Retail rents in the Central Region fall 1.5% in 2Q2019

Retail rents in the Central Region of Singapore tumbled 1.5% q-o-q in 2Q2019, after decreasing 0.2% q-o-q in 1Q2019, according to URA data.

Meanwhile, URA’s price index of retail space in the Central Region rose by 0.4% in 2Q2019 compared to a 1.9% decrease in the previous quarter.

“The retail sector continues to be a two-speed market. Non-prime retail spaces are likely to come under pressure due to competition from e-commerce platforms such as Lazada and Shopee, as well as a tough operating environment with the slowing economy and persistent labour crunch,” says Christine Li, head of research, Singapore and Southeast Asia, of Cushman & Wakefield.

As at the end of 2Q2019, there was a total supply of 3.4 million sq ft in gross floor area (GFA) of retail space from projects in the pipeline, compared with the 3.9 million sq ft in GFA as at the end of 1Q2019.

Going forward, Catherine He, CBRE’s associate director of research, states that the retail market could be under further pressure as economic uncertainty takes a toll on consumer sentiment and retail spending. “The limited upcoming supply remains the saving grace of the market and will help to cushion the pace of rental decline. Rental performance for prime retail space will continue to stay resilient, as demand for such space remains relatively healthy,” she says.

The amount of occupied retail space increased by 796,529 sq ft in net lettable area (NLA) in 2Q2019, compared to a decrease of 150,694 sq ft in the previous quarter. The stock of retail space rose by 193,750 sq ft in NLA, compared to the decrease of 21,528 sq ft in the previous quarter.

Tay Huey Ying, head of research and consultancy, JLL Singapore, expects occupier demand in the coming quarters to be underpinned by the growing trend of online retailers setting up physical stores to build brand equity and differentiate themselves from competitors. For instance, Love Bonito opened its third outlet at Funan in 2Q2019.

“Demand from F&B operators should also hold firm. In particular, the bubble tea trend is not showing signs of slowing down, with more brands entering the market and expanding quickly,” she says. “Examples of these are The Alley, Milksha and ChiCha San Chen, which expanded rapidly within weeks of their initial outlets, with the former two brands adding two outlets each and the latter setting up four outlets, all within two months of their opening.”