Strata office sales dip in 2H2023, but strata retail volume picks-up: Knight Frank

By Nicholas Lam

/ EdgeProp Singapore |

February 5, 2024 10:13 PM SGT

After the successful collective sale of Far East Shopping Centre, displaced occupiers will likely be seeking replacement spaces, boosting demand (Credit: Samuel Isaac Chua / EdgeProp Singapore)

The strata commercial market saw mixed performance in 2H2023, with the strata office market registering a drop in sales value compared to the first half of the year while the strata retail market registering an increase in activity, according to a report by Knight Frank released on Feb 5.

(Source: URA Realis, Knight Frank Research)

Strata office sales slowed in 2H2023, coming off the back of dwindling supply from new launch Solitaire on Cecil. The upcoming office development at 148 Cecil Street by TE Capital Partners and LaSalle Investment Manager saw strong demand following its launch last March with most units snapped up in 2Q2023.

A total of 156 strata office deals were recorded in 2H2023, roughly on par with the 153 units sold in 1H2023. However, sales volume fell 21.1% from $656.5 million in 1H2023 to $518 million in 2H2023. The fall comes in tandem with a decline in average strata office prices from $3,098 psf in 1H2023 to $2,740 psf in 2H2023.

This brings strata office deals to 309 for the whole of 2023, similar to the number of deals recorded last year, while total sales volume clocked in at $1.2 billion, up 1.8% y-o-y and in line with Knight Frank’s projected range of $1.1 billion to $1.2 billion for the year. The average price for strata office deals came in at $2,929 psf for 2023, representing a 14.7% increase y-o-y.

The Downtown Core Planning Area recorded the highest sales value in 2H2023, with 46 strata office units worth $328.7 million sold. The deals were mainly for units at Suntec City and International Plaza, as there was a lack of new strata offices in the CBD, notes Mary Sai, executive director of capital markets at Knight Frank Singapore. At Solitaire On Cecil, two floors at the freehold development were sold in in July at $52.1 million and $51.2 million respectively, which represent the top two strata office transactions in 2H2023.

(Source: URA Realis, Knight Frank Research)

Freehold strata office transactions totalled 42 in 2H2023, falling 27.6% from 58 units in 1H2023. Total sales value fell 41.4% compared to 1H2023 to $226.3 million, while the average price tumbled 13.5% to $3,235 psf. In contrast, Leasehold office transactions saw a 7.8% increase in sales value from $270.6 million in 1H2023 to $291.7 million in 2H2023, in line with an increase in the number of units sold from 95 to 114. However, the average price for leasehold office strata units inched downwards by 1.6% to $2,448 psf compared to the first half of the year.

Over in the strata retail market, a total of 143 transactions worth $309 million were recorded in 2H2023, growing 23.3% and 65% respectively compared to the 116 transactions worth $187.3 million logged in 1H2023.

This brings strata office deals to 259 units worth $496.3 million for the whole of 2023. While the number of strata retail units sold remained the same as in 2022, total sales value dropped 27.8% y-o-y to $496.3 million in 2023. Nonetheless, average unit price showed a 27.3% increase from $2,241 psf in 2022 to $2,854 psf in 2023.

In terms of location, the Orchard and Novena planning areas saw the most activity in 2H2023, with both areas each recording 18 strata retail transactions worth $64.2 million and $57.7 million respectively.

Freehold strata retail transactions totalled 76 units worth $166.3 million in 2H2023, growing from the 60 units sold for $101.8 million in 1H2023. Average unit price also grew from $2,373 psf in 1H2023 to $3,246 psf in 2H2023. For leasehold strata retail units, 67 sales were registered amounting to $142.8 million in 2H2023, higher than the 56 sales worth $85.6 million recorded in 1H2023. The average price also rose from $2,573 psf in 1H2023 to $3,067 psf in 2H2023.

(Source: URA Realis, Knight Frank Research)

For 2024, Knight Frank’s Sai believes that following the successful collective sales of Far East Shopping Centre and Shenton House in 2023, displaced occupiers will likely be seeking replacement space to continue operating their businesses, which in turn will boost demand for existing strata office and retail units.

The demand could prompt other older strata office buildings to attempt the en bloc process. “In the meantime, the evident demand for strata offices might also drive boutique-sized office buildings to stratify and launch refurbished new product in the year ahead,” adds Sai. Knight Frank expects the strata office market to achieve a total transaction value of $1 billion in 2024.

Meanwhile, the strata retail market should remain bolstered by the ongoing recovery and strengthening of the retail sector. “In addition, with the entrepreneurial spirit going strong in Singapore, demand for strata retail units may also come from retail entrepreneurs with seed financing to start up cafés and mini marts in commercial areas,” Sai comments. Knight Frank projects between $400 million and $500 million of strata retail sales in 2024.