How URA's new size policy will affect strata retail shops

Prices of units below 25sqm will likely rise.

According to Knight Frank, on 26 March 2013, the Urban Redevelopment Authority (URA) announced new guidelines, stipulating that average retail unit sizes in all new erection proposals for full commercial as well as mixed use developments should not be less than 50 sqm. 

Knight Frank noted some possible implications of these new set of guidelines on achievable gross development value.

Here's more from Knight Frank:

Smaller units are typically sold at higher unit prices, as the smaller area makes the overall price quantum more affordable for investors. In most instances, average unit prices of shops smaller than 25 sqm can be 5 to 15 per cent higher than that of larger units of more than 25 sqm size on the same level in a development.

Given the strong investor demand for smaller retail units, which typically transact at lower price quantum, and with anticipated lower supply of smaller units moving forward, developers may take the opportunity to further raise the prices of these small units.

According to URA’s Realis transaction data, there were a total of 56 new sales of strata retail shops in 1Q 2013, selling at an average price of $4,160
per sq ft. Approximately 60 per cent of these transactions were of shop units smaller than 25 sqm, with an average price of $4,860 per sq ft. Units which were between 40 and 50 sqm, however, had a lower average price of $4,675 per sq ft, approximately 4 per cent lower than the unit price of shops below 25 sqm.