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While retail rents showed marginal improvement in the first quarter, Singapore’s retail property market continued to show signs of volatility as rents slipped by 1.1 percent quarter-on-quarter in Q2 2018.
“This underscores a market that remains mired with challenges, including technological disruption and rising operational costs,” said JLL Singapore research head Tay Huey Ying.
E-commerce, for instance, remains a tough competitor for traditional retail. This comes as big players such as Lazada have been going on the offensive by luring more merchants into the platform by removing commission charges for sellers in Singapore.
The sector also has to contend with a pipeline of new supply over the next 12 to 18 months. Among them are Paya Lebar Quarter, which is set to come onstream in Q2 2019, and CapitaLand’s Jewel@Changi and Funan due for completion next year.
Tay noted that the growing online shopping culture and changing preferences of customers had also affected Hong Kong’s retail sector, where rents are expected to remain soft.
“Until consumers have a compelling reason to return to physical brick-and-mortar retail shopping, retailers will approach any expansion with caution,” she said.
The shifting strategies of malls also contribute to downward pressure on rents. The growing emphasis on experiential retail to increase foot traffic means more restaurants and lifestyle offerings like arcades, educational centres and gyms are occupying space instead of traditional beauty and fashion retailers.
Although these tenants usually need bigger spaces, they are usually on the lookout for lower rents.
“Notwithstanding the steadier consumer sentiment amid healthier economic and employment environment, the sector will likely remain slow. Retailers need to brace themselves that the market has transformed fundamentally,” added Tay.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
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