Singapore strata retail sales value slashed by half in H1 amidst COVID-19 woes

The total transacted value dropped to S$67.4m in H2 2020 from S$135m in H2 2019.

According to Knight Frank, the strata retail market slowed down significantly in the first half of 2020, as the total transacted strata retail sales value as well as the number of transactions were approximately half of what was recorded in H2 2019. The economic uncertainty in light of the global COVID-19 outbreak and physical restrictions has weakened market sentiment and dampened transaction volume.

In H1 2020, the total transacted value was S$67.4 million, a substantial 50.1% decrease from S$135.0 million in H2 2019, with the number of transactions falling from 91 to 48 in the same period. The average unit price of transactions fell 14.9% from S$3,266 psf in H2 2019 to S$2,779 psf in this half of the year.

With limited new strata retail developments for sale, there was only one primary market sale – a retail unit at 1953 condominium near Farrer Park MRT Station. All other strata retail transactions during the first six months this year were in the secondary market, notably nine units at People’s Park Centre.

The Change Alley Mall retail podium, which sold at S$192.7 million (S$3,099 psf), was the only big-ticket transaction between January and June 2020. This 62,172 sq ft of retail space in Raffles Place was sold by Oxley Holdings in June.

Comparing Freehold & Leasehold Strata Retail Performance

There were 21 freehold strata retail transactions in H1 2020, a 60.4% drop from 53 in H2 2019. This contributed to the sharp 70.2% decline in total transacted value, from S$86.9 million in the previous period to S$25.9 million in H1 2020.

Leasehold strata retail properties were comparatively more resilient than its freehold counterparts. The 27 transactions in H1 2020 represented a 28.9% decrease from 38 in the previous half-year. The total transacted value fell 13.8%, from S$48.1 million during the previous period to $41.5 million in H1 2020.

There was notable interest for strata retail properties at Sim Lim Tower, Midpoint Orchard and ICB Shopping Centre, suggesting that investors were on the lookout for units with future collective sale potential.

Outlook

The COVID-19 outbreak and the subsequent restrictions to stem the spread of the virus has taken a toll on the retail sector, resulting in weak sentiment in the strata retail market. For the rest of the year, the interest in retail properties is likely to remain subdued, with lower sales volumes and decreasing prices.

Investors with cash reserves might take this opportunity to scout for possible bargains which could emerge from the pandemic, taking advantage of an economy in recession
to secure good-value strata retail units.

As in the first half of 2020, strata retail transactions in the months ahead are expected to comprise of units in buildings with redevelopment potential and near/within residential clusters where there is captive shopper traffic.