Glimmers of hope in the retail sector?

By
/ EdgeProp Singapore
|
January 23, 2020 11:53 PM SGT
SINGAPORE (EDGEPROP) - URA’s statistics showed retail rents continued to improve in 4Q2019. Retail rents in the Central Region were 2.3% higher q-o-q, showing the same pace of growth as the previous quarter.
For the full year 2019, retail rents for the Central Region were up 2.9% y-o-y, reversing the full year decline of 1.0% in 2018. However, rents are still 15% below the last peak in 4Q2014, says Tricia Song, Colliers International head of research for Singapore.
Prices of retail properties in the Central Region were up 1.8% q-o-q in 4Q2019, based on the URA’s retail price index. In 2019, prices in the Central Region were up 1.3% y-o-y, compared to a 0.6% increase in 2018.
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 Major transactions of retail properties in 2019 included The Star Vista (pictured above), Rivervale Mall, Duo Galleria, Liang Court mall and Chinatown Point mall (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Major transactions of retail properties in 2019 included The Star Vista (pictured above), Rivervale Mall, Duo Galleria, Liang Court mall and Chinatown Point mall (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Total investment deals in 2019 – highest in a decade

With the retail market stabilising, investor interest has returned to the retail sector, says Colliers Research. Last year, total retail investment sales hit $4.1 billion, a 204% y-o-y jump and the highest in a decade, driven by investor interest and M&A.
Major transactions of retail properties in 2019 included The Star Vista, Rivervale Mall, Duo Galleria, Liang Court mall and Chinatown Point mall. “The market remains conducive for deals [in 2020] given a favourable interest rate outlook and improved demand-supply dynamics in the retail property market,” notes Song.
Optimism over seasonal sales events such as the Black Friday sale and the Singles’ Day sale (although to a lesser extent, as bargains in the latter are mostly online) in 4Q2019 also lifted retailer sentiment, notes Angelia Phua, JLL consulting director for research & consultancy.

New-to-market retailers, brand expansion

New-to-market retailers and brand expansion from various trade types dominated the scene in 4Q2019, especially those in the F&B sector, observes JLL’s Phua. They included F&B retailers Go Noodle House, Nam Dae Mun and Five Guys; Korean skincare retailer Civasan; luxury bed retailer Savoir Beds; as well as activity-based retailer, NERF Action Xperience.
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Brands that expanded their footprint in the retail scene included F&B operators Flor Patisserie and Haidilao Smart Restaurant; home furnishing store, HOOGA; and shoe retailer, GEOX, notes Phua.
While the growth momentum of the past two quarters of 2019 is likely to spill over into 2020, JLL’s Phua expects the pace of growth to be “modest”, given the sluggish global and domestic economic growth outlook.
As the market continues to digest the major supply completions in 2019 including Funan, Paya Lebar Quarter Mall (pictured above), and Jewel Changi Airport, new supply is expected to ease significantly and stay tight in 2020 (Photo: Samuel Isaac Chua/EdgeProp Singapore)
As the market continues to digest the major supply completions in 2019 including Funan, Paya Lebar Quarter Mall (pictured above), and Jewel Changi Airport, new supply is expected to ease significantly and stay tight in 2020 (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Tight supply in 2020-2024

As the market continues to digest the major supply completions in 2019 including Funan, Paya Lebar Quarter Mall, and Jewel Changi Airport, new supply is expected to ease significantly and stay tight in 2020. New supply is expected to stay in the 0.3% to 0.4% range from 2020 to 2024, versus the 10-year historical average of 1.4% of total stock.
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“The new supply is mostly concentrated in suburban and fringe areas, where there is a well-defined population catchment,” says Colliers’ Song. “This should help to support occupancies in the retail market going forward.”
Landlords are expected to continue “reinventing” retail, with further expansion of flexible workspace into retail malls in 2020, adds Song.
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