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Singapore’s retail scene remained muted in Q3 2016, on the back of softer global and local economic conditions and persistently weaker retail spending, according to a Knight Frank report.
Mastercard Index of Consumer Confidence showed that Singapore suffered a significant decline in consumer confidence, which dropped 10.7 points in 1H 2016 from 2H 2015.
Knight Frank noted that while the overall retail sales index improved by 3.5 percent month-on-month in July, retail sales declined by 3.7 percent year-on-year in July.
Given the tougher retail climate, average islandwide prime rents moderated in Q3 2016.
“This was largely weighed down by the weaker retail spending amid the softened global and local economic performance, which resulted in more tenants working towards downsizing and consolidation of their businesses,” said the report.
Average prime rents in Orchard Road fell 0.5 percent quarter-on-quarter—its first decline since Q2 2015. Prime rents in Marina Centre-City Hall-Bugis areas, and City Fringe areas held steady compared to the previous quarter.
Suburban prime rents, on the other hand, improved marginally, mainly supported by the stable demand from surrounding resident catchment.
Looking ahead, Knight Frank expects average rents within the central region to fall by six to eight percent year-on-year in Q4 2016, while the more resilient prime rents are expected to ease by up to three percent year-on-year over the same period.
“The expected fall in rents takes into account not only the projected weakened demand from retailers, but also the likelihood of landlords re-adjusting the rental structures to help their tenants tide over down cycles of the market in order to maintain healthy occupancy status.”
Notably, some 1.072 million sq ft of net lettable retail space are set for completion in 2016. Of this, 409,000 sq ft was ready during the first half, while the remaining 663,000 sq ft will be completed in the second half.
Given this and the cautious stance taken by retailers on business expansion, island-wide occupancy is expected to fall from 92.8 percent in Q4 2015 to between 90 percent and 92 percent in Q4 2016.
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