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Average prime first-storey rents fell islandwide by 3.7 percent quarter-on-quarter and 4.5 percent year-on-year to around S$30.90 per sq ft in Q3 2015, the lowest since the first quarter of 2006, said DTZ Southeast Asia.
The decline in rents was attributed to weaker consumer sentiments and slower retail sales.
According to DTZ, rents in the other city areas, which include retail spaces in the Central Business District, City Hall and Marina Centre, decline the most by 4.5 percent quarter-on-quarter to around S$22.10 per sq ft during the quarter under review.
Meanwhile, average prime first-storey rents in Orchard/Scotts Road was more resilient declining only by a smaller percentage of 3.5 percent quarter-on-quarter to S$38.45 per sq ft, as the area remained highly sought after by many international brands.
Prime first-storey monthly rents within the suburban areas dropped 3.5 percent quarter-on-quarter to S$32.10 per sq ft in Q3.
The latest URA statistics as of Q2 2015 showed that islandwide occupancy rate marginally fell by 0.4 percentage point to 91.8 percent.
Over at the Orchard/ Scotts Road area, occupancy rate slipped by 0.7 percentage point quarter-on-quarter to 92.0 percent in Q2 2015, while occupancy rate within the other city areas and suburban areas marginally dropped by 0.4 and 0.2 percentage point quarter-on-quarter to 90.0 percent and 93.0 percent respectively.
DTZ revealed that there will be no new completions in Orchard/ Scotts Road in the fourth quarter of 2015.
“In the other city areas, an estimated 74,000 sq ft of retail space is expected to come onboard by end-2015, with the retail component at South Beach contributing 53,000 sq ft,” it said.
The bulk of upcoming supply this year will be in the suburban areas, which will see around 836,000 sq ft of new retail space coming into the market. Anticipated completions in the area include Waterway Point (371,000 sq ft) as well as the asset enhancement initiatives (AEI) of Technopark@Chai Chee (230,000 sq ft), which are set to be completed by year-end.
“From 2015 to 2019, more than four million sq ft of retail space in the suburban areas will be released. With more retail options for consumers, malls in the suburban areas are expected to face greater competition. Consequently, older suburban malls in particular, will be inclined to reinvent and enhance their shopping experience in order to sustain rental values,” said Dr Lee Nai Jia, Associate Director of Research at DTZ.
Meanwhile, DTZ director of retail Anna Lee noted that rejuvenation of tenant mix and AEIs are no longer sure-win solutions to ensuring sustainable foot traffic. Rather, “these initiatives have become part and parcel of a natural cycle that malls have to go through to keep abreast of ever-changing consumer trends.”
As such, malls turn to organising unique events and promotional activities in order to increase footfall, she said.
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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