Retail rents fall 2.7% in 3Q21; prices stay flat

SINGAPORE (EDGEPROP) - Retail rents fell 2.7% q-o-q in 3Q20201, while prices of retail properties stayed flat, based on statistics released by URA on Oct 22.

This marks the seventh consecutive quarter of decline in retail rents, widening from the 0.5% fall in 2Q2021. Retail rents have fallen 21% from pre-Covid-19 levels in 4Q2019, notes Tricia Song, head of research, Southeast Asia, at CBRE.

“The continued fall in rents reflects the evolving Covid-19 situation and diminished footfalls due to ongoing safe management measures,” Song says.

However, on a more positive note, the vacancy rate for retail space decreased to 8.1% in 3Q2021 from 8.5% the previous quarter. Song notes that vacancy rates improved across all segments, including the Downtown Core where the vacancy rate improved to 11.2% from 11.9% q-o-q.

“Although retailers remained cautious following multiple government measures that disrupted business, they were more willing to take on calculated risks and commit to leases if the rent level was attractive and landlord support was assured should the business environment turn challenging due to an extension or another tightening of Covid-related measures,” says Angelia Phua, consulting director, research and consultancy, Singapore, at JLL.

The lower vacancy rate was also supported by a slower increase in the stock of retail space, which grew by 7,000 sq m in 3Q2021, compared with an increase of 18,000 sq m in the previous quarter.

Leonard Tay, head of research at Knight Frank Singapore, notes that consumers turned to new activities or new places to explore in Singapore in search of some escape from the pandemic-inhibited routine, driving demand for a wider variety of retail experiences.

“As such, even though the stock of retail space increased by 75,347 sq ft [7,000 sq m] in the third quarter, the amount of occupied retail space grew by about 355,209 sq ft [33,000 sq m], compared to the growth of 150,695 sq ft [14,000 sq m] in Q2 2021. Certain retailers such as Don Don Donki and Decathlon also continued to expand in spite of the pandemic,” he explains.

Retail property prices remained unchanged after declining for three quarters. “Performance was again dragged down by the Central Area, which saw property prices decline marginally by 0.5% q-o-q,” notes Shirley Wong, director for research at Colliers in Singapore.

Looking ahead, consultants say rents are likely to remain muted in 4Q2021 given the ongoing Covid-19 measures. “The recent four-week extension of safe-management measures is expected to temporarily further dampen retailer confidence, and could result in rents succumbing to further pressure in the short term,” says Phua.

However, with the establishment of vaccinated travel lanes and as Singapore transitions towards an endemic Covid-19, consultants believe that a recovery for the retail space is on the horizon. “If restrictions are eased by November, coupled with more vaccinated travel lanes, the pace of rental declines may slow down by the end of the year, with the sector poised to make a gradual recovery in 2022,” says Tay.

As at the end of 3Q2021, there was a total supply of 428,000 sq m of gross floor area of retail space from projects in the pipeline, compared with 419,000 sq m in the previous quarter.