Orchard Road vacancy drops even as retail rents in Central Region falls 1.1% in 2Q2018

By
/ EdgeProp Singapore
|
July 30, 2018 7:29 PM SGT
The +0.1% uptick q-o-q in Central Region retail rents in 1Q2018 was short-lived. The URA retail rental index showed a reversal – a 1.1% decline q-o-q - for 2Q2018. The URA’s Retail Price Index for the Central Region also fell in tandem, declining by 1.3% q-o-q in 2Q2018, compared to the marginal 0.1% q-o-q growth of the previous quarter.
“They underscore a market that remains mired with challenges, including technological disruption and rising operational costs,” says Tay Huey Ying, JLL head of research & consultancy for Singapore.
Island-wide retail vacancy decreased by 0.2 percentage points (ppt) q-o-q to 7.3% in 2Q2018. On a y-o-y basis, vacancy fell 0.8 ppt since 2Q2017. The retail vacancy is trending toward “sub-7%” vacancy levels, compared to vacancy rates above 8% in the 2016-2017 period, notes Tricia Song, Colliers International head of research for Singapore.
Traditional fashion retailers being supplanted by retailers of lifestyle and entertainment products and services such as gyms, even in prime retail space. These tenants generally take up large spaces and look for low rents (Credit: Samuel Isaac Chua/EdgeProp Singapore)

Vacancy lowest in 14 quarters

Orchard Road space however, continued to display resilience as vacancy rates inched downwards to 5.6% in 2Q2018, the lowest in 14 quarters. This is possibly attributed to the lack of new supply introduced, says CBRE.
The drop in vacancy is the result of a rebalancing by retail landlords who are willing to trade off historically high rents for more stabilised occupancy amid challenging market conditions, says Colliers’ Song. Since the last peak in 4Q2014, retail rents in the Central Region have declined 17.1%.
Orchard Road space however, continued to display resilience as vacancy rates inched downwards to 5.6% in 2Q2018, the lowest in 14 quarters (Credit: Samuel Isaac Chua/EdgeProp Singapore)
Contributing to the continued softening of rents is the changing tenant profile and location preferences arising from the shift in consumers’ shopping habits, says JLL’s Tay. She points to traditional fashion retailers being supplanted by retailers of lifestyle and entertainment products and services such as gyms, even in prime retail space. These tenants generally take up large spaces and look for low rents.
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