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Singapore’s retail property market recorded a negative net absorption of 270,000 sq ft in the first quarter of the year mainly due to sluggish retail sales and falling visitor arrivals, according to a report from DTZ Debenham Tei Leung (SEA).
Based on the latest government data, retail sales (excluding motor vehicles) dipped by 0.7 percent in April 2015 on an annual basis, while tourist arrivals declined by 5.4 percent to 4.85 million in the first two months of the year compared to the corresponding period in 2014.
Given the situation, Orchard/Scotts Road saw a negative net absorption of 80,000 sq ft. But it’s the other city areas that suffered the largest negative net absorption of 170,000 sq ft, while the suburbs recorded a lower negative net absorption of 20,000 sq ft.
Net absorption is equivalent to the amount of occupied space at the end of a period minus the amount occupied at the beginning of that time frame. A negative net absorption indicates that space was vacated within the period.
Moreover, occupancy rate in Orchard/Scotts Road slipped by 1.6 percentage point to 92.7 percent in Q1 2015 on a quarterly basis, with average monthly rents falling by 1.5 percent to around S$29.70 per sq ft in the second quarter.
“The decline in average rents was however, ameliorated by the lack of new retail completions and pipeline supply in Orchard/Scotts Road. Only about 10,000 sq ft of retail space was introduced in Q1 with the completion of Claymore Link. Furthermore, the retail pipeline supply there will be limited to about 25,000 sq ft of net leasable area (NLA) over the next four years,” said DTZ.
In the other city areas, occupancy rate dropped 2.8 percentage points to 90.4 percent. Also, the release of retail space amounting to approximately 111,500 sq ft has dragged down average monthly rents in the area by 1.8 percent to $17.65 per sq ft on a quarterly basis.
Over in the suburban areas, occupancy rate largely remained unchanged at 93.2 percent in Q1 2015 on a three-month basis as the malls there were more resilient to the weak visitor arrivals thanks to the support of the local catchment areas. However, average rents there decreased in Q2 by 1.4 percent to around S$27.75 per sq ft as compared to the preceding quarter.
“In view of weakening retail sales and increasing competition from the various retail platforms, landlords are likely to exercise more flexibility during rental negotiations. This is especially so, with about 876,000 sq ft of retail space coming aboard for the rest of 2015,” said Dr Lee Nai Jia, DTZ’s Associate Director of Research.
Specifically, about 72.5 percent (635,500 sq ft) of the upcoming retail space is expected to enter the suburbs in the remainder of the year, while around 26.5 percent (232,500 sq ft) will be released in the other city areas. On the other hand, Orchard/Scotts Road will only get the remaining 1 percent (8,000 sq ft).
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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