_Sustained buying interest for shophouses and muted growth for strata office and retail markets

For the first half of 2017, the shophouse segment continued to receive sustained buying interest, whilst the strata office and retail markets remained muted.

October 13, 2017

Strata office

In H1 2017, the strata office segment reported a lower transaction value of -35.0% in H1 2017 as compared to H2 2016, alongside with fewer transactions (-24.3% in H1 2017 compared to H2 2016). Despite fewer/lower volume in transactions, the average strata office price remained fairly stable at S$2,092 psf in H1 2017 compared to S$2,077 psf in H2 2016. As there were fewer new office sales launches in the first half of 2017, the strata office segment was largely dominated by resale transactions. The sweet spot for office price quantum maintained at between S$1.0 to S$2.0 million in H1 2017, while companies continued to make up close to two-third of all office buyers during this period.

Going forward, the improving business sentiments seen firms in the services sector for H2 2017, could trigger growing interest from business enterprises to invest in office units for their own use. And with no new office project launches envisaged in the short term, average price for strata office is likely to remain fairly flat in the second half of 2017.

Strata retail

The total transaction value for the strata retail segment declined 30.4% in H1 2017 compared to H2 2016 despite an increase in transaction volume (+6.9% in H1 2017 compared to H2 2016). Similar to the strata office segment, the strata retail segment was also dominated by resale transactions due to fewer new sale launches in the first half of this year. In H1 2017, close to 40.9% of the retail transactions were concluded between S$0.5 and S$1.0 million price quantum, with Singapore citizens making up half of the buyers of retail units this period.

The outlook for the Singapore retail scene remains challenging in the medium term, and therefore, smaller retail units with lower price quantum of below S$1.5 million will be more palatable for investors going forward. Freehold retail projects, such as Lucky Plaza, Holland Road Shopping Centre and Sim Lim Tower, located in the Central Region, could remain highly sought after by investors in H2 2017.

Shophouse

The shophouse segment remained the bright spot within the commercial sales segment in H1 2017. With over 58.3% of the total transaction value attributed to large transactions of above S$10 million apiece, the total shophouse transaction value rose 14.2% in H1 2017 compared to H2 2016. Majority of the above S$10 million transactions took place in District 1 (Raffles Place, Cecil, Marina, People’s Park). Companies continue to dominate as top purchases of shophouses, representing 66.7% of the buyers in H1 2017.

Get more information at H1 2017 Biannual Research Bulletin