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Retail space prices increased by 1.1% in 3rd Quarter 2019

by • October 29, 2019 • RetailComments (0)107

Retail space prices increased by 1.1% in 3rd Quarter 2019, compared with the increase of 0.4% in the previous quarter says data released by the Urban Redevelopment Authority (URA) on Oct 25. Rentals of retail space increased by 2.3% in 3rd Quarter 2019, compared with the decrease of 1.5% in the previous quarter.

retail space pricesAs at the end of 3rd Quarter 2019, there was a total supply of 288,000 sq m GFA of retail space from projects in the pipeline, compared with the 320,000 sq m GFA of retail space in the pipeline in the previous quarter. The amount of occupied retail space increased by 29,000 sq m (nett) in 3rd Quarter 2019, compared with the increase of 74,000 sq m (nett) in the previous quarter.

The stock of retail space increased by 16,000 sq m (nett) in 3rd Quarter 2019, compared with the increase of 18,000 sq m (nett) in the previous quarter. As a result, the island-wide vacancy rate of retail space decreased to 7.5% as at the end of 3rd Quarter 2019, from 7.7% as at the end of the previous quarter.

More detailed information on retail space prices and rental indices, supply in the pipeline, stock and vacancy rates can be found in the Real Estate Information System (REALIS), an online database of URA.

Colliers International, commenting on the URA data on retail space prices and other indices said the Q3 2019 statistics demonstrated a positive showing, with rental, price, and vacancy improvements across all areas.

“URA’s Retail Rental Index for the Central Region rose 2.3% QOQ in Q3 2019, compared to the 1.5% decline seen in the previous quarter. Both Central Area and Fringe area rents grew, at 2.3% QOQ and 2.0% QOQ respectively. Cumulatively, rents are still 16.6% below the last peak in Q4 2014. While rents are stabilising, consumer sentiment remains fragile and could be tempered by the weak GDP growth.”

Colliers pointed out that retail space prices in the Central Region was up 1.1% QOQ, driven by a significant growth in Fringe Area of 8.0% QOQ, while Central Area prices edged up a marginal 0.4% QOQ. This it said, is likely driven by higher investor interest and robust transaction volumes.

“Major transactions in the quarter included DUO Galleria, 313@Somerset, Mandarin Gallery, as well as strata unit sales at Queensway Shopping Centre. Meanwhile, islandwide retail vacancy improved sequentially to 7.5% from 7.7%, despite more retail space being granted Temporary Occupation Permit (TOP). During the quarter, 50,100 sq m of retail space was completed, with the most significant supply coming from Paya Lebar Quarter Mall’s 38,600 sq m of Gross Floor Area (GFA).”

Ms Tricia Song, Colliers International’s Head of Research for Singapore, commenting on the URA data on retail space prices and other indices said, “while rents have stabilised in the last few quarters, in part a result of the ongoing consolidation of the retail industry for the past few years, the key risk comes from a weaker economy which could impact consumer sentiment and delay any recovery.”

“We believe consumer spending remains cautious. Based on figures released by the Singapore Department of Statistics, retail sales (excluding motor vehicle sales) fell for the 7th straight month in August, declining by 1.0% YOY.

That said, with the major malls Jewel, Funan, and Paya Lebar Quarter Mall all started operations, future supply should ease significantly. Colliers Research estimates 4Q2019-2023 average annual new supply at 335,000 sq ft versus 1.04 million sq ft over the last 10 years. This should help support occupancies in the retail market going forward.

We expect landlords to continue to focus on “experiential retail” while retailers try to enhance their customer experience. Evidently, the new Haidilao Hot Pot restaurant at Marina Square will collaborate with M1 Limited to set up a trial 5G network. The restaurant will not only be equipped with smart machines such as the Intelligent Kitchen Management System, customised automatic soup-base machine, and food-delivery robots for faster service, it will also have a 5G experience corner for customers to engage in interactive virtual and augmented reality e-gaming while waiting for a table.

In 2019, we expect ground floor retail rents in prime shopping centres along Orchard Road to decline marginally with weak consumer spending; while prime floor rents for Regional Centres (suburban) should stabilise given a higher proportion of non-discretionary income spending. For the latter, those in suburban locations with significant catchment areas and MRT connections, should continue to outperform the less strategically-located suburban malls. Looking into 2020, rents in Orchard and Regional Centres could recover marginally given limited incoming supply.”

Mr Paul Ho, chief mortgage officer of iCompareloan, said, “retail space prices have been slow in the uptick since the drop in the 1st Quarter of 2019. Considering the fact that consumers are cautious and the less than upbeat sentiment caused by the trade war, as well as the threat of a technical recession, it is unlikely we will see an increase in retail space prices to the levels we saw in 2014 and 2015.”

An earlier Colliers International report on the retail scene here in Singapore noted: “Based on figures released by the Singapore Department of Statistics, retail sales (excluding motor vehicle sales) fell for the 4th straight month in May, declining by 1.0% YOY. While we see trends of rents stabilising in the last few quarters, in part a result of the ongoing consolidation of the retail industry for the past few years, increasing risks of an economic technical recession could impact consumer sentiment and delay any recovery.”

The report added: “In 2019, we expect ground floor retail rents in prime shopping centres along Orchard Road could decline marginally with weak consumer spending; while prime floor rents for Regional Centres (suburban) should stabilize given a higher proportion of non-discretionary income spending. For the latter, those in suburban locations with significant catchment areas and MRT connections, should continue to outperform the less strategically-located suburban malls.”

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