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

Muted activity was seen in Singapore’s commercial shophouse market in 3Q2023, with transactions and rents easing when compared to the previous quarter. The total number of shophouse deals registered in the quarter was 38, a 19% q-o-q drop from 47 the quarter before. The transaction value for 3Q2023 decreased 19% q-o-q to total $350.8 million.

The decline could be due to softening economic sentiment in the second half of 2023, along with an anti-money laundering blitz that kicked off in August, observes PropNex Realty in its 3Q2023 shophouse research report.

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The 117 transactions worth $1.1 billion seen in the first nine months of 2023 contrasts to the 155 deals valued at $1.3 billion recorded in the same period in 2022. Most of the shophouse deals in 3Q2023 were for fringe areas such as Districts 8 and 14, with District 8 recording the highest number of transactions at nine units worth $84.5 million.

The greatest shophouse transaction of the quarter was for a three-storey freehold shophouse along Cheong Chin Nam Road in District 21 for $41 million or $3,432 psf. This was followed by a row of three adjoining freehold shophouses in Jalan Besar, selling for $38.5 million or $6,037 psf.

Price performance across districts was uneven in 3Q2023 due to fluctuating sales volume. For freehold and 999-year leasehold shophouses, average unit price on the land area in Districts 7 and 8 increased 7.3% q-o-q to $5,679 psf; while in Districts 14 and 15, prices plunged 39.4% q-o-q to $2,375 psf. Prices in Districts 1 and 2 also declined, falling 13.2% q-o-q to $14,333 psf.

Shophouse rents saw their first decline since 4Q2021 last quarter, with median shophouse rents standing at $5.97 psf per month (psf pm) in 3Q2023, which was 3.9% q-o-q lower than in 2Q2023. However, leasing volume remained steady at 926 rental contracts worth $9.2 million signed last quarter.

The limited selection of choice shophouses available for sale, along with firm prices due to the segment’s growth in recent years, will likely lead to a lower performance in 2023 compared to 2021 and 2022. Nevertheless, PropNex believes investment appetite for shophouses should remain “fairly resilient”, with the ongoing tourism recovery and growth in the services sector expected to support the shophouse rental market.