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Average monthly rent of first-storey retail space across Singapore dropped 1.2 percent quarter-on-quarter in Q1, marking its fourth straight quarter of decline since Q2 2015, a DTZ report revealed.
Average monthly rent for this space fell by 7 percent year-on-year to about S$30.15 per sq ft in Q1 2016. Islandwide occupancy rate also fell by 1.6 percentage points to 91.9 percent year-on-year.
In particular, rent of first-storey retail space at Orchard/Scotts Road dipped by 1.0 percent quarter-on-quarter to about S$37.65 per sq ft during the first quarter of this year. Based on URA data, occupancy rate in the area slid by 2.1 percentage points on year to 92.3 percent in 2015, or the lowest level since 1996.
Retailers in the area are expected to face some pressure, especially due to competition from other markets in Asia, like Bangkok, South Korea and Taiwan, which offer affordable shopping and distinctive cultures to tourists, said the consultancy.
“Cheaper air fares leading to higher mobility throughout the region, in conjunction with a relatively strong Singapore Dollar that made shopping here more expensive, also contributed to weaker retail sales as visitors deter travel plans to the city-state,” the report said.
In other city areas, rent dropped by 2.0 percent on quarter to S$21.35 per sq ft as occupancy rate receded by 1.6 percentage points to 91.6 percent in 2015 versus the previous year.
Aside from the lacklustre business sentiment, rents in the area are being dragged down by the large upcoming supply in 2016. Mixed-use developments set to be completed there include DUO Galleria (56,000 sq ft), Tanjong Pagar Centre (100,000 sq ft) and OUE Downtown Gallery (177,000 sq ft).
Similar to the two aforementioned submarkets, occupancy rate of retail space in the suburbs fell by 1.4 percentage points to 92.0 percent in 2015 on a yearly basis. Consequently, average monthly rent of first-storey retail there dropped by 1.0 percent to S$31.40 per sq ft in Q1 2016 on a quarterly basis.
Meanwhile, many retailers have recently upgraded their space to include private rooms and lounge areas fitted with superior furnishings to attract more shoppers as competition from e-commerce shops heats up, said Anna Lee, DTZ Southeast Asia’s Director of retail.
For instance, Tiffany & Co’s outlet at ION Orchard comes with private viewing space equipped with custom fittings. Dior also completed its revamp in late 2015, which added elegant interior designs, like marble features and luxurious carpets.
Looking ahead, more retailers are expected to consolidate their outlets in 2016 due to rising operating costs and weaker sales from brick-and-mortar stores. These firms are also projected to come up with creative and innovative solutions to vie against e-retailers.
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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