Singapore retail leasing slows as sales weaken in 3Q: CBRE
Retail leasing activity in Singapore slowed in the third quarter of 2019, amid weakening retail sales and a worsening economic outlook, highlights CBRE in its Asia Pacific retail report.
Notable moves included sporting goods giant Decathlon taking over department store Metro as the anchor tenant at The Centrepoint.
Times Bookstore also shut down its outlet at The Centrepoint, while MPH closed down its branches at Raffles City and Parkway Parade. Citing high rental costs for the closures, MPH announced that it will be reopening smaller stores. It has committed to a 1,900 sq ft space at a new concept store at SingPost Centre in Paya Lebar this month. In contrast, MPH at Raffles City spanned 6,500 sq ft.
On the other hand, CBRE observes that retailtainment-related trades continued to perform well, with indoor playground operators seeking further opportunities to enter the market, following the success of similar offerings like Kiztopia and Superpark.
Overall, CBRE highlights that tenants are “increasingly selective and are more reluctant to expand, considering the economic slowdown and less favourable retail climate”. The research consultancy also attributes the slowdown in leasing activity to a decline in the number of large shopping mall completions, following the opening of Jewel Changi Airport and Paya Lebar Quarter.
However, prime retail space remains limited and rents remain stable, it says. E-commerce activity, meanwhile, is concentrated on low-priced items, CBRE states.
In the coming six months, the firm expects that Singapore’s retail market will remain two-tiered, with resilience in prime space and weakness in secondary malls.
Among other Asia-Pacific markets, Hong Kong was the worst performer, suffering an 18% y-o-y decline in retail leasing activity from July to September 2019.
A few leasing deals were signed by personal-care retailers including SaSa and Dr Plant in Mong Kok, and Goutal in Causeway Bay. Some tourist-oriented pharmacies have discontinued negotiations amid social unrest.
Underperforming fashion retailers have continued to pull out from the market: Jack Wills exited Hong Kong after being taken over, while Forever 21 exited Hong Kong due to its global closure. GAP, however, opened a 15,000 sq ft store in Tsim Sha Tsui.
Although some international retailers have withdrawn from Hong Kong, overseas groups have shown interest in establishing a presence in the city, taking advantage of cheaper rents at prime locations.
For the remainder of this year, CBRE foresees high-street rent in Hong Kong declining by another 5% to 10%, with a further correction likely after Chinese New Year in January next year.
It expects short-term leases and popup stores to be the main source of leasing activity for the rest of the year.
In Japan, drugstores remained the strongest demand driver in 3Q2019, although some operators were terminating leases and closing stores. Tokyo, Osaka and Nagoya all saw new store openings.
F&B demand in Japan was led by bubble-tea operators targeting local consumers. Chinese tea brands also sought direct entry to the market, as opposed to the usual route of forming joint ventures with local partners.
Looking forward, CBRE forecasts that the hike in Japan’s consumption tax, from 8% to 10%, will negatively impact future consumption. Additional large-scale expansion is not anticipated, says CBRE, as many retailers have already opened new stores ahead of the 2020 Olympic Games in Tokyo.