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Retailers in Singapore are still suffering from weak consumer spending, high overheads from staffing and rental costs, as well as competition from the online space, revealed a Savills report.
“In constant dollar terms, the retail sales index (excluding motor vehicles) in March 2016 fell 4.3 percent year-on-year, extending February’s 5.2 percent year-on-year decline,” it said.
As a result, prime retail rents within the Orchard and Suburban markets contracted 5.0 percent quarter-on-quarter in Q1 2016. This marks an even “deeper contraction from declines of 0.2 percent and 0.6 percent respectively in the previous quarter,” the report said.
With this, rents at Orchard Road now stand at S$29.9 per sq ft per month, while those in the suburban market stand at S$28.5 per sq ft per month.
The vacancy rate of Orchard Road shops hit a five-year high of 8.8 percent in Q1 2016, while vacancies in the Downtown Core area increased 0.4 percentage points quarter-on-quarter to 10.8 percent. The suburban market, on the other hand, saw vacancies improve by 1.1 percentage points quarter-on-quarter to 4.4 percent. However, according to Savills, this was “not enough to turn-around the 0.1 percentage points increase in island-wide vacancy to 7.3 percent in Q1 2016.”
Looking ahead, Savills expect approximately 8.2 million sq ft gross floor area (GFA) of new retail space to be completed between Q2 2016 and end-2020.
“This works out to an average annual new supply of 1.7 million sq ft,” said the report.
This includes Tanjong Pagar Centre which is set for completion some time this year. With 1.7 million-sq ft GFA, the integrated development saw around 60 percent of its retail space committed, with anchor tenant Virgin Active operating a 31,000-sq ft fitness facility.
Another upcoming large-scale development is Paya Lebar Central located within the Paya Lebar commercial hub. The 1.8 million-sq ft integrated development features a shopping mall, three Grade A office towers and residential apartments.
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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