Will the shophouse market maintain a stellar sales performance in 2023?

As of 9M23, 117 shophouses worth nearly $1.1be exchanged hands.

The shophouse market’s full-year transaction volume in 2023 will likely be weaker than the sales in 2021 and 2022, when 253 and 191 deals were closed, respectively.

According to PropNex, the market’s underperformance this year can be attributed to some investors bidding their time given the "limited selection of choice shophouses available for sale as well as firm prices arising from the healthy growth in the shophouse sector in recent years.”

“In addition, it is possible that the flight-to-safety mindset amongst investors which was rampant following the pandemic outbreak in the past years has waned slightly,” PropNex added.

In 3Q23, shophouse sales fell 19% QOQ to 38 deals. During the first nine months of 2023 (9M23), there were 117 deals worth nearly $1.1b, which PropNex said is a pullback from 9M22 when 155 shophouses worth $1.3b exchanged hands.

“The shophouse market in 2022 looks on track to underperform the stellar sales achieved in 2022 and 2021,” PropNex commented.

PropNex likewise expects leasing market activity to moderate slightly in 2023 due to higher rentals and the more cautious sentiment, as economic growth outlook remains muted.”

In 3Q23, shophouse median rentals eased by 3.98% QoQ to $5.97 psf per month.

On the flip side, PropNex said the shophouse investment sales market should remain "fairly resilient" due to support from occupiers looking to acquire space for business operations post-pandemic and investors looking to add a defensive asset to their portfolio.