URA retail rental index inches up 0.1% q-o-q in Q1 after 12 straight quarters of declines

THE Urban Redevelopment Authority's rental index of retail space in the central region has posted its first increase after 12 consecutive quarters of decline. The index inched up 0.1 per cent in the first quarter of this year over the fourth quarter of last year.

This contrasts with a decline of 0.5 per cent quarter-on-quarter in Q4 2017.

URA's price index of retail space in the Central Region also inched up 0.1 per cent quarter on quarter in the first quarter of 2018 after slipping 1 per cent in Q4 2017.

At the end of Q1 2018, there was a total supply of 530,000 square metres (sq m) gross floor area (GFA) of retail space from projects in the pipeline, 4.1 per cent higher than the the 509,000 sq m GFA of retail space in the pipeline at the end of the previous quarter.

The amount of occupied retail space remained unchanged in Q1 2018, compared with the increase of 64,000 sq m net lettable area (NLA) in the previous quarter. The stock of retail space increased by 11,000 sq m NLA in Q1 2018, compared with the increase of 18,000 sq m NLA in the previous quarter.

As a result, the islandwide vacancy rate of retail space increased to 7.5 per cent at the end of Q1 2018 from 7.4 per cent at the end of the previous quarter.

Commenting on the 0.1 per cent quarter-on-quarter marginal rise in URA's central region rental index in the first quarter, CBRE's head of research for Singapore and South-east Asia, Desmond Sim, said: "While this growth is deemed minor, it is an indication that the retail rental market is showing signs of bottoming out and achieving stability."

That said, Mr Sim does not expect a rebound of retail rents but rather, more stable and sustainable growth in the mid- to long-term. "Prime floors in shopping malls remain highly sought after, while occupancy pressures may still loom for secondary corridors and secondary floors.

"Nonetheless, the cutback in future retail supply over the next few years may lend support to an equalisation of demand and supply," Mr Sim added.

Cushman & Wakefield Singapore's head of research, Christine Li, said: "Despite the tough operating environment, retailers are still keen on taking up space at suburban malls as the shopper catchment and footfall at these malls remain healthy."