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Singapore’s retail property market is reeling from weak sales, falling tourist arrivals and slow economic growth, according to a report by Savills Research.
“A host of demand and supply factors continue to hamper the retail industry, with retailers needing to ride a storm which may last for several more quarters,” said its Senior Director for Research & Consultancy, Alan Cheong.
Retail sales (excluding motor vehicles) slipped by 1.6 percent in August on annual basis, while the purchase of watches and jewellery dipped by 1.7 percent. Likewise, tourist arrivals dropped by 32.1 percent to 2.768 million in the third quarter from the same period a year ago.
As for the economy, its growth remained the same at 2.4 percent in the third quarter compared to Q2 2014, but it is slower than the 4.8 percent expansion in the first quarter of the year
Consequently, monthly rents of prime retail space on Orchard Road remained the same at S$34.6 per sq ft in Q3 2014, while vacancy rate rose by 0.5 of a percentage point to 7.9 percent.
Nevertheless, demand for such premises continues to be strong, but rents are less likely to rise given the sluggish retail sales and high operation costs, the report said.
Similarly, monthly rents of prime retail space on suburban areas stayed flat at S$31.1 per sq ft. Although major shopping centres at these locations are benefiting from high occupancy, the entry of three new rivals could ignite greater competition in the near future.
These include the Seletar Mall with a net leasable area (NLA) of 188,000 sq ft and Big Box (260,000 sq ft), which are targeted for completion in Q4 2014. Another entrant is One KM. The 210,000-sq ft mall achieved partial TOP in the third quarter, and is expected to be fully completed by Q1 2015.
Looking ahead, the report said the expansion plans of retailers will continue to be hampered by slower local economy, falling tourist arrivals, lacklustre retail sales and the government’s stringent curbs on foreign workers.
“Going into the final quarter of the year, prime Orchard rents are expected to hold firm as the importance of branding via Orchard Road outweighs lukewarm retail sales,” noted Savills.
“Over in the suburbs, upcoming malls such as Big Box will enhance the Jurong Lake District as one of Singapore’s regional centres. Seletar Mall is also highly anticipated by its large population catchment. All in all, strong competition for retail space in suburban malls is expected, especially among retailers who are shifting their revenue generators from tourism sales to local consumption,” it added.
Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this and other stories, email nikki@propertyguru.com.sg
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