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The rental market for retail properties in Singapore found a firmer footing last year, potentially indicating that the market has reached rock-bottom after languishing since Q1 2015, according to a new report from Colliers International.
In fact, statistics from the Urban Redevelopment Authority (URA) revealed that retails rents here dipped by 1.0 percent year-on-year in 2018, an improvement from the 4.7 percent and 8.3 percent declines in 2017 and 2016 respectively.
Colliers data also showed that rents of ground-floor retail space in Orchard Road edged up 1.4 percent year-on-year to $41.20 psf per month in the second half of last year. At the same time, retail rents in Singapore’s regional centres posted a marginal gain of 0.4 percent to $33.60 psf per month.
Although ground-level premises are expected to drive the gradual rental recovery, island-wide rents are forecasted to continue flattening to next year, before rebounding due to better supply-demand dynamics.
“Singapore’s retail rents may have bottomed, even as near-term vacancies remain elevated as brand-new malls complete and compete,” said Colliers International’s research head for Singapore, Tricia Song.
For instance, the vacancy level of retail premises increased by 1.1 percentage point year-on-year at the end of 2018. Nonetheless, the rise in rents despite an uptick in vacancy could mean that the oversupply situation in the market could end over the next few quarters, noted Song.
Looking ahead, the stock of retail space here is forecasted to increase over the next few years as there are 3.4 million sq ft of net lettable space in the pipeline. Last year, new completions reached one million square feet, including the redevelopment of Century Square in Tampines Central and the highly anticipated Jewel Changi Airport.
In the near term, rents of ground floor retail space in Orchard Road are expected to increase marginally by 0.8 percent year-on-year to $41.55 psf per month in 2019 amidst government plans to rejuvenate the famed shopping belt.
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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