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Swathes of vacant retail space have started to appear in Singapore, with even more expected in the near future, as the process of securing new tenants becomes longer, according to Knight Frank’s latest retail bulletin.
Another factor that has contributed to the rising vacancy rate is the closure and consolidation of major department stores in a number of malls. For instance, John Little has ceased its operations in Marina Square and plans to close its outlet in Tiong Bahru later this year, while Marks & Spencer will no longer be a tenant at Centrepoint. Isetan shuttered its store at Wisma Atria in Q2 2015, and Metro will bid farewell to Compass Point by Q2 2016.
On a brighter note, the consultancy noted that many retail brands were introduced to the city-state in H1, as landlords clamoured to attract a diverse set of tenants. Malls that have welcomed new-to-market retailers include Vivocity, Scotts Square, Suntec City Mall and Capitol Piazza, which obtained its temporary occupancy permit (TOP) in the Q1. Additionally, Singapore saw several notable mall openings in the first half of the year, while one asset enhancement initiative (AEI) was completed during the same period.
There is 321 Clementi, with an estimated net leasable area of 81,000 sq ft, Capitol Piazza (131,000 sq ft), and Suntec City Phase 3 (137,000 sq ft), while Vivo City has added 15,000 sq ft of retail space in Basement 1.
Meanwhile, quarter-on-quarter monthly rents of prime retail space across Singapore inched up in Q2 by 0.8 percent to S$32.20 psf. In particular, average gross rents of prime retail spaces in Orchard Rd (central) dipped by 1 percent to S$47.40 psf, while in Orchard Rd (fringe), this figure remained unchanged at S$24.10 psf.
Conversely, rents in the Marina Centre / City Hall / Bugis submarket rose by 1.1 percent to S$33 per sq ft, while rents in city fringe and suburban malls increased by 2.2 percent and 2.8 percent to S$23.50 psf and S$33.10 psf respectively.
Looking ahead, around 3.7 million sq ft of net lettable retail space from major projects is expected to ready between 2015 and 2019, with 2018 recording about 1 million sq ft. Out of the latter amount, 0.8 million sq ft (75.3 percent) of the annual new supply will be located in the Outside Central Region (OCR).
“Some key projects in this region are Project Jewel at Airport Boulevard and Northpoint City at Yishun. Other suburban retail developments that will be completed over the next four years include Hillion Mall and Waterway Point,” Knight Frank said.
However, average retail rents could decline further, while vacancy levels could trend upward in H2 2015 as tenants close or consolidate their stores amidst a volatile global economic outlook, ongoing manpower crunch and slowing tourist arrivals.
The upcoming supply this year could also drag down rents island-wide by three to five percent year-on-year, while overall occupancy rate could moderate to 91 to 93 percent by the end of 2015, added the report.
Cheryl Marie Tay, Senior Journalist at PropertyGuru, edited this story. To contact her about this or other stories email cheryl@propertyguru.com.sg
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