Retail rents continued to stagnate islandwide in the first quarter as leasing deals took longer to complete, with retailers more resistant to rent increases and landlords staying firm on their asking prices.
Nevertheless, a large potential supply in the pipeline – an estimated 2.4 million square feet of net lettable retail space to be completed this year – could change the picture.
About 56 per cent of this new supply will be located in suburban areas, followed by 24 per cent in the city fringes, and 20 per cent in Orchard/Scotts Road.
The 2014 pipeline makes up 45 per cent of the 5.4 million sq ft of retail space expected to come onstream from now till 2018.
Pockets of space will arise from the renovations at Suntec City, Marina Square and Chijmes, as well as the exit of Japanese department store operator Parco from its space at Millenia Walk.
The new luxury mall Capitol Piazza, on the site of the former Capitol Building and Stamford House, will also add to the “rest of central” retail stock.
In contrast, retail rents along Orchard/Scotts Road as well as suburban malls are expected to hold up – albeit for different reasons.
Rents along the prime shopping belt are expected to keep steady as retail space remains limited and continues to be highly sought after by international retailers.
New supply to be released at Orchardgateway and 268 Orchard Road, as well as renovations at Shaw Centre and Claymore Link will add about 493,000 sq ft of net lettable retail space by this year-end.
As for suburban retail space, rents are also likely to stay firm despite a large supply coming onstream this year, because of strong demand from both the local residential catchment, and from retailers seeking to expand into the heartlands.
Leasing activity aside, resale retail units in the suburban areas grew 0.5 per cent in average capital value, outdoing those in the core central and rest of central regions which came in flat.
Year-on-year, resale retail units’ capital value growth fell to 4.9 per cent islandwide in Q1, from 17.8 per cent recorded in Q1 last year.
Source: Business Times – 26 March 2014