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With growing popularity of e-commerce, more retail space in Singapore is expected to be no longer necessary in the future, according to a new research from property consultancy JLL.
Citing government estimates, it thinks that about 1.96 million sq ft of a net leasable area (NLA) of actual stores could have been made obsolete in 2016. This is based on the average retail productivity of $537 psf and a three percent share of online sales from the total operating receipts of around $35 billion last year.
This means online sales could have contributed to a significant amount of vacant retail space here, with the Urban Redevelopment Authority (URA) reporting an overall amount of unoccupied premises of 5.3 million sq ft as at Q3 2017.
But with the authorities looking to grow the e-commerce share of retail receipts to about 10 percent by 2020 and overall operating receipts projected to hit $37.1 billion, approximately 6.9 million sq ft of retail space is projected to be no longer needed by then.
“With technological advancements such as the pervasive smartphone use and digital commerce rapidly reshaping the Singapore retail scene, online shopping will continue to grow, and retail competition will intensify. Retail space will have to be transformed to stay relevant for retailing purposes in this internet age,” said JLL.
Despite the negative impact of online sales on the retail property market, some consumer groups still opt for brick-and-mortar stores.
“The Generation X and Baby Boomers still prefer to shop in physical stores while the Millennial Generation and Generation Y enjoy visiting malls to browse and linger in cafes to socialise and engage in online activity on mobile equipment. To stay relevant, landlords and retailers will need to innovate and adopt new strategies to navigate the challenging retail environment,” noted Angelia Phua, JLL Singapore’s Consulting Director of Research and Consultancy.
Meanwhile, the property consultancy is urging the authorities to curb the release of retail sites in its Government Land Sales (GLS) programme to address increasing vacancy levels.
“Limiting the release of government land sales sites for retail will slow down future supply and contain rising vacancy rates. While consumer sentiment has picked up alongside the improving economic conditions, retailer sentiment remains cautious in the face of intensifying competition from online retailers, and this will continue to put pressure on rents,” added JLL’s National Director of Retail Leasing, Lee Siew Ling.
This article was edited by Keshia Faculin.
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