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Despite the bottoming out of rent in Q2 2017, the retail market is still not out of the woods as the rental hike posted as at Q2 2018 remains marginal, ranging from 0.5 percent to 1.4 percent, reported Singapore Business Review citing UBS Asset Management’s 2019 real estate outlook.
“The exception is the city fringe market where rents have not budged since bottoming in Q2 2017. Three new malls totalling 1.25 million sq ft are expected to be completed in 2019, representing roughly two percent of total stock but this is unlikely to represent major supply pressure given that pre-commitment rates are high at 70-90 percent,” said the report’s authors Shaowei Toh and Adeline Chan.
Post-2019, supply growth is expected to significantly taper off, removing completions as downside risk. But with high operating costs and labour shortage, retailers are more likely to concentrate on selecting well-performing stores than expanding.
Demand for space generally comes from experiential or activity-based tenants, with some malls, especially those within the city area, looking to co-working operators to occupy vacant space.
“While this represents a new source of take-up, the trend is emblematic of a generally downbeat retail market,” explained Chan and Toh.
“Nevertheless, malls still cater to a fundamental need, and asset selection is key to outperformance.”
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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