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Vacancy for retail spaces dipped by 0.3% points in H1 2021 to 8.5%.
Singapore saw average retail rents drop 2.4% in the first half of 2021 – even as net absorption turned positive – as landlords prioritise occupancy over rents, according to a report by Colliers International.
Island-wide vacancy fell 0.3 percentage points to 8.5% in H1 2021 and is expected to fall to 8.4% by 2025.
Ground floor rent on Orchard Road dropped 2.7% half-on-half (HoH) to $36.24 per sq ft (psf) in H1 2021, while those at Regional Centres contracted 2% HoH to $31.05 psf, amid tighter restrictions under Phase 2 (Heightened Alert) such as prohibitions on dine in as well as lower permissible group size and mall occupancy limits. The situation only worsened when COVID-19 clusters were linked to several malls.
“Overall, we see room for stabilisation in H2 2021 as higher vaccination rates could allow for potential easing measures towards the end of the year,” said Colliers.
“We forecast average retail rents to decline by 1.8% in 2021 with reprieve from the limited 2021-2025 island-wide supply (0.8% of total stock per annum versus the 10-year historical average of 1.1%), most of which are concentrated in suburban and fringe areas where there are well defined population catchments.”
Meanwhile, retail transactions declined 78.3% h-o-h to $564 million in H1 2021 from a high base due to the acquisition by Frasers Centrepoint Trust (FCT) of the remaining 63.1% stake in the Asia Retail Fund that holds five Singapore suburban retail malls as part of its portfolio.
Notable deals in H1 2021 include FCT’s divestment of YewTee Point as well as the acquisition by Low Keng Huat of a 45% stake in Paya Lebar Square.
In H1 2021, prime floor capital values within the Orchard area remained flat h-o-h at $6,473 psf, following a 5% drop last year.
“According to the Colliers Valuation and Advisory Services (CVAS) team, average island-wide retail cap rates remained unchanged in H1 2021, ranging from 4.25% to 4.75%, but could compress by 25 bps by end 2021 to reflect rental declines, while capital values hold up,” said the report.
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Cheryl Chiew, Digital Content Specialist at PropertyGuru, edited this story. To contact her about this story, email: cheryl@propertyguru.com.sg.
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