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The expected hike in vacancies, along with social distancing measures, lower footfalls and economic uncertainties due to COVID-19, could lead to steeper falls in rent in 2H 2020, Cushman and Wakefield noted.
Vacancies in non-prime locations are expected to increase in the second half of 2020 as many businesses shutter for good, according to Cushman and Wakefield.
It noted that while most retail businesses resumed operations since 19 June, many activity-based tenants like food and beverage (F&B) and health & wellness will not be able to operate at full capacity as social distancing measures remain in place.
The expected hike in vacancies, along with social distancing measures, lower footfalls and economic uncertainties due to COVID-19, could lead to steeper falls in rent in 2H 2020.
“Currently, many landlords are still maintaining close to pre-COVID asking rents, but as vacancies rise, landlords are expected to become more flexible,” said Christine Li, Head of Research for Singapore and Southeast Asia at Cushman and Wakefield.
“However, for popular prime spaces in sought-after suburban malls which are able to maintain high occupancy levels due to their strong tenant profile, rents will be less affected.”
For the second quarter of 2020, prime retail rents declined across the board.
Rents in Other City Areas fell 3.5% quarter-on-quarter to $20.88 per sq ft (psf) per month, while those in Orchard and Suburban declined 1.5% and 0.9% to $34.73 psf per month and $31.56 psf per month, respectively.
For the whole of 2020, prime rents in Other City Area and Orchard are expected to fall by around 10% each, while Suburban prime rents are forecasted to drop by 5%.
“The market expects more vacant spaces in non-prime locations coming into the market in the second half of 2020 as activity-based tenants are usually located in non-prime spaces within the mall due to their larger size requirements,” said Cushman and Wakefield.
There could also be an overall decline in new demand for retail spaces as some F&B tenants “explore delivery options such as cloud kitchens or central kitchens due to current social distancing measures”.
In Q2 2020, indoor family attraction Kidzania Singapore announced that it will be stopping operations at Sentosa Island, while German-themed Starker Bistro closed all seven Singapore outlets.
Esprit reportedly closed 12 outlets across the island, while Isetan will not be renewing its lease at Westgate. Robinsons will also be shutting its outlet in Jem in August.
“Nevertheless, some mall operators were able to re-invent space to secure some interesting replacement tenants,” said Cushman and Wakefield.
JEM, for instance, was able to re-configure its layout to accommodate the first concept store of IKEA, replacing the space left vacant by Robinsons. The concept store is slated to open next year.
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Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email victorkang@propertyguru.com.sg