Is it (still) worth to Purchase a Strata Titled Shop Lot?
Is Strata Titled Mixed Development meant for you?
Whenever there is a new Strata Titled Mixed Development property launch, investors will rush to purchase their shop lot. Some investors buy not 1 unit but multiple units.
During the Pre-Covid days, investors form snaking queues which can be seen outside the show flat as investors have the view that it is indeed a rare opportunity to purchase a shop lot as a new shop lot rarely comes by as shop lots in shopping malls are mostly held by a large real estate firms such as Capitaland and Frasers and not sold to small investors. In other words, it is usually owned by a single landlord and not multiple landlords.
Though the opportunity to purchase a shop lot is tempting as it is rare, Investors should take note that a purchasing a shop lot is different from purchasing a residential unit.
Why purchase a shop lot?
One of the key factors that differentiate a successful shopping mall is the ability of to attract foot fall. In other words the number of people coming to the shopping mall. What this means is that the more people visiting the mall, the higher chance of them making a purchase, either through procuring a service or a product. The net effect is that the revenue of the mall gains as the footfall increases.
1. Don't want to pay ABSD?
The key advantage of purchasing a commercial property is that investors are not subjected ABSD (Additional Buyer Stamp Duty)
2. Differences in Marketing
The difference in Marketing in a strata titled mall compared to a Single Landlord owner is that in a strata titled mall, units located at the front of the mall are most willing to contribute to the marketing or advertisement cost of the mall. The reason is that they will be the units who are more likely to benefit the most from the increased footfall. The units at the back of the mall are least likely to enjoy benefit. Hence, a marketing campaign in a Strata Title Shopping Center is rare
Scenario - Assuming that owner A of unit 300 sqft contributes $1 psf per month to marketing cost. This translates to $300 per month. Assuming for the sake of discussion that there are 100 shops. This would mean an advertisement budget of $30,000 per month and $360,000 per year. This is not much considering that the budget needs to be split up into social media marketing, Website marketing, newspapers and magazines, etc. Hence the actual budget for marketing is relatively small.
The magic ends here when the units at the back of the mall do not want participate in the marketing campaign. That is the reason why no much if no marketing activities happens in strata titled malls.
Specialty Shopping Center
If you really must purchase a shop in strata titled mall, then go for specialty Shopping Center such as Queensway for sporting goods and Sim Lim Square for computers and electronic goods.
New Era of Shopping - Rise of the eCommerce Gaints
Regardless of whether you purchase physically or via eCommerce sites such as Shoppee, Lazada and Amazon amongst other sites. Before you put your name on the dotted line, do seek the advise of our consultants.
