Singapore retail rents down 4.5% in Q3, vacancy flat at 9.6%: URA

RENTALS of retail space in Singapore's central region dropped 4.5 per cent quarter on quarter in the third quarter of 2020, after declining 3.5 per cent in the previous quarter.

However, the latest data released by the Urban Redevelopment Authority (URA) on Friday also showed that prices of retail space in the central region rose by 2.2 per cent in Q3 2020, after chalking up a 1.5 per cent decrease in the previous quarter.

Islandwide, as at the end of the third quarter, there was a total supply of 428,000 square metres (sq m) gross floor area (GFA) of retail space from projects in the pipeline, up from 364,000 sq m GFA in the previous quarter.

The amount of occupied retail space contracted by 50,000 sq m net lettable area (NLA) in Q3, less than the 93,000 sq m drop in the previous quarter.

Meanwhile, the stock of retail space fell by 53,000 sq m NLA in Q3, compared with the increase of 4,000 sq m in Q2.

As a result, the islandwide vacancy rate was flat at 9.6 per cent at the end of Q3.

Christine Li, Cushman & Wakefield's head of research (Singapore and South-east Asia), reckons that the retail rental market will continue to face a tough operating environment, since social distancing and crowd-management measures translate to lower capacity and reduced footfalls. She said: "The gloomy economic outlook will impact discretionary spending by consumers, resulting in weaker retailers downsizing or exiting the market."

Ongoing border closures also mean that retailers - in particular those on Singapore's iconic shopping belt Orchard Road - continue to lose out on the tourist dollar.

Leonard Tay, head of research at Knight Frank Singapore, pointed out that suburban malls are expected to recover faster than those on Orchard Road, given that employees are still working from home. "The rental gap between suburban malls and those in Orchard continues to narrow," he said.

Mr Tay expects overall retail rents will fall 10-15 per cent for this year, while the decline for rents in the suburbs could be capped at 7.5 per cent. He believes the bottom for retail rents could come by year-end or early 2021 as shopper activity picks up.

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