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Although the limited supply of strata-titled retail units could push prices up in the long term, the rental demand for smaller spaces could soften due to the stiffer competition from online retailers and Singapore’s stringent rules on foreign manpower.
According to property consultancy DTZ, this is particularly true for smaller retailers, which account for most of the demand for such premises.
In fact, retail space rents continued to fall in Q4 2014 and for the entire year. Due to its strong retail positioning and limited upcoming supply, Orchard/Scotts Roads posted the lowest rental decline with the average gross fixed rents at these locations dipping by only 0.3 percent to S$30.03 per sq ft per month in the fourth quarter compared to S$30.13 per sq ft per month during the previous quarter.
At the same time, average monthly rents at suburban areas receded by 0.4 percent to S$28.05 per sq ft, while that in other city areas slipped by 0.7 percent to S$17.98 per sq ft. The latter market segment includes Bugis, Beach Road, Bras Basah Road, Bencoolen Street and North Bridge Road.
For the third quarter of 2014, average decline per area stand at 0.3 percent for Orchard/Scotts Roads, 0.5 percent for suburban areas and 1.0 percent for other city areas.
For the entire year, these three market segments recorded rental drops of 0.7 percent, 0.9 percent and 1.9 percent respectively.
On the other hand, capital values of strata retail space in both Orchard/Scotts Roads and the suburban areas rose by 1.3 percent in 2014, while that in other city areas remain unchanged.
It is noted that DTZ’s figures only refer to fixed rents and exclude gross turnover rents which take into account retailers’ revenue. It also excludes stepped-up rents, a rental structure involving rental increases in subsequent years.
Nikki De Guzman, Editor at CommercialGuru, edited this story. To contact her about this or other stories email nikki@propertyguru.com.sg.
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