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Singapore retail rents: tenants’ market

With continuing restructuring in the Singapore retail sector it is a tenants’ market, but while rents are generally under pressure, well-located, well-managed suburban malls are in a strong position.

Meanwhile, average prime retail rents in Orchard Rd and suburban areas continued to fall in the second quarter of this year, reports CBRE.

“Our research shows a clear reduction of rentals, and it would not be accurate to report otherwise,” says CBRE SIngapore/Southeast Asia head of research Desmond Sim.

Average prime Orchard Rd rents stand at S$32.50 (US$24) psf/mth, down 1.1 per cent from the first quarter – the sixth consecutive quarter of decline for the precinct.

Average prime rent for the suburban submarket fell 0.7 per cent to $29.45 psf/mth from the first quarter. There rents began to fall only in the last quarter of last year.

“There are still sparks of activity, particularly around well-located and well-managed suburban malls that have a strong positioning tilted toward families and the immediate catchment,” says Sim, citing Compass One, which has reported 90 per cent precommitment. “With the positive momentum continuing, I would not be surprised if Compass One achieves full occupancy ahead of its opening.”

Compass One is about to reopen after an asset-enhancement exercise. It has seen a strong showing from returning tenants, attracted to its concept of a family mall.

Malls near transport nodes with a good tenant mix and the guarantee of a day and night catchment will continue to be more resilient in terms of rents and occupancy under the current market climate, says the CBRE report.

While general vacancy has been rising and more retail stock can be expected, the availability of prime space in good locations is scarce. This has deterred the expansion and entry of some retail brands as location, visibility and high foot-fall have become even more important factors than ever because of intense competition within the market.

With no foreseeable new supply in Orchard Rd and Marina Centre in the next few years, at least until 2019, this should provide some support for prime rents in Orchard Rd for the next half of the year, says the report.

F&B brands continued to be active in Singapore this quarter. Most new foreign cafes and restaurants that have opened or leased space in Singapore originate from the Asia Pacific region, such as Honolulu Cafe and the food-hall concept Itadakimasu by Parco.

Cosmetics, streetwear and footwear are seeing signs of more activity, and flagship stores are also trending in tandem with the growth of eCommerce.

“The market is particularly challenged by a mismatch of demand and supply at this point in the cycle. While most of the limits to expansion stem from consolidation activity, some retailers are constrained by the shortage of quality space,” says Sim.

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