THE strata-shop segment is roaring.

Brisk sales totalled a record $661 million last year, partly driven by residential cooling measures that have diverted funds to non-residential properties.

Analysis of caveats lodged with the Urban Redevelopment Authority by R'ST Research found a total of 615 strata-shop units transacted last year - just under the record 632 strata shops totalling $656 million sold in 2010.

Sim Lim Square topped the charts with 33 strata-shop units changing hands, followed by Icon @ Changi with 29 units and Space @ Kovan with 28 deals inked.

R'ST Research director Ong Kah Seng said that a record number of 161 strata shops were sold on the primary market due to a slew of attractive new launches.

The robust demand also comes on the back of a dearth of new strata-shop projects in recent years, with many existing strata shops currently in older malls such as Peninsular Plaza, People's Park Centre and Lucky Plaza.

The ample supply of newer choices on the market has attracted more interest, leading to the resale market taking a hit with volumes slowing by 9 per cent last year, compared to 2010.

Mr Ong noted that the popularity of strata shops is partly due to the slew of cooling measures in the housing market, which introduced tighter financing rules and additional stamp duties.

Investors were prompted to look towards alternative real estate investments to park their cash instead, in the light of rock-bottom bank interest rates.

'(Strata shops) remain limited in supply, suggesting there may be possible long-term upside, or alternatively, potential for en bloc redevelopment in selected ageing strata-commercial properties,' Mr Ong added.

'Rising business costs have also led to some retailers buying strata shops to have more certainty in running costs.'

Higher demand for strata-shop units continued in the first three months of the year, with 107 units sold by developers - the highest level in almost 10 years.

This could be due to prices in the strata-industrial segment rocketing, leading to investors turning their eye to the strata-shop and strata-office segments instead, Mr Ong said.

However, the smaller size and more affordable price of shop space has seen the sector gain more in popularity compared to office space.

But he cited as a key concern the lack of overall control in the running of strata-titled malls, compared to a single- owner mall where concerted effort is made to manage the tenant mix.

'As strata-shop users have the freedom to operate their business according to their liking, the overall desired vibrancy of the retail development cluster may not be achieved... There may be duplications and competition in services and retail offerings within the same development,' he noted.

Still, although there are concerns of speculation in the strata-shop segment, Mr Ong emphasised that these are not as pressing as worries of speculative froth in the strata-industrial market and are unlikely to trigger cooling measures.

This is because high industrial property prices have a trickle-down impact on the business costs of small and medium- sized enterprises.

'(On the other hand), serious retailers generally have the option of being located in a single-owner mall, which is also likely to be better conceptualised than a strata-shop ownership development.'

He added that the prospects for new strata shops remain positive, though only if speculative activity is kept in check or moderated.

For buyers of older strata shops, however, the main concern is for the upkeep of the ageing property.

While some of these shops may still offer niche services, strata-titled malls might have already lost their relevance with modern shopping in Singapore's fast-changing retail landscape.

[email protected]