Less retail spending and vacant shopfronts have depressed rents in Singapore’s retail malls, both in Orchard Road and suburban areas, a new report found.
Average prime retail rents in Orchard Road shed 1.1 percent from the first quarter, to $32.50 per square foot per month in the second quarter, a report by CBRE showed. When compared to the same time last year, rents had dropped by 4.4 percent.
Suburban malls saw their rents fall by 0.7 percent to $29.45 per square foot per month in the second quarter. This was a 2.8 percent fall from a year ago.
“The market is particularly challenged by a mismatch of demand and supply at this point in the cycle,” said Mr Desmond Sim, the company’s research head for Singapore and Southeast Asia.
Well-located suburban malls like Compass One in Sengkang, which had a 90 percent pre-commitment from tenants, are the few exceptions, he added.
Singapore’s retail sales index dropped by 4.3 percent in March from a year back. Overall retail vacancy rates stood at 7.3 percent in the first quarter, a 0.1 percentage point increase from the end of last year, according to official statistics.
Orchard Road was badly hit by vacancies, that amounted to 8.8 percent in the first quarter – its highest in five years. Perhaps tourist arrivals are one of the few bright spots, having grown by 13.8 percent in the first quarter from a year ago.
Given this backdrop, landlords should consider linking the rental model to business turnover, so they can step in and help tenants succeed, said Mr Alan Cheong, Savills Research senior director for Singapore.
“The old school way of believing… asset enhancement initiatives may bring about a revival of the mall may need to be supplemented by their ability to think like a new school tenant and work for their success,” he said.
Visit The Straits Times for the full report.
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