Referring to the recently released statistics by the Urban Redevelopment Authority (URA), JLL said that the retail property market is still trying to find its footing. JLL said that both the rent and price indices of retail space in the Central Region returned to the contractionary mode following 4Q18’s expansions.
JLL said rents only recorded a marginal 0.2% q-o-q decline in the Central Region in 1Q19 and this is likely due to changing tenant profile such as the increasing take-up of prime level retail space by rent-sensitive occupiers with large space requirement such as activity-based retailers.
Ms Tay Huey Ying, JLL’s Head of Research and Consultancy for Singapore, said: “Following the openings of SuperPark in Suntec and Holey Moley in Clarke Quay in 4Q18, Nerf Action Xperience and kidztopia will be opening on the ground level of Marina Square in the coming quarters.”
She added: “On a more upbeat note, the Orchard Road revamp and the SGD 9 billion expansion plans by Marina Bay Sands and Resorts World Sentosa should inject confidence in the medium-term prospects of Singapore’s tourism and retail industries.”
JLL believes that this should prop up business confidence and lend support to demand in the retail property market.
Nonetheless, the ongoing restructuring occurring in the retail space will likely see the URA retail rental index flip-flopping between marginal up- and down-ticks in the short-term, added JLL.
CBRE commenting on the same URA statistics on the retail property market noted that retail property rental index for the Central Region moved by -0.2% q-o-q in Q1 2019, compared with the increase of 1.2% in the previous quarter.
This suggests a plateauing of the retail property market, CBRE said.
Mr Desmond Sim, CBRE’s Head of Research for Southeast Asia, said: “On the back of the introduction of new supply, vacancy rates have risen from 9.6% in Q4 2018 to 9.9% in Q1 2019. Orchard Road and Outside Central Region submarkets have seen higher vacancy rates of 6.1% and 11.1%, respectively, this quarter.”
He added: “Looking ahead, with the physical occupation of recent completions, the likes of Jewel Changi Airport and the AEI of TripleOne Somerset, being taken into account, we expect the vacancy rate to compress.”
CBRE believes that in addition, the supply pipeline om the retail property market is expected to tighten over the next few years, which will further equalise the demand and supply balance.
The retail property market continues to be a two-tier market with resilience in the prime spaces while secondary spaces and floors remain challenging, noted CBRE. It added that landlords for such secondary spaces would have to strike a fine balance between occupancy and rental values.
Colliers International commenting on the URA data said, “the retail real estate indices for Q1 2019 declined after some respite in the last quarter, amid an increase in vacancy and as consumer and investor sentiments remain subdued.:
It noted that URA’s Retail Rental Index for the Central Region dipped marginally by 0.2% QOQ, compared to the 1.2% increase in Q4 2018. And that except for a blip in Q1 2018 which showed a 0.1% QOQ uptick, rents have declined a cumulative 18.1% between Q1 2015 and Q3 2018.
Colliers said that while it believes that rents have started to stabilise in the retail property market, it does not expect any significant improvement given a lack of catalyst.
Ms Tricia Song, Colliers’ Head of Research for Singapore said, “consumer spending remains cautious. Based on figures released by the Singapore Department of Statistics, the retail sales index (excluding motor vehicle sales) increased by 5.3% YOY in January 2019 but declined by a higher 10.7% YOY in February 2019.”
She added: “The large variance in retail sales between the two months was mostly attributed to the Chinese New Year festive season, which occurred in early February this year, but was celebrated in mid-February in 2018.”
“Recent retail mall REITs’ financial results showed some improvement in shopper traffic in their malls in Q1 2019, as well as positive rental reversions, underscoring some success in their proactive asset and lease management. Landlords need to continuously engage shoppers with new offerings and enhanced experiences in the new era of omni-channel shopping lifestyles.
“Besides the continued challenge from e-commerce, we expect elevated new retail space supply in the central region, city fringe and suburban areas in 2019 (equivalent to 2.0% of current stock). Upcoming supply in 2019 includes Raffles Hotel Arcade, Funan, and PLQ Mall. Supply should taper off significantly from 2020.”
In 2019, Colliers expects ground floor retail rents in prime shopping centres along Orchard Road to rise marginally by 1-2% YOY, due to the lack of new stock; while prime floor rents for Regional Centres (suburban) should stabilise.
Colliers added that for the Regional Centres, those in suburban locations with significant catchment areas and MRT connections, should outperform the less strategically-located suburban malls.
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