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Jonathan Denis-Jacob, Director and Head of Consulting and Advisory Services at Colliers International, believes that brick-and-mortar retail will remain relevant for retailers.
Colliers International expects Singapore’s retail property market to stabilise this year and gradually recover thereafter, while the industrial property market is forecasted to recover on strong demand for logistics warehouses as well as hi-specs space.
It revealed that ground floor rent in Orchard Road fell 2.6% half-on-half in the second half of 2020 to $37.24 per sq ft per month. This brings the full-year average retail decline to 7.2% year-on-year – the worst in Colliers’ record.
Jonathan Denis-Jacob, Director and Head of Consulting and Advisory Services at Colliers International, believes that brick-and-mortar retail will remain relevant for retailers.
“Brick-and-mortar retail will remain relevant and is here to stay, especially for global retailers. While we saw several high profile retail brand closures, although not all these were strictly related to COVID-19, we also saw some resilient brands quickly backfilled these vacated space with new concepts,” he said.
“We have seen a rapid take-up of a large prime retail footprint despite the ongoing pandemic. For example. the three former Robinsons’ spaces were taken over very quickly by major retailers for their concept stores such as IKEA at JEM, and more recently, BHG at Raffles City and Courts at The Heeren.”
The easing of restrictions led to an improvement in retail sales, which registered a 4.5% year-on-year decline in December, as IT products, supermarkets, sporting goods and furniture/household products recorded double-digit sales growth.
However, recovery among different trades is uneven.
“With this uneven recovery, landlords will rejig tenant mix and pivot their strategies leading average retail rents to remain flat in 2021. Rents could improve thereafter with widespread virus containment and resumption of travelling,” said Tricia Song, Head of Research for Singapore at Colliers International.
“A saving grace is the limited 2021-2025 islandwide supply at 0.8% of total stock p.a. vs the 10-year historical average of 1.1%. In addition, the new supply is mostly concentrated in suburban and fringe areas, where there are well-defined population catchments.”
Over at the industrial property front, Colliers noted that the market was relatively resilient last year, with the JTC rental and price index falling 1.5% year-on-year and 2.7% year-on-year, respectively. Industrial occupancy, on the other hand, climbed 0.7 percentage points to 89.9% last year.
Colliers Research expects to see a recovery this year as the thriving biomedical manufacturing and technology sector support demand for hi-spec spaces and business parks.
Factory rents are forecasted to remain flat on ample supply, while warehouse-logistics rents are expected to grow 1.3% year-on-year.
“Warehouse rents had surprisingly declined in 2020, albeit marginally, despite higher take-up. This could be due to landlords prioritising occupancy over rents, especially during a period of crisis,” said Song.
She expects sustained demand for e-commerce and tighter occupancy to “support rental growth for the logistics space in the next few years”.
“As net yields for Singapore industrial/logistics properties remained stable in H2 2020 at 5.75-6.25%, there is an increasing interest from property funds and REITs for industrial assets, particularly for the logistics warehouses and hi-specs space such as data centres,” said Steven Tan, Senior Director for Investment Services at Colliers International.
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