Retail rents in Singapore remained weak in 1H2019, with the URA retail rental index in the Central Region recording a 1.7% fall from end-2018, real estate consultancy Colliers highlighted in a report released on Aug 14.
Ground floor rents on Orchard Road declined by 1.5% half-on-half (h-o-h) in 1H2019 to $40.60 psf per month, while rents in the Central Region remained flat at $33.60 psf per month.
Although rental declines have slowed since early 2018, the soft economy could impact the weak consumer sentiment and delay any rental increases, notes Colliers.
New supply in 2019 has been well distributed across the city centre, city fringe and suburbs, observes Colliers. It forecasts that supply pipelines should taper off over 2020 to 2023.
Colliers attributes the new supply of retail options in 2019 to the decline in retail vacancy rates by 80 basis points h-o-h in 1H2019 to 7.7%. This has been “driven by higher net absorption which is likely boosted by good take-up at Jewel at Changi and Funan”, the report says. On a y-o-y basis, vacancy increased by 40 basis points.
On June 28, Funan reopened after a three-year revamp, with 95% of its retail space leased. The new Funan comprises 507,000 sq ft of retail space, 260,000 sq ft of office space, as well as a co-living component. At Funan, 25% of its space is dedicated to F&B, boasting new concepts such as a 200m cycling path, urban farm and a Taobao store, the brand’s first in Singapore.
Jewel Changi Airport officially opened on April 17, with 280 shops over 580,000 sq ft of retail space.
In 2H2019, PLQ Mall is expected to be completed, injecting 340,000 sq ft of retail space into the market. Colliers forecasts the average annual new supply for 2H2019 to 2023 to be 380,000 sq ft, vastly less than 1.04 million sq ft over the last decade. “The lower supply should help support occupancy going forward,” it observes.
Consolidation in the retail sector continued in 1H2019. Bath and body products retailer Crabtree & Evelyn shut all its physical stores in Singapore as it moved operations online, relaunching its website and new product lines. Brands such as Isetan, Cold Storage, Marks & Spencer, MPH and Kinokuniya have also downsized operations.
Meanwhile, the trend of “clicks-to-bricks” – where an online retailer enforces its offline presence by expanding to physical stores – has continued. Singapore online fashion label Love Bonito has opened its third store, also its flagship store, at Funan.
Colliers also observes the rise of “subscription e-commerce”, where curated products are shipped to customers on a regular basis, at a faster shipping time, to differentiate itself from online retailers.
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