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Despite a good number of new leasing enquiries in Singapore, retailers took a long time to sign their rental agreements in Q2 2015, CBRE said in its recent report.
According to the property consultancy, this “stemmed from retailers’ concerns about the uncertainty of the market as tourist arrival and retail sales figures remained weak. Manpower constraints also impeded the expansion rate of some retailers, particularly in the Food & Beverage (F&B) segment.”
Given this, several international brands exited the local retail scene. For instance, US fast food chain Wendy’s suffered its second failed attempt to operate in Singapore after it closed its last outlet here, while Hong Kong’s lifestyle retailer Goods of Desire closed its store in April because of poor profitability.
“Still, the number of new international brands entering the market remained healthy,” noted CBRE. Most of them are European retailers eyeing Asia’s greener pastures given the sluggish retail sentiments in their home countries. Aside from fashion and F&B, the other retail segments that flourished in the quarter were those that offer services and those involved in beauty and health.
Amidst the challenges faced by retailers, monthly rents of prime retail space in Orchard Road slipped by 0.1 percent to S$34 per sq ft in Q2 2015 on a quarterly basis and 0.6 percent year-on-year. The decline was attributed to the few well-performing developments and the dearth of prime retail space in the iconic shopping belt.
Meanwhile, prime retails rents in suburban malls remained unchanged at S$30.30 per sq ft as compared to the previous quarter and the corresponding period last year.
Looking ahead, although rents would continue to face downward pressure in the next 12 months, prime retail rents in Orchard Road and in suburban malls are expected to be supported by the limited amount of prime space in both submarkets, CBRE said.
It added that despite the issues faced by tenants, they would still have the upper hand in lease negotiations as vacancy is expected to rise further.
Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this or other stories email nikki@propertyguru.com.sg
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