Singapore retail rents stabilise
Singapore retail rents stabilised island-wide in the last quarter of last year, according to real estate specialists Edmund Tie & Company.
In the company’s quarterly Real Estate Times research report, ETC said monthly rents of ground-floor space in the Orchard/Scotts Road precinct were the most resilient of the year, staying firm at $37.20 per sqft, compared to a decline of 2.2 per cent in 2016. Improving tourist numbers were a large contributor to the trend, along with a limited pipeline of new space coming on stream.
And the arrival of overseas brands such as Apple, Pablo and Don Quijote into the area attracted more crowds and reinforced Orchard Road’s position as a retail destination, said ETC.
Gross rents of prime first-storey retail space in the other city areas and suburban areas fell slightly by 0.6 per cent and 0.5 per cent last year to about $19.75 and $30.45 per sq ft per month respectively.
Monthly gross rents of prime first-storey retail space island-wide remained unchanged for the second consecutive quarter in the final three months of last year, bringing about a slight decline of 0.3 per cent for the full 12 months. That compares well to a 4.3 per cent decrease in 2016.
The authors of the report said the moderation in the decline in rents was due to the recovery in the city state’s retail sales, resulting in an increase in occupancy rates. Occupancy increased by 0.4 percentage points to 91 per cent in the third quarter of last year.
Outlook for 2018
Brick-and-mortar retailers face challenges as more consumers turn to e-commerce platforms in the coming year, said the report.
“However, e-commerce will likely come under the local tax regime… This will mean having e-commerce players registering for GST in Singapore or customers having to pay tax on the goods and services purchased online. This may act as an additional factor for the online retailers to go for physical space, if the prices between the goods bought online and offline narrow,” said the authors.
ETC suspects the upcoming new supply of retail space in suburban and other city areas may exert downward pressure on rents of retail spaces in both subzones.
“From Q1 to Q3 2017, about 621,000 sqft of retail space was completed island-wide, with another 432,000 sqft expected to complete in Q4 2017. This will mainly emanate from Northpoint City (318,000 sqft). Subsequently, there will be around 1.1 million sqft of space completing this year and next year, respectively. The other city areas will be faced with the largest pressure, with the supply in both years exceeding the 10-year annual average absorption (2007 to 2016) of 239,000 sqft.