Shophouse market sees lower transactions and rents in 3Q2023: PropNex

The commercial shophouse market saw more muted activity in 3Q2023, a total of 38 transactions were recorded based on caveats lodged, a 19% q-o-q drop from the previous quarter. The value of shophouse transactions fell 19% as well to an amount of $350.8 million.

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Fluctuating interest from foreign and local investors, along with softening economic sentiment and an anti-money laundering blitz that kicked off in August, are some factors attributed to the slower sales. Year-on-year, the number of shophouse deals is 5.6% higher than the total recorded in 3Q2022, while total value is 2.3% higher.

In terms of location, most of the deals last quarter centred around Districts 8, 14, 12, 1 and 2. The largest transaction in 3Q2023 was a three-storey shophouse along Cheong Chin Nam Road for $41 million or $3,432 psf, closely followed by a row of three adjoining freehold shophouses on Jalan Besar for $38.5 million ($6,037 psf).

Price growth was not consistent in each district. For freehold and 999-year leasehold shophouses, average unit price on the land area in Districts 7 and 8 grew 7.3% q-o-q, while in Districts 14 and 15, prices plunged 39.4% q-o-q. For 99-year leasehold shophouses, average unit price on the land area in Districts 7 and 8 led the way, increasing 12% q-o-q.

Shophouse rents saw its first decline since 4Q2021 last quarter, standing at $5.97 psf per month. Nonetheless, leasing volume remained steady, with 926 rental contracts valued at $9.2 million signed.

PropNex believes investment appetite for shophouses should remain “fairly resilient” despite the lower sales expected in 2023 due to limited selection of choice shophouses available for sale, along with firm prices arising from the segment’s growth in recent years. The firm foresees a recovery in tourism and growth in the services sector to support the shophouse rental market in 2023.

Related news shifing to the shophouse market over the years have been promising. Shophouse transactions cooled in the second half of the year amidst higher financing costs and interest rates, while four-storey amalgamated shophouses went on sale for $55 million at Duxton Road. The value of 8M Real Estate’s shophouse portfolio rose from $400 million to $1.4 billion in six years.