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The retail space segment saw weak retail sales and a dip in tourist arrivals during the second quarter of the year, according to Savills Singapore.
Between January and May, international visitor arrivals dipped by 1.7 percent to 6.3 million compared to the same period last year due to woes arising from the missing MH370 plane, Thailand’s political uncertainty and China’s legislation on overseas tour packages.
Retail sales also grew at a sluggish pace in Q2 2014. “Excluding motor vehicles, retail sales grew by a marginal 0.1 percent year-on-year in May, after shedding 1.4 percent in April,” the property consultancy said.
“Despite the Great Singapore Sale (GSS), held from 30 May to 27 July, retailers have reported that they do not expect sales to surpass that of GSS 2013.”
Another key factor that has negatively affected retail sales is the growing popularity of ecommerce.
“With retailers bearing the brunt of slower sales and rising operating costs, landlords may have met their waterloo in their drive to raise rents,” said Alan Cheong, Senior Director for Research & Consultancy at Savills Research.
As such, some retailers such as F J Benjamin, have decided to downsize or shutter underperforming stores, the report said.
Rental prices also remained flat in Q2 2014 with prime retail space on Orchard Road commanding S$34.6 per sq ft per month, while rent in suburban malls stood at S$31.1 per sq ft per month.
Despite the weaker retail sales, Savills said the city-state continues to attract new retail brands. “However, without strong support from the tourism sector, retailers in the local scene will face greater challenges in coping with rising rental and operation costs,” it said, noting that the stable economy and robust employment figures are expected to buoy sales for retailers in suburban malls.
“We foresee retailers applying downward pressure on rents on Orchard Road, while rents in suburban malls, being less affected, may possibly inch up as sales figures have thus far, been fairly stable. Demand for space is likely to come from F&B and lifestyle brands, whereas some fashion retailers may put their expansion plans on hold,” added Savills.
In terms of upcoming supply, the retail scene is expected to be boosted by two major completions towards the end of the year. These include the Seletar Mall which is due to open in the suburbs by November, and the 133,000 sq ft Capitol Piazza in the CBD which is targeted for completion by Q3 2014.
Nikki De Guzman, Editor at CommercialGuru, edited this story. To contact her about this and other stories, email nikki@propertyguru.com.sg
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