Possible drop in retail rents in 2016: report

Singapore saw average islandwide rents for first-storey spaces drop by 1.2 percent quarter-on-quarter to around S$30.50 per sq ft in Q4 2015 its third consecutive decline since Q2 2015, according to report by DTZ Southeast Asia.

For the whole of 2015, average first-storey rents declined at a faster rate of 5.9 percent compared to the 0.3 percent drop registered in 2014.

DTZ attributed much of the decline to weakened consumer sentiments amid uncertain global economic conditions.

Rents in Orchard/ Scotts Road emerged as the most resilient, with average first-storey rents dipping by one percent quarter-on-quarter and five percent year-on-year to S$38.05 per sq ft in Q4 2015.

Over in the suburban areas, average first-storey rents slid by 1.2 percent quarter-on-quarter and 5.7 percent year-on-year to S$30.70 per sq ft. Average first-storey rents in the other city areas, on the other hand, dropped by 1.4 percent quarter-on-quarter and 6.9 percent year-on-year to around S$21.80 per sq ft in Q4 2015.

Despite the softening in islandwide rental values, occupancy rates have remained healthy from Q1 to Q3 2015 as landlords become more flexible.

The latest URA statistics showed that overall retail occupancy climbed by 0.3 percentage point in Q3 2015 to 92.1 percent.

Looking ahead, DTZ expects rental values to continue to drop in 2016, especially in the other city areas. However, it noted that the decline will only be temporary.

While the pending completions in 2016 will pressure retail rents in other city area to fall, the decline is likely to be temporary, said Dr Lee Nai Jia, DTZs Director of Research.

We anticipate retail rents to recover when the residential components in the mixed-use developments receive their Temporary Occupation Permits. The increase in resident population in the other city area will support the retail trade.

Notably, around 743,000 sq ft of net lettable area (NLA) of retail space, or 60 percent of the 1.2 million sq ft of NLA in the 2016 pipeline, will be added to the existing stock of retail space in other city areas.

Nikki De Guzman, Editor at CommercialGuru edited this story. To contact her about this or other stories emailnikki@propertyguru.com.sg

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