Retail rents see strongest growth in five years

By
/ EdgeProp Singapore
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January 26, 2019 9:41 PM SGT
URA’s retail rental index rose by 1.2% q-o-q in 4Q2018, making it the strongest quarter for rental growth in five years since 3Q2013, says Cushman & Wakefield (C&W). This compares to a 1.2% decline q-o-q in 3Q2018. Between 4Q2014 and 3Q2018, rents declined a cumulative 18.1%, except for 1Q2018 which showed an uptick of 0.1% q-o-q, according to Colliers International. Prices of retail space rose by 1.5% q-o-q in 4Q2018, following the previous quarter’s 0.3% q-o-q increase.
Meanwhile, islandwide retail vacancy increased for a second consecutive quarter as more retail stock was completed progressively, says Tricia Song, head of research for Singapore, Colliers International. Retail vacancy was 8.5% in 4Q2018, up by 0.9 percentage point q-o-q and 1.1 percentage point y-o-y. In the quarter, the largest new supply injection came from Jewel Changi Airport with a gross floor area (GFA) of 929,000 sq ft. Elsewhere, Raffles Hotel Shopping Arcade and City Gate saw 124,000 sq ft and 102,000 sq ft respectively of GFA completed in 4Q2018.
SuperPark Singapore opened a 40,000 sq ft indoor playground in November 2018 in Suntec City (eft), while the world's first Nerf Experience Centre will open at Marina Square (Credit: Samuel Isaac Chua/EdgeProp Singapore)
Orchard Road continued to outperform as its vacancy rate slid to 5.1% in 4Q2018 – the lowest since the 4.5% recorded in 3Q2014, says Tay Huey Ying, JLL’s head of research and consultancy, Singapore. It is also the lowest vacancy rate recorded in 4Q2018 among all the regions reported by the URA. This attests to the street’s continued appeal to new-to-market brands as well as those looking to expand their footprint in Singapore, notes Tay.
Supply should taper off significantly from 2020. “In 2019, we expect ground floor retail rents in prime shopping centres along Orchard Road to rise marginally by 1% to 2% y-o-y, due to the lack of new stock, while prime floor rents for regional centres (suburban) should stabilise,” says Colliers’ Song. For the regional centres, Song reckons those in suburban locations with significant catchment areas and MRT connections should outperform the less strategically located suburban malls.
“Besides the continued challenge from e-commerce, we expect elevated new retail space supply in late 2018 to 2019 (equivalent to 3.0% of current stock), spread out over the central region, city fringe and suburban...