SALES of strata-titled office space recorded more-or-less flat growth in 2023, with transaction value up 1.8 per cent to S$1.2 billion, according to a report by Knight Frank.

Some 309 deals were closed in the year, the same number as in 2022. But the number was down 9.6 per cent from the 342 sales transacted in 2021.

The average price rose 14.7 per cent to S$2,929 per square foot (psf), buoyed by demand for Solitaire on Cecil, the sole new product launched in 2023.

Strata office sales slowed in the second half of 2023, declining 21.1 per cent from that in the first half. H2 sales tallied S$518 million, after most units at Solitaire on Cecil sold out in the second quarter, at prices ranging from S$3,986 psf to S$5,397 psf.

The average price of strata office space stood at S$2,740 psf for H2, down 11.6 per cent from S$S$3,098 psf in H1 2023.

This year, the market is expected to be held up in part by a substantial number of occupiers displaced by the recent collective sales of Far East Shopping Centre and Shenton House, said Mary Sai, Knight Frank’s Singapore executive director for capital markets. The affected firms will be “looking for new office space to continue their business operations, especially those with a preference for ownership and investment”, she added.

Steady demand for limited freehold strata office units may push older buildings to attempt an en bloc sale, and drive boutique-sized office buildings to “stratify and launch refurbished new product in the year ahead”, Knight Frank said. 

Fresh supply is limited by planning guidelines barring strata-title subdivision in new commercial developments in the Central Business District and Orchard Road.

Knight Frank expects the strata office market to run up a total transaction value of S$1 billion in 2024 – even in the face of an upcoming supply of 1.8 million sq ft of new office supply in the Central Business District.

The Downtown Core Planning Area recorded the highest volume of sales in H2 2023, with 46 units worth S$328.7 million sold. Most of these transactions were for office units in Suntec City and International Plaza. The report noted that overall demand may be higher than recorded because some buyers/investors prefer not to disclose their purchases in order to keep a low profile.

Strata sales of retail space fell 27.8 per cent in value to S$496.3 million in 2023 from the S$687.7 million closed in 2022. Retailers were cautious in expanding due to prevailing economic uncertainty, and were more selective in their acquisitions, said Knight Frank.

More and higher value deals were signed in the second half than in the first. Some 143 deals were closed in H2 2023 for S$309 million, compared with the 116 transactions worth S$187.5 million in H1. 

Although the number of retail deals done in 2023 was the same as 2022, the average unit price jumped 27.3 per cent to S$2,854 psf in 2023, up from S$2,241 psf in 2022, Knight Frank noted.

The most significant transaction in the second half of 2023 was the sale of four freehold strata units at 15 Scotts in the Orchard Planning Area, for S$31.1 million or S$4,828 psf. Other notable sales included a unit located at 26C Lorong Mambong in Holland Village, which went for S$14.1 million, and another unit at Oxley Tower for S$11 million. The Orchard and Novena Planning Areas each recorded a total of 18 strata units sold during the period, amounting to S$64.2 million and S$57.5 million, respectively. This was followed by 19 strata units sold in the Downtown Core Planning Area that totalled S$52.6 million.

Knight Frank expects buyer and investor interest in strata retail units to remain stable in the year ahead as more people return to the office, in line with the broad-based retail recovery. The consultancy firm projects total sales value to come in at between S$400 million and S$500 million for 2024, with cost pressures reining in investment.