Strata retail units show healthy gains

Most investors who have bought strata-titled shops in mixed developments in recent years have made money, at least on paper, property consultants say.

Such properties are gaining traction among investors given their healthy rental yields and capital appreciation. They are also unaffected by recent market cooling measures.

The limited supply of strata retail units here has also helped prices to stay resilient. Only a handful of mixed projects with strata shops have been built in the last five years, including Alexis and Southbank.

At least another eight, such as East Village at Tanah Merah, Millage at Geylang and The Promenade@Pelikat achieved good take-up rates and are due to be ready in the next five years.

In all, at least 600 strata shops will be added to the market here.

While strata shops can also be found in malls such as Sim Lim Square, investors like those in mixed developments as they are mostly well located, cheaper and have a ready pool of traffic from residents, experts said.

Prices have also soared, in line with market conditions.

For instance, a retail unit at Southbank, in Lavender, was marketed for an average of $1,508 per sq ft (psf) in 2006, but was last sold in the resale market at $2,295 psf in 2010.

The trend is also borne out by some older mixed projects like Aquarius by the Park and Bukit Timah Plaza, achieving a 21.5 per cent annual compounded rate of return over the past five years.

Experts say rental yields for strata shops could range from 3.5 to 6 per cent, which is fairly attractive. But returns could be lower for those who bought units through a costlier subsale.

Generally those who held the units long enough, for at least three years, may be able to expect at least 15 per cent capital appreciation, however, that new supply coming on stream could moderate that.

Source: The Straits Times – 21 July 2012