Retail rents in Central Region fall 1.2% in 3Q0218

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/ EdgeProp Singapore
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October 27, 2018 3:48 PM SGT
According to URA’s rental index, retail rents in the Central Region fell 1.2% in 3Q2018, despite stronger retail sales and tourism in Singapore. The latest dip in rents came on the back of the 0.3 percentage point rise in islandwide vacancy rate from 7.3% in 2Q2018 to 7.6% in 3Q2018 as demand for retail space contracted.
Changing shopper’s preference and e-commerce has led to structural changes in the retail market and retail mix to meet the demands of millennials, observes Christine Li, senior director of research at Cushman & Wakefield(C&W).
Landlords are increasingly adding such retailers in the hope of driving footfall to their malls, for instance large-format activity based retailers such as Superpark indoor activity park, ABC Cooking Studio and Holey Moley golf club. They are believed to have played a part in keeping rents soft, says Tay Huey Ying, JLL Singapore head of research & consultancy.
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Vacancy rates on Orchard Road continued to improve: By the end of 3Q2018, vacancy rates are 3.3 percentage points below the recent high of 9.2% in 2Q2016 (Photo Credit: Samuel Isaac Chua/EdgeProp Singapore
C&W’s Li agrees. “Activity-based tenants are making a comeback and malls which are unable to efficiently incorporate such tenants are facing challenges to attract footfalls. This has led to the continued decline in overall retail rents.”
On a brighter note, vacancy rates on Orchard Road continued to improve, says JLL’s Tay. By the end of 3Q2018, vacancy rates are 3.3 percentage points below the recent high of 9.2% in 2Q2016. “This demonstrates that Singapore’s prime shopping belt remains appealing to retailers, both new-to-market and expanding brands, because of its diverse catchment comprising locals and tourists.”
Landlords will have to continue to experiment with different tenant mix and strategies to improve occupancy and footfalls. The substantial supply coming on stream over the next 15 months amounting to a total gross floor area (GFA) of 308,000 sqm will continue to weigh down rents, cautions JLL’s Tay. “Until brick-and-mortar retail stores manage to convert foot traffic into in-store purchases, rent movements are expected to remain subdued.”
The trend of a two-tier market will continue as accessible and well-managed malls attract the bulk of pedestrian footfalls. According to C&W data, average prime rents in major malls in Orchard and suburban areas have continued to rise, as retailers consolidate...