Smaller Deals Lead Strata Retail Sales Value Drop 321 1H2024 Knight Frank

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In the first half of the year, the strata retail market experienced a decline, as reported in a recent Knight Frank study. The total transaction value dropped 32.1% to $215.5 million compared to the previous half year, which saw $317.2 million, according to the report.AdvertisementThis decrease is due to a drop in transaction volume, with only 131 deals in 1H2024 compared to 147 in the second half of 2023, marking a 10.9% decline. The decrease in transaction value is also attributed to lower prices for strata retail space, as the average price per square foot (psf) dropped by 20.1% to $2,190 in 1H2024 from $2,740 in 2H2023.Read also: Manufacturing rebound boosts industrial sales and rents in 2Q2024: Knight FrankThe report notes that most of the strata retail transactions in the first half of 2024 were for smaller quantum deals. In fact, only three units sold for more than $10 million, with the majority of deals falling below $4 million. According to the report, 78.6% of the strata retail transactions in 1H2024 were under $2 million.The largest strata retail deal during this period was the sale of a 2,669 sq ft unit in Royal Square at Novena for $11 million ($4,121 psf) in January. The second largest was a 689 sq ft unit on the first floor of Lucky Plaza, sold for $10.5 million ($15,242 psf) in the same month. The third and final transaction worth more than $10 million was the sale of a 4,306 sq ft retail space in Peninsula Plaza, which was sold for $10.4 million in April.The Rochor Planning Area saw the most activity among buyers, with 27 strata retail transactions amounting to $44.1 million in sales. Parklane Shopping Mall on Selegie Road saw the most transactions in the area, with 11 deals worth $11.3 million. The Geylang Planning Area ranked second with 24 strata retail transactions totaling $34.9 million, with nine of those transactions occurring at The Arizon, a mixed-use development on Geylang Road.The comparison between freehold and leasehold transactions showed that the average price of freehold units remained relatively steady at $3,266 psf in 1H2024, dropping by just 1.1% from $3,301 psf in 2H2023. In contrast, the average price per square foot for leasehold units experienced a larger decline of 21.1%, from $3,054 psf in the previous half year to $2,411 psf in 1H2024.AdvertisementRead also: Prime retail rents islandwide up 0.9% in 2Q2024: Knight FrankLatest retail transactions at The Arizon. (Source: URA, EP Buddy)Freehold retail units experienced a smaller decrease in transaction volume and total value compared to leasehold units. Transaction volume only dropped by 2.6%, with 76 transactions in 1H2024 compared to 78 transactions in the previous half year. The total value of these transactions also decreased, but by a lesser amount of 30.2%, from $171.7 million to $119.9 million.In contrast, sales for leasehold retail units dropped by 20.3%, from 69 deals in 2H2023 to 55 in 1H2024. The total transaction value for the segment fell by 34.3% to $95.6 million from $145.5 million over the same period.Knight Frank predicts that the rising operational costs of retail and F&B sectors will continue to be a challenge for retailers in the coming months. 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 appealing to investors and buyers looking for a more affordable alternative to conservation shophouses.In addition, the potential for collective sales of select units may also contribute to their appeal, as seen with the successful en bloc sales of Shenton House and Delfi Orchard. In November 2023, IOI Properties Group CEO Lee Yeow Seng acquired Shenton House in the CBD for $538 million, while City Developments purchased Delfi Orchard on Orchard Road for $439 million in May.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.