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. The Arizon, a mixed-use development on Geylang Road, saw nine strata retail units sold for a total of $24.4 million.
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Comparison between freehold and leasehold transactions revealed that 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 per square foot of leasehold units experienced a 21.1% drop to $2,411 psf from $3,054 psf during the same period.
The decline in transaction volume and total transaction value was also more moderate for freehold retail units, experiencing a 2.6% decrease to 76 transactions in 1H2024 from 78 transactions in 2H2023. In comparison, leasehold retail sales dropped by 20.3% from 69 deals in 2H2023 to 55 in 1H2024, with the total transaction value falling by 34.3% from $145.5 million to $95.6 million over the same period.
Looking ahead, Knight Frank predicts that the challenging operating costs in the retail and F&B sectors may make it difficult for retailers, especially those located away from transport nodes or in low footfall areas. However, the potential for collective sales of select units may still attract buyers and investors looking for a more affordable alternative to conservation shophouses.
The successful en bloc sales of Shenton House and Delfi Orchard are examples of this, with Shenton House being sold for $538 million last November to Lee Yeow Seng, CEO of IOI Properties Group, and Delfi Orchard being acquired by City Developments in May for $439 million.
Knight Frank anticipates that the overall sales value for the strata retail market in 2024 could reach between $400 million and $500 million.