Retail rents bottom out as gyms, arcades move in
The rental decline narrowed to 1% in 2018 from the 4.7% and 8.3% decreases in 2017 and 2016, respectively.
The retail rental market in Singapore has shown signs of better days as recorded in the latter days of 2018. Based on the Urban Redevelopment Authority’s (URA) data, overall Central Region retail rents showed a marginal uptick of about 1.2% QOQ for Q4 2018.
This means H2 was flat compared to H1 2018, and rents fell by just 1% for the full year 2018. The rate of decline slowed down considerably from the 4.7% and 8.3% declines for 2017 and 2016, respectively. Considering this progression, will this be the signal the bottoming of the long-running decline that Singapore has witnessed starting in Q1 2015?
According to Colliers International, Orchard Road ground-floor rents in the Lion City saw an uptick of 1.4% YOY to SGD41.20 (USD30.18) psf pm in H2 2018, whilst regional centres saw a marginal uptick of 0.4% YOY to $33.60 (US$24.62) psf pm, marking recovery in ground-floor rents.
“We expect ground-floor rents to lead the gradual recovery, but overall retail rents should continue flattening out in 2019-2020 before picking up sustainably on more favourable
supply-demand dynamics,” Colliers International said in their report. “We advise landlords to be flexible and practical about setting rents in order to support occupancy.”
What’s new in retail?
Tenant profile mixes were heading towards more big-format activitybased retail concepts, such as game arcades, billiard rooms and gyms, taking up anchor tenancies in malls. More online retailers also went physical, such as Taobao which opened its first physical store in Singapore in Nomadx at Plaza Singapura. Online grocer honestbee opened habitat, billed as “the world’s first tech-enabled grocery and dining concept”. Meanwhile, luxury brands continued to embrace duplexes, or dual-level shops. Italian lifestyle brand Moncler opened a flagship duplex at The Shoppes, its largest APAC store.
Global luxury brands continue to embrace the concept of duplexes, or dual-level shops, and expansion into children’s wear. Marina Bay Sands Shoppes now hosts 17 duplexes - the largest collection of duplexes under one roof in Singapore. In January 2019, Italian apparel manufacturer and lifestyle brand Moncler opened a flagship duplex at The Shoppes, its largest store in the Asia-pacific region.
Retail stock will increase by 2.36 million sqft over 2018-2019 due to several large projects, in particular Jewel Changi Airport (~576,000 sqft), Paya Lebar Quarter (PLQ)
Mall (~340,000 sqft) and Funan Mall redevelopment (~325,000 sqft). The supply in 2019 is 90.4% more than the annual net supply of 1million sqft in 2018, according to a report from Savills Research, although this should ease to less than 500,000 sqft per annum from 2020 to 2023. By 2020, the main retail supply will come from auxiliary retail components in residential developments.
From Colliers: Singapore retail and industrial property sectors find their footing; rosier outlook for selected segments in 2019
Overall retail rents should continue flattening out in 2019-2020 before picking up sustainably on more favourable supply-demand dynamics.
Orchard Road will be revitalised as a lifestyle destination
Singapore retail supply, absorption, & vacancy (2011-2022)