Demand for retail strata units remains strong

The proliferation of mixed developments in suburban areas in recent years has pushed up sales for shops substantially, with demand for strata-titled retail units experiencing strong growth.

More than 600 shop units were sold last year, more than double the 300 units sold in 2009.

At the Promenade @ pelikat in the Upper Serangoon area, comprising 270 retail units and 164 residential units, shop prices start at S$2,350 per square foot.

208 units were launched under Phase One two weeks ago and developer Oxley Holdings says 90 per cent of the shops have been sold.

Analysts say demand for such strata retail units will remain strong going forward.

Executive director of Credo Real Estate, Ong Teck Hui, said that the increase in the supply of shops over the last five years was about 5 per cent and “because of that, vacancy rate has remained low, at about 5 per cent.”

“What we have seen is a stronger volume of sales for strata shops over the last two years, at a rate of more than 600 units per year,” he added.

Prices of strata-titled commercial units have risen by some 20 per cent in the last couple of years, analysts said.

“Market yields for these properties tend to be higher, commensurate with the risk that you take,” head of research at Jones Lang LaSalle Chua Yang Liang said.

The yields for residential properties, depending on the location and market conditions, can be as low as 2% and as high as 3.5% to 4%, Chua added, “whereas in commercial market the yields tend to be better, between 4% and 6%.”

More individual investors are also increasingly looking at strata-titled shops as a viable investment option, especially in the suburban areas — accounting for some 75 per cent of all investors in those markets.

“A lot of the individuals may have actually switched portfolios from residential to one of retail,” special advisor at HSR Donald Han said.

“The rationale behind it is that your retail strata titled investment does not attract the additional buyer’s stamp duty, it has less complications, or less lure towards meeting any government cooling measures as well.”

For the whole of 2012, analysts expect 600 to 800 units of strata-titled retail units to be sold.

About 125 units of such properties have been sold in the first two and half months of this year, HSR said.

They include units at [email protected], The [email protected], Millage and Robinson Square.

Source : Channel NewsAsia – 23 Apr 2012

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