Singapore saw an increase in retail vacancy rate during the first quarter despite healthy demand for prime spaces and stable rental growth, according to a report from Savills.
Islandwide retail vacancy rose to 6.8 per cent in the first quarter amid the addition of 323,000sqft of new retail space, compared to 6.2 per cent in the previous quarter.
According to the report, after five quarters of positive net take-up, net demand registered -129,000sqft as occupied space fell across most areas.
The recent completion of Punggol Coast Mall and the revamp of The Cathay put further pressure on vacancy as they took time to be absorbed, it added.
Meanwhile, some landlords of prime malls along Orchard observed healthy demand for lease renewals, especially from luxury retailers, allowing them to negotiate for higher rents due to limited supply.
Even as existing tenants exit, vacated prime spaces are often quickly filled by new-to-Singapore retailers, such as Japanese thrift shop brand 2nd Street, which took over a premises at Somerset from Pomelo.
The report noted some signs of rents starting to come under pressure across the Central Region such as a 0.2 per cent quarter-on-quarter decline in Central Area and 1.1 per cent drop in Fringe Area.
According to Savills’ basket of retail properties, the average monthly rent in the Orchard Area and Suburban Area remained flat at SG$23.2 (US$18) per sqft and $14.7 per sqft respectively.
The report estimates that pipeline supply remains relatively stable at around 597,000sqft of retail space this year, compared to 679,000sqft last year.
For the full year, Savills expects Orchard rents to reach the upper bound of the 1-2 per cent forecast range and suburban rents to be in the lower end of this range.
Elevated global trade tensions are likely to negatively impact Singapore’s export-reliant economy, particularly in the second half, weighing on business hiring and wage growth, hence weakening retail sales, according to the real estate company.
More churn in mall directories is in the forecast this year as underperforming tenants either sit through their leases before moving out or pre-terminate their leases if they are unable to sustain their business, it added.
