As Asia's financial and commercial center, Singapore's real estate market has always been a hot spot for investors. In the first half of 2024, Singapore's real estate market was generally weak due to high interest rates and the government's cooling policy. Although sales were poor, the overall housing price valuation was still high.

Singapore's rental market is sluggish?

In the first half of 2024, both Singapore's strata office and strata retail markets showed a significant contraction. According to a report by Knight Frank, the total transaction value of strata office space fell by 15.6% month-on-month to 437 million yuan. This downward trend is also reflected in prices, with the average price per square foot falling sharply by 20.1% month-on-month to 2,190 yuan. The strata retail space market also faced challenges, with transaction value falling by 32.1% month-on-month to 215.5 million yuan, transaction volume falling by 10.9% month-on-month, and the average price per square foot falling by 11.3% month-on-month to 2,822 yuan.

Specifically, according to the report, there were 154 strata office unit transactions in the first half of the year, only two fewer than in the second half of 2023, but the average price per square foot fell sharply by 20.1% month-on-month to $2,190. Of the five largest transactions in the first half of the year, units in Vision Exchange and Suntec City in Jurong East each accounted for two seats. The Downtown Core Planning Area remained the most popular area, with a total of 47 transactions and a total sales of $190.1 million, most of which came from International Plaza and Solitaire on Cecil, the only freehold new strata office space project in the central business district.、

Still growing against the trend overall?

Despite the overall sluggish purchase market, the leasing market showed a different trend. Although the transaction volume of leasing strata retail properties fell by 7.9% year-on-year, the total sales rose by 10.4% against the trend to $291.7 million. This phenomenon shows that rental properties still attract a considerable number of investors and businesses due to their flexibility and low initial investment requirements amid increasing market uncertainty.

Market Adjustment and Coping Strategies

The market adjustment provides owners and investors with an opportunity to reassess and adjust their strategies. Many owners are beginning to consider further subdividing their assets to better meet the needs of small businesses and private wealth. In addition, the relatively low prices of stratified retail units provide opportunities for buyers seeking smaller investment scales. The success of collective sales, such as Shenton House and Delfi Orchard, also provide positive signals for the market.

Owners and developers are beginning to provide more personalized property products and services based on the needs of specific customer groups. For example, some developers are beginning to focus on creating retail spaces with specific themes or concepts to attract specific consumer groups. This strategy can not only increase the attractiveness of the property, but also bring higher rental returns to the owners.

The integration and innovation of technology are also affecting the development of the stratified retail market. With the rise of e-commerce and changes in consumer shopping habits, many retailers are beginning to explore online and offline integrated business models. This provides new opportunities for owners of strata retail properties, who can attract these retailers by offering more flexible leasing options and value-added services.

Overall market outlook

Despite the current market challenges, Knight Frank is cautiously optimistic about the future development of Singapore's strata retail market. It expects the market to improve in the second half of the year, with full-year strata retail space transactions expected to reach $400 million to $500 million. Full-year transactions for strata office space are also expected to grow, thanks to buyers' flexible choice of self-use or leasing for long-term income, as well as continued demand for strata properties.

Overall, although Singapore's strata retail market faces certain challenges in the first half of 2024, the market fundamentals remain solid. Through market segmentation, technological innovation and policy support, the market is expected to gradually pick up in the second half of the year and provide new opportunities for investors and owners. Market participants need to maintain a keen insight, grasp market changes, and develop flexible strategies to cope with the changing market environment.

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