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Prices of retail space and retail rent fall slightly in Q3

Prices of retail space and retail rent fall slightly in Q3.

The retail property market remained subdued in the third quarter although the decline in rents moderated, the Urban Redevelopment Authority said.

Prices of retail space fell 0.9 per cent in the three months to Sept 30, compared with the second quarter. That followed a 3.2 per cent decline in the second quarter.

Retail rent dipped 0.2 per cent in the third quarter compared with a drop of 1.2 per cent in the second - a sign that the worst may be over, analysts said.

This is the mildest quarterly correction since the downturn started in the first quarter of 2015, and comes alongside the strongest quarterly net absorption so far this year.

Demand for islandwide retail space expanded by 15,000 sq m in the third quarter, a reversal from a contraction of 41,000 sq m in the first quarter and a contraction of 3,000 sq m in the second quarter.

The rental index for the Central area saw its first increase in 10 quarters, up 0.7 per cent in the third quarter from the second quarter.

The retail market is finding its footing, thanks to improved tourism traffic. Retail rents in Orchard Road are leading the recovery, as median rents of new leases recorded in the quarter inked its first quarter-on-quarter increase of 1 per cent after 10 quarters. This is in line with the continually strong interest for retail space in Orchard Road malls, particularly from new-to-market international brands.

Weakness still lies in the fringe areas. While overall consumer sentiment has improved, challenges such as high operating costs, labour constraints, the threat of e-commerce and competition from shopping havens in other countries, remain.

There are also more online shopping portals such as Reebonz opening brick-and-mortar stores.

With Amazon Prime Now in the market, retailers are looking to innovate to stay relevant and compete for shoppers' dollars.

Many other big box retailers such as Courts, Decathlon, Gain City and Harvey Norman are upping their ante and investing heavily on their e-commerce platform to complement their brick-and -mortar presence.

Shopping centres like Century Square, Funan Mall and SingPost Centre do not want to be left out and have embarked on aggressive asset enhancement works to refresh its tenant mix and overall look and feel.

Adapted from: The Straits Times, 30 October 2017