Retail landlords opt for increased occupancy over high rents: Colliers

/ EdgeProp
August 23, 2018 2:00 PM SGT
Retail landlords traded off high rents for increased occupancy amid challenging market conditions in 1H2018, notes Colliers International in its semi-annual retail report. Island-wide retail vacancy decreased by 0.2 percentage point q-o-q to 7.3% in 2Q2018. On the other hand, the retail rental market remained generally soft. According to URA data, overall Central Region retail rents fell 1.7% y-o-y in 1H2018.
In the Orchard Road district, groundfloor rents in prime shopping malls stayed flat at $40.39 psf a month in 1H2018, says Colliers. This segment is expected to lead a gradual rental recovery in the coming four years, climbing to an annual average of $42.60 in that period.
Colliers says overall yields are expected to remain largely flat until 2022, with room for further yield compression. Retail yields are forecast to be about 4.6% this year.
Demand for retail space will be about 1.5 million sq ft this year, but new supply within the year will bring total supply in the market to 2.3 million sq ft, estimates Colliers. Overall demand is expected to ramp up for malls with sizeable catchments, as well as for ground-floor retail spaces.
A large influx of supply this year is expected to bump up island-wide vacancy rates to 8.4%, but this is likely to trend downwards to an annual 7% over the next four years.
Retail properties with a sizeable market catchment, well-differentiated tenant mix or potential for future catchment growth are attractive investment opportunities, says Colliers.