Singapore retail rents slipped by 4.2 per cent in 2016 – an improvement on the 5.7 per cent decline of 2015, according to data from Edmund Tie & Company research.
And they should remain resilient in the year ahead.
The islandwide average monthly retail gross rent fell to about $29.25 per sq ft last year in what Edmund Tie describes as a “moderate decline”.
Stabilising rents in the Orchard Road-Scotts Road precinct helped pare back the slide. While rents in Orchard/Scotts Road eased by 2.2 per cent in the first half of 2016, rents remained unchanged at $37.20 per sq ft per month in the second half.
“The resilience in rents was attributed to limited supply in the prime shopping district, with only about 90,000 sq ft of retail net lettable area (NLA) expected to be completed over the next four years,” said Edmund Tie in a statement. “Moreover, there was strong demand for retail units in Orchard/Scotts Road, especially for those with a visible street frontage, as evidenced by the recent opening of several flagship stores and new-to-market brands.”
During the third quarter of 2016, retailers absorbed some 112,000 sqft of new space in the precinct, a reversal from the negative net absorption of 99,000 sqft in the second quarter.
“Hence, barring any unforeseen economic shocks, rents are anticipated to remain resilient in 2017.”
Rents in the suburban areas were also stabilising, remaining unchanged quarter-on-quarter at $30.60 per sqft per month in the fourth quarter, after falling by 3.5 per cent during the first three quarters.
Edmund Tie says rents are unlikely to decrease in 2017 as much as they did last year, with upcoming suburban malls reporting healthy pre-commitment rates.
“In the third quarter, a positive net absorption of 314,000 sqft was recorded in the suburban areas, the highest in almost two years.”
On the contrary, rents in the other city areas remained under pressure, falling by 1 per cent quarter-on-quarter to about $19.90 per sqft per month in the final three months. “This was the seventh consecutive quarter of decline and it took the total rental decline in the other city areas to 8.7 per cent in 2016.
In addition, negative net absorption extended to -376,000 sqft in the third quarter from 25,000 sqft in the second. “Amid the impending supply of approximately 430,000 sqft of retail NLA in 2017, rents are likely to ease further in the first half of 2017, given a lack of crowds during the weekends due to the limited residential catchment. Nevertheless, the fall is likely to be transitory as retail demand will be supported by residents or guests of the residential, serviced apartment and/or hotel component in upcoming mixed-use developments such as DUO, OUE Downtown and Marina One.”
2017 outlook
“Overall, the decline in islandwide average rent is expected to moderate further in 2017,” predicted Edmund Tie. “To overcome competition from eCommerce and manpower constraints, more retailers are beginning to embrace technology, including NTUC FairPrice and Kopitiam. NTUC FairPrice currently offers the click-and-collect option for online shoppers, and self- checkout counters that are equipped to accept cash – which reduces its reliance on cashiers. Likewise, Kopitiam at the upcoming Hillion Mall will introduce the iCashbox payment system, as well as self-orderings kiosks and a rewards programme to encourage diners to “Return Tray for Reward”.”
Dr Lee Nai Jia, Edmund Tie & Company’s Southeast Asia (SEA) head of research, noted: “Looking forward, it is possible that malls in the future will become fulfilment centres, where buyers go to the malls to collect their goods, or exhibition venues, where retailers attract buyers and deliver their purchases to their homes. Retail rents will not only reflect the location, but also the experiential effect of the mall.”